UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4085
Fidelity Income Fund
(Exact name of registrant as specified in charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)
Scott C. Goebel, Secretary
82 Devonshire St.
Boston, Massachusetts 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | August 31 |
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Date of reporting period: | August 31, 2008 |
Item 1. Reports to Stockholders
Fidelity
Total Bond
Fund
Annual Report
August 31, 2008
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Trustees and Officers |
| |
Distributions |
| |
Board Approval of Investment Advisory Contracts and Management Fees |
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To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com (search for "proxy voting guidelines") or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company.
Annual Report
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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com or http://www.advisor.fidelity.com, as applicable.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Most domestic and international equity indexes continued to dwell in negative territory, pressured by unfavorable
credit-market conditions, particularly in the United States. On the upside,
investment-grade bonds and money markets generally have served investors well so far this year. Financial markets are always unpredictable, but there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best-performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended August 31, 2008 | Past 1 | Past 5 | Life of |
Total Bond | 3.29% | 4.26% | 4.63% |
A From October 15, 2002.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Total Bond, a class of the fund, on October 15, 2002, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® U.S. Aggregate Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Ford O'Neil, Lead Portfolio Manager of Fidelity Total Bond Fund
Several years of healthy economic growth and a hearty appetite for risk abruptly reversed during the 12-month period ending August 31, 2008, as a meltdown in the subprime mortgage market led to an unnerving credit crisis. Bond investors fled from lower-quality debt instruments and flocked to those with an explicit or implicit guarantee from the U.S. government. The investment-grade bond market as a whole, as measured by the Lehman Brothers® U.S. Aggregate Index, rose 5.86%. Treasuries did the best, benefiting from their reputation as one of the world's safest investments. The Lehman Brothers U.S. Treasury Index gained 8.65% during the period - one of the highest returns of any domestic or international asset class over the past 12 months. At the opposite end of the spectrum, the asset-backed sector - home to weak-performing subprime debt - fell 3.48% according to the Lehman Brothers U.S. Fixed-Rate Asset-Backed Securities Index.
Total Bond gained 3.29%, trailing the Lehman Brothers U.S. Universal Index, which returned 5.21%, and the Lehman Brothers U.S. Aggregate Index. In this review, I'll address the aggregate of my direct investments and those I made in Fidelity fixed-income central funds. Underweighting index-topping U.S. Treasuries and government agency securities and overweighting weak securitized bonds accounted for the bulk of the fund's shortfall versus the Aggregate index. Specifically, holdings in asset-backed securities backed by subprime mortgages and commercial mortgage-backed securities - with sizable exposure coming from our stake in Fidelity® Ultra-Short Central Fund, one of the central funds discussed above - caused most of the damage. I significantly reduced the fund's exposure to Ultra-Short Central and cut direct investments in securitized bonds by period end. The market's growing aversion to riskier assets meant our out-of-index stake in emerging-markets debt and overexposure to corporate bonds worked against us, because both segments struggled. Similar factors hurt our high-yield bond positions, which significantly lagged the index. Conversely, out-of-index exposure to Treasury Inflation-Protected Securities (TIPS) helped. Another plus was yield-curve positioning, with my decisions to overweight better-performing intermediate bonds and underweight lagging long-term bonds benefiting performance. To manage the fund's yield-curve positioning, I used interest rate swaps - contracts that usually involve the exchange of fixed-rate interest payments for floating-rate payments.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2008 to August 31, 2008).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
Shareholder Expense Example - continued
| Beginning | Ending | Expenses Paid |
Class A |
|
|
|
Actual | $ 1,000.00 | $ 992.50 | $ 3.96 |
Hypothetical A | $ 1,000.00 | $ 1,021.17 | $ 4.01 |
Class T |
|
|
|
Actual | $ 1,000.00 | $ 992.30 | $ 4.11 |
Hypothetical A | $ 1,000.00 | $ 1,021.01 | $ 4.17 |
Class B |
|
|
|
Actual | $ 1,000.00 | $ 987.80 | $ 7.64 |
Hypothetical A | $ 1,000.00 | $ 1,017.44 | $ 7.76 |
Class C |
|
|
|
Actual | $ 1,000.00 | $ 988.80 | $ 7.65 |
Hypothetical A | $ 1,000.00 | $ 1,017.44 | $ 7.76 |
Total Bond |
|
|
|
Actual | $ 1,000.00 | $ 994.20 | $ 2.26 |
Hypothetical A | $ 1,000.00 | $ 1,022.87 | $ 2.29 |
Institutional Class |
|
|
|
Actual | $ 1,000.00 | $ 993.90 | $ 2.56 |
Hypothetical A | $ 1,000.00 | $ 1,022.57 | $ 2.59 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
| Annualized |
Class A | .79% |
Class T | .82% |
Class B | 1.53% |
Class C | 1.53% |
Total Bond | .45% |
Institutional Class | .51% |
Annual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of its investments in each non-money market Fidelity Central Fund.
Quality Diversification (% of fund's net assets) | |||||||
As of August 31, 2008 | As of February 29, 2008 | ||||||
![]() | U.S. Government and |
| ![]() | U.S. Government and |
| ||
![]() | AAA 11.0% |
| ![]() | AAA 10.8% |
| ||
![]() | AA 5.9% |
| ![]() | AA 4.2% |
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![]() | A 8.8% |
| ![]() | A 7.0% |
| ||
![]() | BBB 15.1% |
| ![]() | BBB 12.8% |
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![]() | BB and Below 10.2% |
| ![]() | BB and Below 9.6% |
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![]() | Not Rated 0.9% |
| ![]() | Not Rated 0.6% |
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![]() | Equities 0.1% |
| ![]() | Equities 0.0% |
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![]() | Short-Term |
| ![]() | Short-Term |
|
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. All ratings are as of the report date and do not reflect subsequent downgrades. |
Weighted Average Maturity as of August 31, 2008 | ||
|
| 6 months ago |
Years | 6.2 | 5.7 |
The weighted average maturity is based on the dollar-weighted average length of time until principal payments are expected or until securities reach maturity, taking into account any maturity shortening feature such as a call, refunding or redemption provision. |
Duration as of August 31, 2008 | ||
|
| 6 months ago |
Years | 4.6 | 4.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of August 31, 2008* | As of February 29, 2008** | ||||||
![]() | Corporate Bonds 31.9% |
| ![]() | Corporate Bonds 25.7% |
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![]() | U.S. Government and |
| ![]() | U.S. Government and |
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![]() | Asset-Backed |
| ![]() | Asset-Backed |
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![]() | CMOs and Other Mortgage Related Securities 10.4% |
| ![]() | CMOs and Other Mortgage Related Securities 9.8% |
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![]() | Municipal Bonds 0.3% |
| ![]() | Municipal Bonds 0.0% |
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![]() | Stocks 0.1% |
| ![]() | Stocks 0.0% |
| ||
![]() | Other Investments 5.2% |
| ![]() | Other Investments 4.8% |
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![]() | Short-Term |
| ![]() | Short-Term |
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* Foreign investments | 9.8% |
| ** Foreign investments | 9.5% |
| ||
* Futures and Swaps | 12.6% |
| ** Futures and Swaps | 12.1% |
|
† Short-term Investments and Net Other Assets are not included in the pie chart.
A holdings listing for the Fund, which presents direct holdings as well as the pro rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable.
Annual Report
Investments August 31, 2008
Showing Percentage of Net Assets
Corporate Bonds - 16.5% | ||||
| Principal | Value | ||
Convertible Bonds - 0.1% | ||||
ENERGY - 0.0% | ||||
Oil, Gas & Consumable Fuels - 0.0% | ||||
Chesapeake Energy Corp. 2.5% 5/15/37 | $ 1,300,000 | $ 1,750,710 | ||
INFORMATION TECHNOLOGY - 0.1% | ||||
Communications Equipment - 0.1% | ||||
Lucent Technologies, Inc. 2.875% 6/15/25 | 3,838,000 | 2,943,516 | ||
Nortel Networks Corp.: | ||||
1.75% 4/15/12 (h) | 6,339,000 | 4,468,995 | ||
1.75% 4/15/12 | 870,000 | 613,350 | ||
| 8,025,861 | |||
Semiconductors & Semiconductor Equipment - 0.0% | ||||
Advanced Micro Devices, Inc. 6% 5/1/15 | 3,200,000 | 1,815,040 | ||
TOTAL INFORMATION TECHNOLOGY | 9,840,901 | |||
TOTAL CONVERTIBLE BONDS | 11,591,611 | |||
Nonconvertible Bonds - 16.4% | ||||
CONSUMER DISCRETIONARY - 2.4% | ||||
Auto Components - 0.0% | ||||
Tenneco, Inc. 8.125% 11/15/15 | 855,000 | 767,363 | ||
Automobiles - 0.0% | ||||
Ford Motor Co.: | ||||
6.5% 8/1/18 | 750,000 | 397,500 | ||
7.45% 7/16/31 | 1,450,000 | 746,750 | ||
| 1,144,250 | |||
Diversified Consumer Services - 0.0% | ||||
Service Corp. International: | ||||
6.75% 4/1/15 | 650,000 | 611,000 | ||
7.5% 4/1/27 | 1,935,000 | 1,548,000 | ||
| 2,159,000 | |||
Hotels, Restaurants & Leisure - 0.8% | ||||
Boyd Gaming Corp. 7.75% 12/15/12 | 650,000 | 581,750 | ||
Cap Cana SA 9.625% 11/3/13 (h) | 600,000 | 528,000 | ||
Carrols Corp. 9% 1/15/13 | 85,000 | 71,188 | ||
Chukchansi Economic Development Authority 8% 11/15/13 (h) | 565,000 | 457,650 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Fontainebleau Las Vegas Holdings LLC/Fontainebleau Las Vegas Capital Corp. 10.25% 6/15/15 (h) | $ 1,270,000 | $ 571,500 | ||
Galaxy Entertainment Finance Co. Ltd. | 1,440,000 | 1,384,200 | ||
Harrah's Operating Co., Inc.: | ||||
5.375% 12/15/13 | 1,795,000 | 816,725 | ||
5.5% 7/1/10 | 420,000 | 352,800 | ||
Host Marriott LP: | ||||
6.375% 3/15/15 | 250,000 | 215,300 | ||
7.125% 11/1/13 | 4,590,000 | 4,280,175 | ||
ITT Corp. 7.375% 11/15/15 | 250,000 | 237,500 | ||
Landry's Restaurants, Inc. 9.5% 12/15/14 | 2,385,000 | 2,361,150 | ||
Mandalay Resort Group 9.375% 2/15/10 | 700,000 | 686,000 | ||
Mashantucket Western Pequot Tribe 8.5% 11/15/15 (h) | 5,740,000 | 4,218,900 | ||
McDonald's Corp. 6.3% 3/1/38 | 7,590,000 | 7,519,656 | ||
MGM Mirage, Inc.: | ||||
5.875% 2/27/14 | 3,295,000 | 2,644,238 | ||
6.625% 7/15/15 | 4,055,000 | 3,244,000 | ||
6.75% 9/1/12 | 5,985,000 | 5,191,988 | ||
6.75% 4/1/13 | 3,650,000 | 3,102,500 | ||
6.875% 4/1/16 | 1,710,000 | 1,368,000 | ||
7.625% 1/15/17 | 4,555,000 | 3,661,081 | ||
8.375% 2/1/11 | 1,585,000 | 1,428,481 | ||
Mohegan Tribal Gaming Authority: | ||||
6.125% 2/15/13 | 1,825,000 | 1,533,000 | ||
7.125% 8/15/14 | 3,515,000 | 2,565,950 | ||
Park Place Entertainment Corp.: | ||||
7.875% 3/15/10 | 700,000 | 598,500 | ||
8.125% 5/15/11 | 3,780,000 | 2,646,000 | ||
Royal Caribbean Cruises Ltd.: | ||||
7.25% 3/15/18 | 790,000 | 667,550 | ||
yankee: | ||||
7% 6/15/13 | 3,350,000 | 2,998,250 | ||
7.25% 6/15/16 | 4,190,000 | 3,561,500 | ||
7.5% 10/15/27 | 2,125,000 | 1,615,000 | ||
Scientific Games Corp.: | ||||
6.25% 12/15/12 | 875,000 | 824,688 | ||
7.875% 6/15/16 (h) | 1,950,000 | 1,911,000 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Seminole Hard Rock Entertainment, Inc. 5.2763% 3/15/14 (h)(m) | $ 3,010,000 | $ 2,377,900 | ||
Seneca Gaming Corp.: | ||||
Series B, 7.25% 5/1/12 | 1,215,000 | 1,087,425 | ||
7.25% 5/1/12 | 3,395,000 | 3,038,525 | ||
Snoqualmie Entertainment Authority: | ||||
6.875% 2/1/14 (h)(m) | 140,000 | 102,550 | ||
9.125% 2/1/15 (h) | 1,805,000 | 1,322,163 | ||
Station Casinos, Inc.: | ||||
6% 4/1/12 | 940,000 | 648,600 | ||
7.75% 8/15/16 | 710,000 | 479,250 | ||
Times Square Hotel Trust 8.528% 8/1/26 (h) | 111,072 | 111,072 | ||
Town Sports International Holdings, Inc. 0% 2/1/14 (e) | 2,270,000 | 2,020,300 | ||
Universal City Florida Holding Co. I/II 8.375% 5/1/10 | 3,025,000 | 2,926,688 | ||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.: | ||||
6.625% 12/1/14 | 1,590,000 | 1,442,925 | ||
6.625% 12/1/14 | 6,460,000 | 5,878,600 | ||
| 85,280,218 | |||
Household Durables - 0.2% | ||||
D.R. Horton, Inc. 6.5% 4/15/16 | 1,170,000 | 936,000 | ||
Fortune Brands, Inc. 5.875% 1/15/36 | 13,274,000 | 10,754,077 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.375% 12/15/14 | 710,000 | 426,000 | ||
8.875% 4/1/12 | 425,000 | 284,750 | ||
11.5% 5/1/13 (h) | 120,000 | 122,556 | ||
KB Home: | ||||
6.25% 6/15/15 | 535,000 | 446,725 | ||
6.375% 8/15/11 | 650,000 | 598,000 | ||
Newell Rubbermaid, Inc. 6.25% 4/15/18 | 3,105,000 | 2,809,522 | ||
Pulte Homes, Inc. 5.25% 1/15/14 | 645,000 | 548,250 | ||
Urbi, Desarrollos Urbanos, SA de CV 8.5% 4/19/16 (h) | 505,000 | 513,206 | ||
| 17,439,086 | |||
Media - 1.3% | ||||
AOL Time Warner, Inc. 7.625% 4/15/31 | 500,000 | 500,312 | ||
Cablemas SA de CV 9.375% 11/15/15 (Reg. S) | 2,015,000 | 2,178,618 | ||
Cablevision Systems Corp.: | ||||
7.1325% 4/1/09 (m) | 340,000 | 342,975 | ||
8% 4/15/12 | 3,070,000 | 3,046,975 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Charter Communications Holdings I LLC: | ||||
9.92% 4/1/14 | $ 1,495,000 | $ 717,600 | ||
11.125% 1/15/14 | 505,000 | 252,500 | ||
Charter Communications Holdings I LLC/Charter Communications Holdings I Capital Corp. 11% 10/1/15 | 5,490,000 | 4,090,050 | ||
Charter Communications Holdings II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 | 3,865,000 | 3,671,750 | ||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp.: | ||||
8.375% 4/30/14 (h) | 2,220,000 | 2,120,100 | ||
10.875% 9/15/14 (h) | 890,000 | 934,500 | ||
Clear Channel Communications, Inc.: | ||||
5% 3/15/12 | 885,000 | 550,913 | ||
6.25% 3/15/11 | 705,000 | 558,713 | ||
7.65% 9/15/10 | 700,000 | 670,250 | ||
Comcast Corp.: | ||||
5.7% 5/15/18 | 9,000,000 | 8,552,781 | ||
6.45% 3/15/37 | 8,838,000 | 8,151,243 | ||
COX Communications, Inc. 6.45% 12/1/36 (h) | 1,365,000 | 1,277,684 | ||
CSC Holdings, Inc.: | ||||
6.75% 4/15/12 | 2,735,000 | 2,680,300 | ||
7.625% 4/1/11 | 1,235,000 | 1,241,175 | ||
8.5% 6/15/15 (h) | 2,340,000 | 2,351,700 | ||
EchoStar Communications Corp.: | ||||
6.375% 10/1/11 | 2,810,000 | 2,743,263 | ||
7% 10/1/13 | 5,770,000 | 5,495,925 | ||
Kabel Deutschland GmbH 10.625% 7/1/14 | 3,690,000 | 3,800,700 | ||
Lamar Media Corp.: | ||||
Series B, 6.625% 8/15/15 | 535,000 | 474,813 | ||
6.625% 8/15/15 | 1,030,000 | 914,125 | ||
News America Holdings, Inc. 7.75% 12/1/45 | 170,000 | 174,986 | ||
News America, Inc.: | ||||
6.15% 3/1/37 | 2,970,000 | 2,687,069 | ||
6.2% 12/15/34 | 5,330,000 | 4,843,691 | ||
6.65% 11/15/37 | 15,817,000 | 15,248,157 | ||
Nexstar Broadcasting, Inc. 7% 1/15/14 | 1,120,000 | 907,200 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Nexstar Finance Holdings LLC/Nexstar Finance Holdings, Inc. 11.375% 4/1/13 | $ 639,181 | $ 575,263 | ||
Nielsen Finance LLC/Nielsen Finance Co.: | ||||
0% 8/1/16 (e) | 1,505,000 | 1,030,925 | ||
10% 8/1/14 | 2,975,000 | 3,004,750 | ||
Quebecor Media, Inc.: | ||||
7.75% 3/15/16 | 3,590,000 | 3,392,550 | ||
7.75% 3/15/16 | 1,790,000 | 1,691,550 | ||
The Reader's Digest Association, Inc. 9% 2/15/17 | 2,805,000 | 1,654,950 | ||
Time Warner Cable, Inc.: | ||||
5.85% 5/1/17 | 2,607,000 | 2,488,574 | ||
6.75% 7/1/18 | 12,300,000 | 12,417,932 | ||
7.3% 7/1/38 | 9,000,000 | 9,043,443 | ||
Time Warner, Inc.: | ||||
6.5% 11/15/36 | 7,565,000 | 6,683,352 | ||
6.625% 5/15/29 | 4,415,000 | 4,038,228 | ||
TL Acquisitions, Inc.: | ||||
0% 7/15/15 (e)(h) | 1,305,000 | 947,756 | ||
10.5% 1/15/15 (h) | 4,155,000 | 3,562,913 | ||
Umbrella Acquisition, Inc. 9.75% 3/15/15 pay-in-kind (h)(m) | 720,000 | 513,000 | ||
Viacom, Inc.: | ||||
6.125% 10/5/17 | 4,235,000 | 3,984,826 | ||
6.75% 10/5/37 | 1,460,000 | 1,312,422 | ||
Videotron Ltd. 9.125% 4/15/18 (h) | 1,150,000 | 1,207,500 | ||
Visant Holding Corp. 8.75% 12/1/13 | 450,000 | 428,625 | ||
| 139,158,627 | |||
Multiline Retail - 0.0% | ||||
Matahari Finance BV 9.5% 10/6/09 | 995,000 | 996,269 | ||
Specialty Retail - 0.1% | ||||
AutoNation, Inc. 7% 4/15/14 | 1,290,000 | 1,119,075 | ||
Michaels Stores, Inc. 10% 11/1/14 | 1,405,000 | 1,046,725 | ||
Nebraska Book Co., Inc. 8.625% 3/15/12 | 1,000,000 | 807,500 | ||
Sally Holdings LLC: | ||||
9.25% 11/15/14 | 1,410,000 | 1,417,050 | ||
10.5% 11/15/16 | 700,000 | 707,000 | ||
Sonic Automotive, Inc. 8.625% 8/15/13 | 700,000 | 532,000 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Specialty Retail - continued | ||||
Toys 'R' US, Inc.: | ||||
7.375% 10/15/18 | $ 445,000 | $ 311,500 | ||
7.625% 8/1/11 | 4,470,000 | 3,922,425 | ||
| 9,863,275 | |||
Textiles, Apparel & Luxury Goods - 0.0% | ||||
Hanesbrands, Inc. 6.5081% 12/15/14 (h)(m) | 2,345,000 | 2,034,288 | ||
Levi Strauss & Co.: | ||||
8.875% 4/1/16 | 1,780,000 | 1,535,250 | ||
9.75% 1/15/15 | 2,180,000 | 1,978,350 | ||
| 5,547,888 | |||
TOTAL CONSUMER DISCRETIONARY | 262,355,976 | |||
CONSUMER STAPLES - 1.3% | ||||
Beverages - 0.1% | ||||
Constellation Brands, Inc.: | ||||
7.25% 9/1/16 | 2,050,000 | 2,009,000 | ||
7.25% 5/15/17 | 775,000 | 757,563 | ||
8.375% 12/15/14 | 2,395,000 | 2,466,850 | ||
Diageo Capital PLC 5.75% 10/23/17 | 8,133,000 | 8,060,673 | ||
| 13,294,086 | |||
Food & Staples Retailing - 0.3% | ||||
Albertsons, Inc.: | ||||
7.45% 8/1/29 | 250,000 | 238,110 | ||
7.75% 6/15/26 | 210,000 | 195,300 | ||
CVS Caremark Corp.: | ||||
6.036% 12/10/28 (h) | 12,277,725 | 11,334,304 | ||
6.302% 6/1/37 (m) | 8,615,000 | 7,311,981 | ||
Rite Aid Corp.: | ||||
6.875% 8/15/13 | 735,000 | 444,675 | ||
7.5% 3/1/17 | 3,030,000 | 2,522,475 | ||
9.375% 12/15/15 | 735,000 | 474,075 | ||
10.375% 7/15/16 | 1,425,000 | 1,362,656 | ||
SUPERVALU, Inc. 7.5% 11/15/14 | 1,150,000 | 1,138,500 | ||
Wal-Mart Stores, Inc. 6.2% 4/15/38 | 10,570,000 | 10,456,034 | ||
| 35,478,110 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER STAPLES - continued | ||||
Food Products - 0.6% | ||||
Bertin Ltda. 10.25% 10/5/16 (h) | $ 505,000 | $ 517,625 | ||
Cargill, Inc.: | ||||
6% 11/27/17 (h) | 8,750,000 | 8,651,554 | ||
6.625% 9/15/37 (h) | 8,334,000 | 8,027,751 | ||
Dean Foods Co.: | ||||
6.9% 10/15/17 | 4,170,000 | 3,753,000 | ||
7% 6/1/16 | 3,235,000 | 2,992,375 | ||
General Mills, Inc. 5.2% 3/17/15 | 7,738,000 | 7,600,798 | ||
Gruma SA de CV 7.75% | 1,685,000 | 1,672,363 | ||
Kraft Foods, Inc.: | ||||
6.125% 2/1/18 | 5,261,000 | 5,166,807 | ||
6.875% 2/1/38 | 11,635,000 | 11,382,800 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | 1,595,000 | 1,595,000 | ||
Pierre Foods, Inc. 9.875% 7/15/12 (c) | 540,000 | 43,200 | ||
Pilgrims Pride Corp.: | ||||
7.625% 5/1/15 | 1,725,000 | 1,509,375 | ||
8.375% 5/1/17 | 1,425,000 | 1,129,313 | ||
Smithfield Foods, Inc. 7.75% 7/1/17 | 5,140,000 | 4,548,900 | ||
| 58,590,861 | |||
Personal Products - 0.0% | ||||
Revlon Consumer Products Corp. 9.5% 4/1/11 | 1,205,000 | 1,156,800 | ||
Tobacco - 0.3% | ||||
Philip Morris International, Inc.: | ||||
4.875% 5/16/13 | 7,558,000 | 7,487,166 | ||
5.65% 5/16/18 | 7,161,000 | 7,045,035 | ||
6.375% 5/16/38 | 12,110,000 | 11,910,476 | ||
Reynolds American, Inc. 7.25% 6/15/37 | 4,865,000 | 4,794,866 | ||
| 31,237,543 | |||
TOTAL CONSUMER STAPLES | 139,757,400 | |||
ENERGY - 2.4% | ||||
Energy Equipment & Services - 0.1% | ||||
Compagnie Generale de Geophysique SA: | ||||
7.5% 5/15/15 | 1,640,000 | 1,627,700 | ||
7.75% 5/15/17 | 2,970,000 | 2,947,725 | ||
Complete Production Services, Inc. 8% 12/15/16 | 740,000 | 727,050 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Energy Equipment & Services - continued | ||||
Helix Energy Solutions Group, Inc. 9.5% 1/15/16 (h) | $ 1,295,000 | $ 1,290,144 | ||
Seitel, Inc. 9.75% 2/15/14 | 2,545,000 | 2,245,963 | ||
Weatherford International Ltd. 7% 3/15/38 | 5,880,000 | 5,857,991 | ||
| 14,696,573 | |||
Oil, Gas & Consumable Fuels - 2.3% | ||||
Anadarko Petroleum Corp.: | ||||
5.95% 9/15/16 | 8,600,000 | 8,380,691 | ||
6.45% 9/15/36 | 2,115,000 | 1,943,911 | ||
Arch Western Finance LLC 6.75% 7/1/13 | 1,600,000 | 1,588,000 | ||
Atlas Pipeline Partners LP 8.125% 12/15/15 | 2,145,000 | 2,037,750 | ||
Canadian Natural Resources Ltd.: | ||||
5.7% 5/15/17 | 14,850,000 | 14,331,869 | ||
6.25% 3/15/38 | 3,050,000 | 2,809,227 | ||
6.75% 2/1/39 | 2,980,000 | 2,931,381 | ||
Chaparral Energy, Inc.: | ||||
8.5% 12/1/15 | 1,530,000 | 1,327,275 | ||
8.875% 2/1/17 | 1,140,000 | 986,100 | ||
Chesapeake Energy Corp.: | ||||
6.5% 8/15/17 | 1,925,000 | 1,780,625 | ||
6.875% 1/15/16 | 740,000 | 706,700 | ||
7.5% 9/15/13 | 1,300,000 | 1,322,750 | ||
7.5% 6/15/14 | 1,790,000 | 1,798,950 | ||
7.625% 7/15/13 | 600,000 | 606,000 | ||
Connacher Oil and Gas Ltd. 10.25% 12/15/15 (h) | 1,145,000 | 1,182,213 | ||
Drummond Co., Inc. 7.375% 2/15/16 (h) | 4,035,000 | 3,500,363 | ||
Duke Capital LLC 6.75% 2/15/32 | 10,542,000 | 9,867,460 | ||
Duke Energy Field Services 6.45% 11/3/36 (h) | 2,400,000 | 2,178,998 | ||
El Paso Performance-Linked Trust 7.75% 7/15/11 (h) | 1,165,000 | 1,173,738 | ||
Energy Partners Ltd. 9.75% 4/15/14 | 3,070,000 | 2,724,625 | ||
Forest Oil Corp.: | ||||
7.25% 6/15/19 | 1,080,000 | 990,900 | ||
7.75% 5/1/14 | 675,000 | 671,625 | ||
KazMunaiGaz Finance Sub BV 9.125% 7/2/18 (h) | 510,000 | 521,475 | ||
Massey Energy Co. 6.875% 12/15/13 | 4,565,000 | 4,450,875 | ||
Nakilat, Inc. 6.067% 12/31/33 (h) | 2,885,000 | 2,519,095 | ||
National Gas Co. of Trinidad & Tobago Ltd. 6.05% 1/15/36 (h) | 240,000 | 223,704 | ||
Newfield Exploration Co. 7.125% 5/15/18 | 1,285,000 | 1,207,900 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Nexen, Inc.: | ||||
5.875% 3/10/35 | $ 240,000 | $ 203,393 | ||
6.4% 5/15/37 | 3,645,000 | 3,269,306 | ||
NGPL PipeCo LLC 6.514% 12/15/12 (h) | 4,600,000 | 4,666,452 | ||
OPTI Canada, Inc.: | ||||
7.875% 12/15/14 | 2,280,000 | 2,254,464 | ||
8.25% 12/15/14 | 3,965,000 | 3,945,175 | ||
Pan American Energy LLC 7.75% 2/9/12 (h) | 3,120,000 | 3,042,000 | ||
Pemex Project Funding Master Trust: | ||||
5.75% 3/1/18 (h) | 860,000 | 844,950 | ||
6.625% 6/15/35 | 625,000 | 620,313 | ||
6.625% 6/15/35 (h) | 260,000 | 258,050 | ||
Petro-Canada: | ||||
6.05% 5/15/18 | 3,850,000 | 3,727,967 | ||
6.8% 5/15/38 | 18,950,000 | 18,027,779 | ||
Petrohawk Energy Corp.: | ||||
7.875% 6/1/15 (h) | 1,725,000 | 1,604,250 | ||
9.125% 7/15/13 | 4,270,000 | 4,227,300 | ||
Petroleos de Venezuela SA: | ||||
5.25% 4/12/17 | 9,205,000 | 6,282,413 | ||
5.375% 4/12/27 | 3,045,000 | 1,728,038 | ||
Petroleum Development Corp. 12% 2/15/18 | 1,605,000 | 1,685,250 | ||
Petrozuata Finance, Inc.: | ||||
7.63% 4/1/09 (h) | 1,258,137 | 1,258,137 | ||
8.22% 4/1/17 (h) | 2,178,398 | 2,254,642 | ||
Pioneer Natural Resources Co. 6.65% 3/15/17 | 2,935,000 | 2,678,188 | ||
Plains All American Pipeline LP: | ||||
6.125% 1/15/17 | 6,185,000 | 6,032,670 | ||
6.65% 1/15/37 | 4,430,000 | 4,003,918 | ||
Plains Exploration & Production Co.: | ||||
7% 3/15/17 | 4,040,000 | 3,625,900 | ||
7.75% 6/15/15 | 485,000 | 461,963 | ||
Range Resources Corp.: | ||||
6.375% 3/15/15 (Reg. S) | 1,085,000 | 1,022,613 | ||
7.375% 7/15/13 | 2,060,000 | 2,060,000 | ||
7.5% 5/15/16 | 2,615,000 | 2,595,388 | ||
Ras Laffan Liquid Natural Gas Co. Ltd. III 6.332% 9/30/27 (h) | 1,840,000 | 1,669,726 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
SandRidge Energy, Inc.: | ||||
6.4163% 4/1/14 (h)(m) | $ 2,720,000 | $ 2,529,600 | ||
8.625% 4/1/15 pay-in-kind (h) | 6,045,000 | 5,863,650 | ||
Ship Finance International Ltd. 8.5% 12/15/13 | 330,000 | 326,700 | ||
Southwestern Energy Co. 7.5% 2/1/18 (h) | 965,000 | 977,063 | ||
Spectra Energy Capital, LLC 6.2% 4/15/18 | 14,500,000 | 14,153,305 | ||
Suncor Energy, Inc.: | ||||
6.1% 6/1/18 | 9,625,000 | 9,558,443 | ||
6.85% 6/1/39 | 10,460,000 | 10,474,529 | ||
Teekay Corp. 8.875% 7/15/11 | 2,115,000 | 2,231,325 | ||
TEPPCO Partners LP: | ||||
6.65% 4/15/18 | 4,741,000 | 4,770,508 | ||
7.55% 4/15/38 | 9,095,000 | 9,136,582 | ||
Tesoro Corp. 6.5% 6/1/17 | 365,000 | 305,688 | ||
Texas Eastern Transmission LP 6% 9/15/17 (h) | 4,381,000 | 4,273,666 | ||
TNK-BP Finance SA: | ||||
6.875% 7/18/11 (h) | 1,200,000 | 1,146,000 | ||
7.5% 3/13/13 (Reg. S) | 1,145,000 | 1,079,163 | ||
Valero Energy Corp. 6.625% 6/15/37 | 2,785,000 | 2,457,339 | ||
XTO Energy, Inc.: | ||||
6.375% 6/15/38 | 13,285,000 | 11,975,949 | ||
6.75% 8/1/37 | 10,380,000 | 9,790,323 | ||
YPF SA 10% 11/2/28 | 1,475,000 | 1,430,750 | ||
| 250,295,028 | |||
TOTAL ENERGY | 264,991,601 | |||
FINANCIALS - 4.0% | ||||
Capital Markets - 0.9% | ||||
Bear Stearns Companies, Inc. 6.95% 8/10/12 | 9,630,000 | 10,002,498 | ||
BlackRock, Inc. 6.25% 9/15/17 | 6,750,000 | 6,629,729 | ||
Goldman Sachs Group, Inc.: | ||||
5.625% 1/15/17 | 3,200,000 | 2,897,322 | ||
6.75% 10/1/37 | 28,895,000 | 25,423,352 | ||
JPMorgan Chase Capital XX 6.55% 9/29/36 | 10,020,000 | 8,244,616 | ||
JPMorgan Chase Capital XXV 6.8% 10/1/37 | 7,405,000 | 6,321,019 | ||
Lehman Brothers Holdings, Inc.: | ||||
6.75% 12/28/17 | 4,235,000 | 3,798,185 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Lehman Brothers Holdings, Inc.: - continued | ||||
6.875% 5/2/18 | $ 6,600,000 | $ 6,144,765 | ||
7% 9/27/27 | 5,000,000 | 4,458,450 | ||
Merrill Lynch & Co., Inc.: | ||||
6.15% 4/25/13 | 3,165,000 | 2,999,265 | ||
6.875% 4/25/18 | 557,000 | 513,002 | ||
Morgan Stanley 4.75% 4/1/14 | 1,635,000 | 1,435,569 | ||
Northern Trust Corp. 5.5% 8/15/13 | 2,275,000 | 2,314,533 | ||
UBS AG Stamford Branch: | ||||
5.75% 4/25/18 | 12,400,000 | 11,871,128 | ||
5.875% 12/20/17 | 12,585,000 | 12,268,663 | ||
| 105,322,096 | |||
Commercial Banks - 0.7% | ||||
American Express Bank FSB 6% 9/13/17 | 10,000,000 | 9,186,950 | ||
Bank of America NA: | ||||
5.3% 3/15/17 | 1,515,000 | 1,374,775 | ||
6% 10/15/36 | 690,000 | 595,837 | ||
BB&T Capital Trust IV 6.82% 6/12/77 (m) | 2,314,000 | 1,803,738 | ||
Credit Suisse First Boston 6% 2/15/18 | 13,365,000 | 12,823,089 | ||
Development Bank of Philippines 8.375% (m) | 1,355,000 | 1,365,163 | ||
Ex-Im Ukraine 7.65% 9/7/11 (Issued by Credit Suisse London Branch for Ex-Im Ukraine) | 3,665,000 | 3,426,775 | ||
EXIM of Ukraine 7.75% 9/23/09 (Issued by Dresdner Bank AG for EXIM Ukraine) | 445,000 | 440,550 | ||
HBOS PLC 6.75% 5/21/18 (h) | 10,175,000 | 9,189,500 | ||
HSBC Holdings PLC 6.5% 9/15/37 | 8,400,000 | 7,659,481 | ||
HSBK (Europe) B.V. 9.25% 10/16/13 (h) | 1,085,000 | 1,047,025 | ||
KeyCorp Capital Trust VII 5.7% 6/15/35 | 2,600,000 | 1,660,451 | ||
Standard Chartered Bank 6.4% 9/26/17 (h) | 11,244,000 | 10,642,131 | ||
UBS Luxembourg SA (Reg. S) 8.375% 10/22/11 | 1,545,000 | 1,552,725 | ||
Vimpel Communications 8% 2/11/10 (Issued by UBS Luxembourg SA for Vimpel Communications) | 195,000 | 196,950 | ||
Wachovia Bank NA 6.6% 1/15/38 | 9,000,000 | 7,051,041 | ||
Wells Fargo & Co. 5.625% 12/11/17 | 10,423,000 | 10,018,379 | ||
| 80,034,560 | |||
Consumer Finance - 0.7% | ||||
American Express Co. 8.15% 3/19/38 | 9,010,000 | 9,196,264 | ||
American General Finance Corp. 6.9% 12/15/17 | 5,510,000 | 4,413,857 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Ford Motor Credit Co. LLC: | ||||
5.7% 1/15/10 | $ 1,415,000 | $ 1,234,623 | ||
7% 10/1/13 | 280,000 | 203,000 | ||
7.25% 10/25/11 | 840,000 | 643,474 | ||
7.375% 10/28/09 | 1,420,000 | 1,319,782 | ||
7.875% 6/15/10 | 710,000 | 612,041 | ||
9.875% 8/10/11 | 1,410,000 | 1,157,470 | ||
General Electric Capital Corp.: | ||||
5.625% 9/15/17 | 4,445,000 | 4,344,530 | ||
5.625% 5/1/18 | 25,000,000 | 24,305,525 | ||
5.875% 1/14/38 | 14,000,000 | 12,606,090 | ||
6.375% 11/15/67 (m) | 9,000,000 | 8,242,956 | ||
SLM Corp.: | ||||
2.94% 7/27/09 (m) | 1,827,000 | 1,731,463 | ||
2.96% 7/26/10 (m) | 6,515,000 | 5,872,543 | ||
4% 1/15/09 | 1,885,000 | 1,870,806 | ||
4.5% 7/26/10 | 4,120,000 | 3,748,162 | ||
| 81,502,586 | |||
Diversified Financial Services - 0.5% | ||||
Bank of America Corp. 5.75% 12/1/17 | 4,590,000 | 4,281,837 | ||
GlaxoSmithKline Capital, Inc.: | ||||
5.65% 5/15/18 | 5,941,000 | 5,958,015 | ||
6.375% 5/15/38 | 7,549,000 | 7,553,069 | ||
Hilcorp Energy I LP/Hilcorp Finance Co.: | ||||
7.75% 11/1/15 (h) | 5,185,000 | 4,692,425 | ||
9% 6/1/16 (h) | 1,000,000 | 970,000 | ||
International Lease Finance Corp. 5.65% 6/1/14 | 1,600,000 | 1,340,848 | ||
Leucadia National Corp.: | ||||
7% 8/15/13 | 6,420,000 | 6,259,500 | ||
7.125% 3/15/17 | 880,000 | 836,000 | ||
NSG Holdings II, LLC 7.75% 12/15/25 (h) | 5,470,000 | 5,251,200 | ||
OAO TMK 8.5% 9/29/09 (Issued by TMK Capital SA for OAO TMK) | 4,200,000 | 4,200,000 | ||
Pakistan International Sukuk Co. Ltd. 5.3569% 1/27/10 (m) | 500,000 | 450,000 | ||
Sunwest Management, Inc. 8.385% 6/9/10 (m) | 325,000 | 298,415 | ||
ZFS Finance USA Trust V 6.5% 5/9/67 (h)(m) | 12,400,000 | 10,682,265 | ||
| 52,773,574 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Insurance - 0.3% | ||||
American International Group, Inc.: | ||||
5.85% 1/16/18 | $ 8,920,000 | $ 7,510,631 | ||
8.175% 5/15/58 (h)(m) | 7,875,000 | 6,082,508 | ||
Pacific Life Global Funding 5.15% 4/15/13 (h) | 7,895,000 | 7,899,713 | ||
The Chubb Corp.: | ||||
5.75% 5/15/18 | 4,035,000 | 3,871,506 | ||
6.5% 5/15/38 | 3,390,000 | 3,211,011 | ||
USI Holdings Corp. 6.6794% 11/15/14 (h)(m) | 150,000 | 117,000 | ||
| 28,692,369 | |||
Real Estate Investment Trusts - 0.4% | ||||
Duke Realty LP: | ||||
5.4% 8/15/14 | 4,695,000 | 4,301,578 | ||
5.875% 8/15/12 | 895,000 | 880,649 | ||
5.95% 2/15/17 | 490,000 | 451,404 | ||
6.25% 5/15/13 | 14,190,000 | 13,993,199 | ||
6.5% 1/15/18 | 3,795,000 | 3,540,226 | ||
Highwoods/Forsyth LP 5.85% 3/15/17 | 80,000 | 68,000 | ||
HMB Capital Trust V 6.37% 12/15/36 (c)(h)(m) | 270,000 | 2,700 | ||
Hospitality Properties Trust 6.7% 1/15/18 | 5,000,000 | 4,144,435 | ||
Host Hotels & Resorts LP 6.875% 11/1/14 | 835,000 | 749,413 | ||
iStar Financial, Inc. 5.95% 10/15/13 | 300,000 | 211,500 | ||
Liberty Property LP 6.625% 10/1/17 | 3,785,000 | 3,532,892 | ||
Omega Healthcare Investors, Inc.: | ||||
7% 4/1/14 | 4,880,000 | 4,672,600 | ||
7% 1/15/16 | 400,000 | 373,000 | ||
Reckson Operating Partnership LP 6% 3/31/16 | 4,021,000 | 3,430,653 | ||
Rouse Co. 5.375% 11/26/13 | 100,000 | 76,171 | ||
Rouse Co. LP/TRC, Inc. 6.75% 5/1/13 (h) | 100,000 | 82,000 | ||
Senior Housing Properties Trust 8.625% 1/15/12 | 250,000 | 255,000 | ||
UDR, Inc. 5.5% 4/1/14 | 2,755,000 | 2,597,320 | ||
Ventas Realty LP: | ||||
6.5% 6/1/16 | 105,000 | 98,700 | ||
6.625% 10/15/14 | 1,350,000 | 1,292,625 | ||
6.75% 4/1/17 | 1,285,000 | 1,220,750 | ||
| 45,974,815 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Real Estate Management & Development - 0.2% | ||||
American Real Estate Partners/American Real Estate Finance Corp.: | ||||
7.125% 2/15/13 | $ 7,880,000 | $ 6,885,150 | ||
8.125% 6/1/12 | 2,465,000 | 2,295,531 | ||
ERP Operating LP: | ||||
5.375% 8/1/16 | 2,170,000 | 1,932,695 | ||
5.5% 10/1/12 | 3,140,000 | 3,012,924 | ||
5.75% 6/15/17 | 6,260,000 | 5,642,514 | ||
Forest City Enterprises, Inc. 7.625% 6/1/15 | 100,000 | 90,000 | ||
Inversiones y Representaciones SA 8.5% 2/2/17 (h) | 910,000 | 618,800 | ||
| 20,477,614 | |||
Thrifts & Mortgage Finance - 0.3% | ||||
Bank of America Corp.: | ||||
4.9% 5/1/13 | 13,200,000 | 12,775,224 | ||
5.65% 5/1/18 | 13,300,000 | 12,269,396 | ||
Credit Suisse First Boston (New York Branch) 5% 5/15/13 | 6,309,000 | 6,145,124 | ||
Wrightwood Capital LLC 10.5% 6/1/14 (h) | 100,000 | 87,000 | ||
| 31,276,744 | |||
TOTAL FINANCIALS | 446,054,358 | |||
HEALTH CARE - 0.5% | ||||
Health Care Equipment & Supplies - 0.1% | ||||
Bausch & Lomb, Inc. 9.875% 11/1/15 (h) | 3,055,000 | 3,139,013 | ||
Biomet, Inc.: | ||||
10% 10/15/17 | 4,825,000 | 5,198,938 | ||
10.375% 10/15/17 pay-in-kind | 3,155,000 | 3,300,919 | ||
11.625% 10/15/17 | 2,045,000 | 2,152,363 | ||
FMC Finance III SA 6.875% 7/15/17 | 1,030,000 | 988,800 | ||
| 14,780,033 | |||
Health Care Providers & Services - 0.2% | ||||
Community Health Systems, Inc. 8.875% 7/15/15 | 4,865,000 | 4,859,162 | ||
DASA Finance Corp. 8.75% 5/29/18 (h) | 590,000 | 595,900 | ||
HCA, Inc.: | ||||
6.5% 2/15/16 | 1,420,000 | 1,166,175 | ||
9.125% 11/15/14 | 1,665,000 | 1,712,869 | ||
9.25% 11/15/16 | 3,450,000 | 3,557,813 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
HEALTH CARE - continued | ||||
Health Care Providers & Services - continued | ||||
HCA, Inc.: - continued | ||||
9.625% 11/15/16 pay-in-kind | $ 9,515,000 | $ 9,693,406 | ||
HealthSouth Corp. 10.75% 6/15/16 | 1,280,000 | 1,382,400 | ||
IASIS Healthcare LLC/IASIS Capital Corp. 8.75% 6/15/14 | 1,350,000 | 1,356,750 | ||
Skilled Healthcare Group, Inc. 11% 1/15/14 | 64,000 | 67,520 | ||
Sun Healthcare Group, Inc. 9.125% 4/15/15 | 10,000 | 10,000 | ||
Tenet Healthcare Corp.: | ||||
6.5% 6/1/12 | 285,000 | 272,175 | ||
7.375% 2/1/13 | 1,975,000 | 1,871,313 | ||
Viant Holdings, Inc. 10.125% 7/15/17 (h) | 71,000 | 59,995 | ||
| 26,605,478 | |||
Health Care Technology - 0.1% | ||||
DJO Finance LLC / DJO Finance Corp. 10.875% 11/15/14 | 6,520,000 | 6,568,900 | ||
Pharmaceuticals - 0.1% | ||||
AstraZeneca PLC: | ||||
5.9% 9/15/17 | 3,520,000 | 3,656,129 | ||
6.45% 9/15/37 | 2,600,000 | 2,666,362 | ||
| 6,322,491 | |||
TOTAL HEALTH CARE | 54,276,902 | |||
INDUSTRIALS - 0.9% | ||||
Aerospace & Defense - 0.1% | ||||
Alliant Techsystems, Inc. 6.75% 4/1/16 | 2,045,000 | 1,978,538 | ||
BE Aerospace, Inc. 8.5% 7/1/18 | 520,000 | 542,100 | ||
Bombardier, Inc.: | ||||
6.3% 5/1/14 (h) | 1,575,000 | 1,512,000 | ||
7.45% 5/1/34 (h) | 425,000 | 405,875 | ||
8% 11/15/14 (h) | 1,915,000 | 1,972,450 | ||
| 6,410,963 | |||
Airlines - 0.2% | ||||
American Airlines, Inc. pass-thru trust certificates: | ||||
6.817% 5/23/11 | 3,390,000 | 2,627,250 | ||
6.977% 11/23/22 | 1,212,061 | 787,840 | ||
8.608% 10/1/12 | 960,000 | 806,400 | ||
AMR Corp. 9% 8/1/12 | 485,000 | 276,450 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Airlines - continued | ||||
Continental Airlines, Inc. pass-thru trust certificates: | ||||
7.566% 9/15/21 | $ 396,970 | $ 345,364 | ||
7.73% 9/15/12 | 19,588 | 17,090 | ||
7.875% 7/2/18 | 1,555,470 | 1,042,165 | ||
9.558% 9/1/19 | 251,878 | 181,352 | ||
9.798% 4/1/21 | 798,009 | 670,327 | ||
Delta Air Lines, Inc. pass-thru trust certificates: | ||||
7.57% 11/18/10 | 7,640,000 | 7,200,700 | ||
8.021% 8/10/22 | 1,002,104 | 751,578 | ||
8.954% 8/10/14 | 1,573,111 | 1,179,833 | ||
Northwest Airlines, Inc. pass-thru trust certificates 8.028% 11/1/17 | 1,165,000 | 932,000 | ||
United Air Lines, Inc. pass-thru trust certificates: | ||||
Class B, 7.336% 7/2/19 | 904,705 | 624,246 | ||
7.032% 4/1/12 | 750,105 | 738,853 | ||
7.186% 10/1/12 | 1,862,895 | 1,837,280 | ||
| 20,018,728 | |||
Building Products - 0.0% | ||||
Nortek, Inc. 10% 12/1/13 (h) | 3,025,000 | 2,767,875 | ||
Ply Gem Industries, Inc. 11.75% 6/15/13 (h) | 1,415,000 | 1,266,425 | ||
| 4,034,300 | |||
Commercial Services & Supplies - 0.2% | ||||
Allied Waste North America, Inc.: | ||||
6.875% 6/1/17 | 1,025,000 | 1,008,344 | ||
7.125% 5/15/16 | 395,000 | 398,950 | ||
7.25% 3/15/15 | 800,000 | 810,000 | ||
7.875% 4/15/13 | 120,000 | 122,850 | ||
ARAMARK Corp.: | ||||
6.3006% 2/1/15 (m) | 3,270,000 | 3,041,100 | ||
8.5% 2/1/15 | 3,130,000 | 3,153,475 | ||
FTI Consulting, Inc.: | ||||
7.625% 6/15/13 | 2,105,000 | 2,178,675 | ||
7.75% 10/1/16 | 915,000 | 947,025 | ||
Iron Mountain, Inc.: | ||||
6.625% 1/1/16 | 2,670,000 | 2,516,475 | ||
7.75% 1/15/15 | 2,545,000 | 2,545,000 | ||
8.625% 4/1/13 | 210,000 | 211,050 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Commercial Services & Supplies - continued | ||||
JohnsonDiversey, Inc. 9.625% 5/15/12 | $ 210,000 | $ 212,100 | ||
Rental Service Corp. 9.5% 12/1/14 | 1,405,000 | 1,124,000 | ||
US Investigations Services, Inc.: | ||||
10.5% 11/1/15 (h) | 1,250,000 | 1,118,750 | ||
11.75% 5/1/16 (h) | 950,000 | 779,000 | ||
| 20,166,794 | |||
Electrical Equipment - 0.0% | ||||
General Cable Corp. 7.125% 4/1/17 | 700,000 | 665,000 | ||
Sensus Metering Systems, Inc. 8.625% 12/15/13 | 4,885,000 | 4,787,300 | ||
| 5,452,300 | |||
Industrial Conglomerates - 0.2% | ||||
Covidien International Finance SA 6.55% 10/15/37 | 3,620,000 | 3,682,289 | ||
General Electric Co. 5.25% 12/6/17 | 15,620,000 | 15,095,730 | ||
Nell AF Sarl 8.375% 8/15/15 (h) | 500,000 | 292,500 | ||
Sequa Corp.: | ||||
11.75% 12/1/15 (h) | 1,415,000 | 1,195,675 | ||
13.5% 12/1/15 pay-in-kind (h) | 705,000 | 572,460 | ||
| 20,838,654 | |||
Machinery - 0.1% | ||||
Case Corp. 7.25% 1/15/16 | 1,040,000 | 1,007,500 | ||
Terex Corp. 8% 11/15/17 | 5,965,000 | 5,913,105 | ||
| 6,920,605 | |||
Marine - 0.0% | ||||
Navios Maritime Holdings, Inc. 9.5% 12/15/14 | 490,000 | 467,950 | ||
Road & Rail - 0.1% | ||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.: | ||||
7.625% 5/15/14 | 1,895,000 | 1,383,350 | ||
7.75% 5/15/16 | 2,145,000 | 1,490,775 | ||
CSX Corp. 6.25% 4/1/15 | 2,470,000 | 2,420,175 | ||
Hertz Corp.: | ||||
8.875% 1/1/14 | 3,020,000 | 2,808,600 | ||
10.5% 1/1/16 | 1,920,000 | 1,680,000 | ||
Kansas City Southern Railway Co. 8% 6/1/15 | 2,415,000 | 2,463,300 | ||
| 12,246,200 | |||
Trading Companies & Distributors - 0.0% | ||||
Ashtead Capital, Inc. 9% 8/15/16 (h) | 300,000 | 272,250 | ||
Ashtead Holdings PLC 8.625% 8/1/15 (h) | 275,000 | 248,188 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Trading Companies & Distributors - continued | ||||
Penhall International Corp. 12% 8/1/14 (h) | $ 60,000 | $ 42,000 | ||
VWR Funding, Inc. 10.25% 7/15/15 | 1,155,000 | 1,051,050 | ||
| 1,613,488 | |||
TOTAL INDUSTRIALS | 98,169,982 | |||
INFORMATION TECHNOLOGY - 0.5% | ||||
Communications Equipment - 0.1% | ||||
Lucent Technologies, Inc.: | ||||
6.45% 3/15/29 | 2,700,000 | 1,863,000 | ||
6.5% 1/15/28 | 1,940,000 | 1,338,600 | ||
Nortel Networks Corp.: | ||||
7.0406% 7/15/11 (m) | 485,000 | 449,838 | ||
10.125% 7/15/13 | 1,005,000 | 934,650 | ||
| 4,586,088 | |||
Computers & Peripherals - 0.0% | ||||
Seagate Technology HDD Holdings 6.8% 10/1/16 | 2,650,000 | 2,385,000 | ||
Electronic Equipment & Instruments - 0.2% | ||||
Celestica, Inc. 7.875% 7/1/11 | 1,450,000 | 1,460,875 | ||
Flextronics International Ltd.: | ||||
6.25% 11/15/14 | 420,000 | 386,400 | ||
6.5% 5/15/13 | 2,510,000 | 2,371,950 | ||
Jabil Circuit, Inc. 8.25% 3/15/18 | 5,260,000 | 5,285,143 | ||
NXP BV: | ||||
5.5406% 10/15/13 (m) | 435,000 | 341,475 | ||
9.5% 10/15/15 | 1,125,000 | 765,000 | ||
Texas Competitive Electric Holdings Co. LLC: | ||||
Series A, 10.25% 11/1/15 (h) | 4,110,000 | 4,099,725 | ||
Series B, 10.25% 11/1/15 (h) | 3,900,000 | 3,890,250 | ||
10.5% 11/1/16 pay-in-kind (h)(m) | 3,965,000 | 3,806,400 | ||
Tyco Electronics Group SA 7.125% 10/1/37 | 1,895,000 | 1,908,104 | ||
| 24,315,322 | |||
IT Services - 0.0% | ||||
First Data Corp. 9.875% 9/24/15 (h) | 2,050,000 | 1,773,250 | ||
Iron Mountain, Inc. 8% 6/15/20 | 705,000 | 683,850 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INFORMATION TECHNOLOGY - continued | ||||
IT Services - continued | ||||
SunGard Data Systems, Inc.: | ||||
9.125% 8/15/13 | $ 995,000 | $ 1,004,950 | ||
10.25% 8/15/15 | 990,000 | 996,188 | ||
| 4,458,238 | |||
Office Electronics - 0.1% | ||||
Xerox Capital Trust I 8% 2/1/27 | 4,835,000 | 4,641,600 | ||
Semiconductors & Semiconductor Equipment - 0.1% | ||||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 | 2,280,000 | 2,126,100 | ||
9.25% 6/1/16 | 710,000 | 690,475 | ||
Avago Technologies Finance Ltd.: | ||||
10.125% 12/1/13 | 2,130,000 | 2,300,400 | ||
11.875% 12/1/15 | 710,000 | 781,000 | ||
Freescale Semiconductor, Inc.: | ||||
6.6513% 12/15/14 (m) | 1,045,000 | 768,075 | ||
8.875% 12/15/14 | 1,140,000 | 924,882 | ||
9.125% 12/15/14 pay-in-kind | 1,110,000 | 861,693 | ||
10.125% 12/15/16 | 1,150,000 | 879,750 | ||
Spansion LLC 11.25% 1/15/16 (h) | 700,000 | 437,500 | ||
| 9,769,875 | |||
Software - 0.0% | ||||
SS&C Technologies, Inc. 11.75% 12/1/13 | 95,000 | 100,225 | ||
TOTAL INFORMATION TECHNOLOGY | 50,256,348 | |||
MATERIALS - 0.8% | ||||
Chemicals - 0.1% | ||||
Berry Plastics Corp. 7.5406% 2/15/15 (m) | 1,350,000 | 1,275,750 | ||
Chemtura Corp. 6.875% 6/1/16 | 735,000 | 620,193 | ||
Equistar Chemicals LP 7.55% 2/15/26 | 350,000 | 227,500 | ||
JohnsonDiversey Holdings, Inc. 10.67% 5/15/13 | 480,000 | 470,400 | ||
Momentive Performance Materials, Inc. 9.75% 12/1/14 | 4,500,000 | 4,005,000 | ||
Nalco Co. 7.75% 11/15/11 | 1,400,000 | 1,424,500 | ||
NOVA Chemicals Corp.: | ||||
5.9525% 11/15/13 (m) | 1,560,000 | 1,343,550 | ||
6.5% 1/15/12 | 5,650,000 | 5,141,500 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
MATERIALS - continued | ||||
Chemicals - continued | ||||
Pliant Corp. 11.35% 6/15/09 (f) | $ 60,253 | $ 48,805 | ||
PolyOne Corp. 8.875% 5/1/12 | 1,410,000 | 1,420,575 | ||
| 15,977,773 | |||
Construction Materials - 0.0% | ||||
Texas Industries, Inc. 7.25% 7/15/13 (h) | 940,000 | 878,900 | ||
Containers & Packaging - 0.1% | ||||
BWAY Corp. 10% 10/15/10 | 940,000 | 935,300 | ||
Crown Americas LLC/Crown Americas Capital Corp. 7.75% 11/15/15 | 700,000 | 722,750 | ||
Crown Cork & Seal, Inc.: | ||||
7.375% 12/15/26 | 280,000 | 238,000 | ||
8% 4/15/23 | 335,000 | 298,150 | ||
Graphic Packaging International, Inc. 8.5% 8/15/11 | 1,005,000 | 969,825 | ||
Greif, Inc. 6.75% 2/1/17 | 3,195,000 | 3,099,150 | ||
Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 | 170,000 | 140,250 | ||
Vitro SAB de CV 8.625% 2/1/12 | 2,415,000 | 2,113,125 | ||
| 8,516,550 | |||
Metals & Mining - 0.5% | ||||
Evraz Group SA: | ||||
8.875% 4/24/13 (h) | 4,505,000 | 4,414,900 | ||
9.5% 4/24/18 (h) | 715,000 | 691,763 | ||
FMG Finance Property Ltd.: | ||||
6.6819% 9/1/11 (h)(m) | 1,490,000 | 1,467,650 | ||
10% 9/1/13 (h) | 6,810,000 | 7,150,500 | ||
10.625% 9/1/16 (h) | 884,000 | 990,080 | ||
Freeport-McMoRan Copper & Gold, Inc.: | ||||
8.25% 4/1/15 | 4,030,000 | 4,221,425 | ||
8.375% 4/1/17 | 1,480,000 | 1,568,800 | ||
Noranda Aluminium Acquisition Corp. 6.8275% 5/15/15 pay-in-kind (m) | 500,000 | 426,250 | ||
OAO Severstal 9.75% 7/29/13 (Issued by Steel Capital SA for OAO Severstal) (h) | 750,000 | 748,125 | ||
RathGibson, Inc. 11.25% 2/15/14 | 350,000 | 336,875 | ||
Rio Tinto Finance Ltd.: | ||||
6.5% 7/15/18 | 7,128,000 | 7,171,581 | ||
7.125% 7/15/28 | 8,900,000 | 9,019,242 | ||
Steel Dynamics, Inc.: | ||||
6.75% 4/1/15 | 3,860,000 | 3,599,450 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Steel Dynamics, Inc.: - continued | ||||
7.375% 11/1/12 | $ 1,235,000 | $ 1,210,300 | ||
7.75% 4/15/16 (h) | 1,285,000 | 1,249,663 | ||
United States Steel Corp. 6.65% 6/1/37 | 3,395,000 | 2,881,652 | ||
Vale Overseas Ltd. 6.25% 1/23/17 | 2,685,000 | 2,685,814 | ||
Vedanta Resources PLC 6.625% 2/22/10 (h) | 2,000,000 | 2,002,600 | ||
| 51,836,670 | |||
Paper & Forest Products - 0.1% | ||||
Catalyst Paper Corp. 8.625% 6/15/11 | 845,000 | 686,563 | ||
Domtar Corp.: | ||||
5.375% 12/1/13 | 705,000 | 613,350 | ||
7.125% 8/15/15 | 975,000 | 928,688 | ||
Georgia-Pacific Corp.: | ||||
7% 1/15/15 (h) | 6,505,000 | 6,098,438 | ||
8.125% 5/15/11 | 3,130,000 | 3,145,650 | ||
8.875% 5/15/31 | 1,510,000 | 1,404,300 | ||
Stone Container Corp. 8.375% 7/1/12 | 2,545,000 | 2,239,600 | ||
Stone Container Finance Co. 7.375% 7/15/14 | 300,000 | 241,500 | ||
| 15,358,089 | |||
TOTAL MATERIALS | 92,567,982 | |||
TELECOMMUNICATION SERVICES - 1.7% | ||||
Diversified Telecommunication Services - 1.2% | ||||
AT&T, Inc.: | ||||
6.3% 1/15/38 | 40,171,000 | 37,879,807 | ||
6.8% 5/15/36 | 11,484,000 | 11,414,407 | ||
BellSouth Capital Funding Corp. 7.875% 2/15/30 | 1,060,000 | 1,141,395 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 | 3,465,000 | 3,274,425 | ||
Citizens Communications Co.: | ||||
6.25% 1/15/13 | 1,300,000 | 1,238,250 | ||
9% 8/15/31 | 650,000 | 565,500 | ||
Indosat Finance Co. BV 7.75% 11/5/10 | 1,085,000 | 1,095,850 | ||
Intelsat Ltd.: | ||||
6.5% 11/1/13 | 3,700,000 | 2,830,500 | ||
7.625% 4/15/12 | 5,385,000 | 4,563,788 | ||
11.25% 6/15/16 | 975,000 | 1,023,750 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
Level 3 Financing, Inc.: | ||||
6.845% 2/15/15 (m) | $ 350,000 | $ 280,875 | ||
8.75% 2/15/17 | 1,465,000 | 1,274,550 | ||
9.25% 11/1/14 | 185,000 | 169,738 | ||
Qwest Corp.: | ||||
6.0263% 6/15/13 (m) | 70,000 | 64,750 | ||
7.5% 10/1/14 | 2,440,000 | 2,250,900 | ||
7.625% 6/15/15 | 1,850,000 | 1,711,250 | ||
SBC Communications, Inc.: | ||||
6.15% 9/15/34 | 350,000 | 325,697 | ||
6.45% 6/15/34 | 370,000 | 353,526 | ||
Sistema Capital SA 8.875% 1/28/11 (Reg. S) | 1,280,000 | 1,288,000 | ||
Sprint Capital Corp.: | ||||
6.875% 11/15/28 | 15,675,000 | 13,323,750 | ||
7.625% 1/30/11 | 1,010,000 | 1,010,000 | ||
8.375% 3/15/12 | 1,295,000 | 1,304,713 | ||
8.75% 3/15/32 | 815,000 | 792,588 | ||
Telecom Italia Capital SA 7.2% 7/18/36 | 9,915,000 | 9,117,834 | ||
Telefonica Emisiones SAU 7.045% 6/20/36 | 4,999,000 | 5,076,190 | ||
Time Warner Telecom Holdings, Inc. 9.25% 2/15/14 | 3,795,000 | 3,813,975 | ||
U.S. West Communications: | ||||
6.875% 9/15/33 | 890,000 | 658,600 | ||
7.5% 6/15/23 | 920,000 | 745,200 | ||
Verizon Communications, Inc.: | ||||
6.1% 4/15/18 | 6,000,000 | 5,984,862 | ||
6.25% 4/1/37 | 2,348,000 | 2,156,309 | ||
6.4% 2/15/38 | 7,621,000 | 7,090,990 | ||
6.9% 4/15/38 | 6,295,000 | 6,233,208 | ||
Verizon Global Funding Corp. 7.75% 12/1/30 | 5,296,000 | 5,635,315 | ||
| 135,690,492 | |||
Wireless Telecommunication Services - 0.5% | ||||
Cricket Communications, Inc. 10% 7/15/15 (h) | 1,755,000 | 1,772,550 | ||
Digicel Group Ltd.: | ||||
8.875% 1/15/15 (h) | 7,220,000 | 6,732,650 | ||
9.125% 1/15/15 pay-in-kind (h)(m) | 2,575,000 | 2,401,188 | ||
9.25% 9/1/12 (h) | 820,000 | 840,500 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: | ||||
6.375% 6/15/15 | 1,525,000 | 1,441,125 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: - continued | ||||
7.625% 5/15/16 (h) | $ 1,485,000 | $ 1,481,288 | ||
8.375% 3/15/13 | 3,395,000 | 3,509,581 | ||
Intelsat Jackson Holdings Ltd.: | ||||
9.5% 6/15/16 (h) | 4,755,000 | 4,766,888 | ||
11.5% 6/15/16 (h) | 765,000 | 799,425 | ||
Intelsat Subsidiary Holding Co. Ltd. 8.875% 1/15/15 (h) | 5,155,000 | 5,097,264 | ||
Millicom International Cellular SA 10% 12/1/13 | 3,110,000 | 3,281,050 | ||
Mobile Telesystems Finance SA 8% 1/28/12 (h) | 2,695,000 | 2,688,263 | ||
Nextel Communications, Inc.: | ||||
5.95% 3/15/14 | 650,000 | 520,000 | ||
6.875% 10/31/13 | 5,490,000 | 4,515,525 | ||
7.375% 8/1/15 | 970,000 | 788,125 | ||
Orascom Telecom Finance SCA 7.875% 2/8/14 (h) | 3,800,000 | 3,477,000 | ||
Pakistan Mobile Communications Ltd. 8.625% 11/13/13 (h) | 1,870,000 | 1,421,200 | ||
Rural Cellular Corp. 8.25% 3/15/12 | 360,000 | 372,600 | ||
Sprint Nextel Corp. 6% 12/1/16 | 3,260,000 | 2,974,750 | ||
Telecom Personal SA 9.25% 12/22/10 (h) | 4,220,000 | 4,177,800 | ||
Vimpel Communications: | ||||
8.375% 4/30/13 (Issued by VIP Finance Ireland Ltd. for Vimpel Communications) (h) | 3,055,000 | 2,963,350 | ||
9.125% 4/30/18 (Issued by VIP Finance Ireland Ltd. for Vimpel Communications) (h) | 1,150,000 | 1,098,250 | ||
| 57,120,372 | |||
TOTAL TELECOMMUNICATION SERVICES | 192,810,864 | |||
UTILITIES - 1.9% | ||||
Electric Utilities - 0.9% | ||||
Commonwealth Edison Co.: | ||||
5.4% 12/15/11 | 1,923,000 | 1,943,997 | ||
5.8% 3/15/18 | 10,485,000 | 10,212,726 | ||
6.15% 9/15/17 | 5,140,000 | 5,152,557 | ||
Duke Energy Carolinas LLC: | ||||
5.25% 1/15/18 | 4,710,000 | 4,670,554 | ||
6.05% 4/15/38 | 4,552,000 | 4,436,689 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Edison Mission Energy: | ||||
7% 5/15/17 | $ 2,095,000 | $ 2,005,963 | ||
7.2% 5/15/19 | 3,810,000 | 3,667,125 | ||
7.625% 5/15/27 | 1,650,000 | 1,493,250 | ||
EDP Finance BV 6% 2/2/18 (h) | 5,953,000 | 5,904,584 | ||
Enel Finance International SA: | ||||
6.25% 9/15/17 (h) | 2,667,000 | 2,704,735 | ||
6.8% 9/15/37 (h) | 16,141,000 | 16,412,411 | ||
Energy Future Holdings: | ||||
10.875% 11/1/17 (h) | 4,420,000 | 4,519,450 | ||
11.25% 11/1/17 pay-in-kind (h)(m) | 4,680,000 | 4,586,400 | ||
Illinois Power Co. 6.125% 11/15/17 | 2,700,000 | 2,579,391 | ||
Intergen NV 9% 6/30/17 (h) | 4,595,000 | 4,686,900 | ||
IPALCO Enterprises, Inc. 7.25% 4/1/16 (h) | 4,440,000 | 4,395,600 | ||
Majapahit Holding BV 7.75% 10/17/16 | 840,000 | 802,200 | ||
Mirant Americas Generation LLC: | ||||
8.3% 5/1/11 | 1,060,000 | 1,078,550 | ||
8.5% 10/1/21 | 2,575,000 | 2,201,625 | ||
9.125% 5/1/31 | 340,000 | 292,400 | ||
National Power Corp. 6.875% 11/2/16 (h) | 2,005,000 | 1,949,863 | ||
Nevada Power Co. 6.5% 5/15/18 | 790,000 | 790,000 | ||
PPL Capital Funding, Inc. 6.7% 3/30/67 (m) | 2,290,000 | 1,929,641 | ||
Southern California Edison Co. 5.95% 2/1/38 | 3,750,000 | 3,719,903 | ||
Virginia Electric & Power Co. 5.4% 4/30/18 | 12,750,000 | 12,408,938 | ||
| 104,545,452 | |||
Gas Utilities - 0.1% | ||||
Dynegy Holdings, Inc.: | ||||
8.375% 5/1/16 | 3,070,000 | 3,000,925 | ||
8.75% 2/15/12 | 1,325,000 | 1,338,250 | ||
Intergas Finance BV: | ||||
6.375% 5/14/17 (Reg. S) | 1,250,000 | 1,093,750 | ||
6.875% 11/4/11 (Reg. S) | 2,170,000 | 2,094,050 | ||
Transportadora de Gas del Sur SA 7.875% 5/14/17 (h) | 2,580,000 | 2,031,750 | ||
| 9,558,725 | |||
Independent Power Producers & Energy Traders - 0.5% | ||||
AES Corp.: | ||||
7.75% 3/1/14 | 5,400,000 | 5,319,000 | ||
7.75% 10/15/15 | 3,805,000 | 3,757,438 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
UTILITIES - continued | ||||
Independent Power Producers & Energy Traders - continued | ||||
AES Corp.: - continued | ||||
8% 10/15/17 | $ 1,090,000 | $ 1,070,925 | ||
Allegheny Energy Supply Co. LLC 7.8% 3/15/11 | 9,060,000 | 9,331,800 | ||
Mirant North America LLC 7.375% 12/31/13 | 2,000,000 | 1,987,500 | ||
NRG Energy, Inc.: | ||||
7.25% 2/1/14 | 3,290,000 | 3,240,650 | ||
7.375% 2/1/16 | 3,750,000 | 3,684,375 | ||
7.375% 1/15/17 | 4,070,000 | 3,947,900 | ||
PPL Energy Supply LLC 6.5% 5/1/18 | 6,895,000 | 6,719,074 | ||
Reliant Energy, Inc.: | ||||
7.625% 6/15/14 | 5,230,000 | 5,073,100 | ||
7.875% 6/15/17 | 2,895,000 | 2,793,675 | ||
Tenaska Alabama Partners LP 7% 6/30/21 (h) | 453,070 | 423,621 | ||
TXU Corp. 5.55% 11/15/14 | 3,140,000 | 2,449,200 | ||
| 49,798,258 | |||
Multi-Utilities - 0.4% | ||||
Aquila, Inc. 11.875% 7/1/12 (m) | 155,000 | 179,025 | ||
CMS Energy Corp. 6.55% 7/17/17 | 5,620,000 | 5,342,749 | ||
Dominion Resources, Inc. 7.5% 6/30/66 (m) | 9,800,000 | 8,825,841 | ||
MidAmerican Energy Holdings, Co.: | ||||
5.75% 4/1/18 | 5,000,000 | 4,958,420 | ||
6.5% 9/15/37 | 17,430,000 | 17,388,813 | ||
NiSource Finance Corp.: | ||||
5.45% 9/15/20 | 1,650,000 | 1,408,923 | ||
6.8% 1/15/19 | 10,000,000 | 9,725,880 | ||
| 47,829,651 | |||
TOTAL UTILITIES | 211,732,086 | |||
TOTAL NONCONVERTIBLE BONDS | 1,812,973,499 | |||
TOTAL CORPORATE BONDS (Cost $1,904,437,007) | 1,824,565,110 | |||
U.S. Government and Government Agency Obligations - 12.0% | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - 2.9% | ||||
Fannie Mae: | ||||
3.625% 2/12/13 (g) | $ 43,445,000 | $ 42,949,032 | ||
4.375% 7/17/13 (k) | 8,745,000 | 8,854,750 | ||
4.75% 11/19/12 | 24,650,000 | 25,491,748 | ||
5% 2/16/12 | 8,000,000 | 8,319,624 | ||
Freddie Mac: | ||||
3.5% 5/29/13 (g) | 73,300,000 | 71,484,506 | ||
4.125% 12/21/12 | 55,225,000 | 55,486,049 | ||
5.25% 7/18/11 (g) | 100,000,000 | 104,675,900 | ||
Tennessee Valley Authority 5.375% 4/1/56 | 385,000 | 394,932 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 317,656,541 | |||
U.S. Treasury Inflation Protected Obligations - 6.5% | ||||
U.S. Treasury Inflation-Indexed Notes: | ||||
1.625% 1/15/18 | 78,310,500 | 78,028,088 | ||
2% 1/15/14 (k) | 334,070,632 | 346,244,167 | ||
2% 7/15/14 | 75,430,550 | 78,314,711 | ||
2.375% 4/15/11 | 57,042,626 | 59,068,005 | ||
2.625% 7/15/17 | 124,540,740 | 134,954,818 | ||
3.5% 1/15/11 (k) | 25,136,600 | 26,733,544 | ||
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | 723,343,333 | |||
U.S. Treasury Obligations - 2.6% | ||||
U.S. Treasury Bonds 6.25% 5/15/30 | 22,776,000 | 28,409,507 | ||
U.S. Treasury Notes: | ||||
3.375% 6/30/13 (g) | 126,233,000 | 128,008,088 | ||
4.125% 8/31/12 | 35,285,000 | 36,925,188 | ||
4.5% 9/30/11 (k) | 91,855,000 | 96,885,531 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 290,228,314 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $1,293,596,571) | 1,331,228,188 | |||
U.S. Government Agency - Mortgage Securities - 13.8% | ||||
| ||||
Fannie Mae - 12.3% | ||||
3.736% 10/1/33 (m) | 1,656,106 | 1,653,023 | ||
4.36% 5/1/35 (m) | 2,457,990 | 2,469,144 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
4.378% 5/1/35 (m) | $ 2,547,427 | $ 2,561,002 | ||
4.5% 4/1/20 | 2,293,272 | 2,263,814 | ||
5% 8/1/18 to 3/1/23 | 22,398,232 | 22,321,970 | ||
5% 9/1/38 (i) | 100,000,000 | 96,052,390 | ||
5% 9/1/38 (i) | 138,000,000 | 132,552,298 | ||
5.29% 2/1/36 (m) | 2,085,980 | 2,115,611 | ||
5.303% 12/1/35 (m) | 1,189,471 | 1,205,710 | ||
5.5% 10/1/17 to 11/1/37 | 458,233,709 | 457,705,328 | ||
5.5% 9/1/23 (i)(j) | 24,000,000 | 24,201,442 | ||
5.5% 9/1/38 (i) | 100,000,000 | 98,701,220 | ||
5.5% 9/1/38 (i) | 100,000,000 | 98,701,220 | ||
5.616% 7/1/37 (m) | 1,335,609 | 1,359,396 | ||
6% 6/1/22 to 3/1/38 | 256,492,937 | 260,644,009 | ||
6% 9/1/38 (i) | 50,000,000 | 50,473,480 | ||
6.028% 4/1/36 (m) | 1,048,137 | 1,072,406 | ||
6.252% 6/1/36 (m) | 406,689 | 413,927 | ||
6.309% 4/1/36 (m) | 1,017,138 | 1,043,936 | ||
6.5% 12/1/34 to 8/1/37 | 30,501,592 | 31,546,999 | ||
6.5% 9/1/38 (i) | 50,000,000 | 51,402,855 | ||
6.5% 9/1/38 (i) | 18,000,000 | 18,505,028 | ||
TOTAL FANNIE MAE | 1,358,966,208 | |||
Freddie Mac - 1.5% | ||||
4.392% 1/1/35 (m) | 4,843,444 | 4,857,635 | ||
4.617% 2/1/35 (m) | 4,994,663 | 5,020,296 | ||
4.737% 10/1/35 (m) | 10,754,965 | 10,770,076 | ||
5.5% 11/1/17 | 3,873,871 | 3,942,672 | ||
5.735% 10/1/35 (m) | 735,744 | 747,066 | ||
5.853% 6/1/36 (m) | 1,233,777 | 1,256,531 | ||
5.984% 7/1/37 (m) | 6,129,619 | 6,253,762 | ||
6% 10/1/35 to 3/1/38 | 86,575,645 | 87,373,379 | ||
6% 9/1/38 (i) | 47,000,000 | 47,367,963 | ||
6.045% 6/1/36 (m) | 1,160,487 | 1,184,320 | ||
6.063% 4/1/36 (m) | 1,909,574 | 1,948,759 | ||
6.11% 6/1/36 (m) | 1,161,978 | 1,187,224 | ||
TOTAL FREDDIE MAC | 171,909,683 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,525,546,529) | 1,530,875,891 | |||
Asset-Backed Securities - 0.6% | ||||
| Principal | Value | ||
ACE Securities Corp. Home Equity Loan Trust Series 2005-SD1 Class A1, 2.8719% 11/25/50 (m) | $ 14,187 | $ 11,462 | ||
Advanta Business Card Master Trust Series 2007-D1 | 2,590,000 | 1,459,740 | ||
Airspeed Ltd. Series 2007-1A Class C1, 4.9669% 6/15/32 (h)(m) | 4,731,465 | 2,223,788 | ||
AmeriCredit Prime Automobile Receivables Trust Series 2007-1 Class E, 6.96% 3/31/16 (h) | 2,215,000 | 1,674,511 | ||
Ameriquest Mortgage Securities, Inc. Series 2004-R8 Class M9, 5.2219% 9/25/34 (m) | 177,014 | 16,622 | ||
Anthracite CDO II Ltd. Series 2002-2A: | ||||
Class F, 7.6% 12/24/37 (h) | 160,000 | 139,200 | ||
Class G, 9.75% 12/24/37 (h) | 210,000 | 180,600 | ||
Anthracite CDO III Ltd./Anthracite CDO III Corp. Series 2004-1A Class A, 2.8319% 3/23/19 (h)(m) | 295,980 | 232,821 | ||
Capital Auto Receivables Asset Trust Series 2006-1: | ||||
Class C, 5.55% 1/18/11 | 1,500,000 | 1,497,792 | ||
Class D, 7.16% 1/15/13 (h) | 160,000 | 149,384 | ||
Capital Trust RE CDO Ltd./Capital Trust RE CDO Corp. Series 2005-3A Class A2, 5.16% 6/25/35 (h) | 460,000 | 386,400 | ||
CapitalSource Real Estate Loan Trust Series 2006-1A Class A2A, 3.0675% 1/20/37 (h)(m) | 250,000 | 165,000 | ||
Capmark VII Ltd. Series 2006-7A Class H, 4.0169% 8/20/36 (h)(m) | 500,000 | 150,000 | ||
Carrington Mortgage Loan Trust Series 2006-NC3 Class M10, 4.4719% 8/25/36 (h)(m) | 290,000 | 13,862 | ||
Concord Real Estate CDO Ltd./LLC Series 2006-1A | 250,000 | 65,000 | ||
Countrywide Home Loan Trust Series 2006-13N Class N, 7% 8/25/37 (h) | 480,708 | 22,883 | ||
Crest Clarendon Street Ltd./Crest Clarendon Corp. Series 2002-1A: | ||||
Class B1, 6.065% 12/28/35 (h) | 500,000 | 425,000 | ||
Class B2, 4.0213% 12/28/35 (h)(m) | 500,000 | 420,000 | ||
Crest Dartmouth Street Ltd./Crest Dartmouth Street Corp. Series 2003-1A Class D, 9% 6/28/38 (h) | 100,000 | 85,000 | ||
DB Master Finance LLC Series 2006-1 Class M1, 8.285% 6/20/31 (h) | 235,000 | 176,250 | ||
Ford Credit Auto Owner Trust: | ||||
Series 2006-B Class D, 7.26% 2/15/13 (h) | 1,175,000 | 1,087,713 | ||
Series 2006-C Class D, 6.89% 5/15/13 (h) | 915,000 | 828,746 | ||
Series 2007-A Class D, 7.05% 12/15/13 (h) | 970,000 | 846,502 | ||
GS Auto Loan Trust Series 2006-1 Class D, 6.25% 1/15/14 (h) | 830,696 | 785,692 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
GSAMP Trust Series 2004-AR1 Class B4, 5% 6/25/34 (h)(m) | $ 421,734 | $ 37,165 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class E, 4.1219% 9/25/46 (h)(m) | 250,000 | 92,500 | ||
Home Equity Asset Trust Series 2006-3N Class B, 6.5% 8/27/36 (h) | 250,000 | 25 | ||
Kent Funding III Ltd. Series 2006-3A Class D, 5.8988% 10/29/47 (m) | 267,490 | 2,675 | ||
Leafs CMBS I Ltd. Series 2002-1A Class D, 4.13% 11/20/37 (h) | 155,000 | 114,169 | ||
Marathon Real Estate CDO Ltd. Series 2006-1A Class B, 2.9019% 5/25/46 (h)(m) | 250,000 | 134,727 | ||
Merna Reinsurance Ltd. Series 2007-1 Class B, 4.5506% 6/30/12 (h)(m) | 5,400,000 | 5,187,240 | ||
N-Star Real Estate CDO Ltd. Series 1A: | ||||
Class B1, 4.4844% 8/28/38 (h)(m) | 195,000 | 163,800 | ||
Class C1B, 7.696% 8/28/38 (h) | 63,000 | 44,781 | ||
Newcastle CDO VIII Series 2006-8A Class 10, 4.7219% 11/1/52 (h)(m) | 250,000 | 17,500 | ||
Park Place Securities, Inc. Series 2005-WHQ2 Class M7, 3.7219% 5/25/35 (m) | 134,000 | 7,705 | ||
Prima Capital CDO Ltd./Prima Capital CDO Corp. Series 2005-1A Class A2, 4.646% 7/24/39 (h) | 353,271 | 323,905 | ||
Residential Asset Securities Corp. Series 2007-KS2 Class AI1, 2.5419% 2/25/37 (m) | 2,445,212 | 2,384,081 | ||
Resource Real Estate Funding CDO Series 2007-1A | 250,000 | 92,500 | ||
ROCK 1 CRE CDO LLC Series 2006-1A Class H, 4.0763% 12/15/26 (h)(m) | 185,000 | 64,750 | ||
SIRENS B.V. Series 2007-2 Class A1, 4.5881% 4/13/10 (h)(m) | 10,000,000 | 8,512,000 | ||
Structured Asset Securities Corp.: | ||||
Series 2006-BC1 Class B1, 4.9719% 3/25/36 (h)(m) | 80,986 | 1,013 | ||
Series 2007-BC4 Class A3, 2.7219% 11/25/37 (m) | 15,977,484 | 14,159,822 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 2.9169% 3/15/11 (h)(m) | 14,070,000 | 14,045,814 | ||
Swift Master Auto Receivables Trust Series 2007-1 Class B, 2.6869% 6/15/12 (m) | 3,285,000 | 2,728,156 | ||
TIAA Real Estate CDO Ltd./TIAA Real Estate CDO Corp.: | ||||
Series 2002-1A: | ||||
Class IIFX, 6.77% 5/22/37 (h) | 225,000 | 202,500 | ||
Class IV, 6.84% 5/22/37 (h) | 235,000 | 195,293 | ||
Series 2003-1A Class B2, 5.4802% 12/28/38 (h) | 100,000 | 80,000 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Wachovia Auto Loan Owner Trust Series 2006-2A | $ 1,390,000 | $ 735,551 | ||
Wachovia Ltd./Wachovia LLC Series 2006-1A: | ||||
Class F, 3.9544% 9/25/26 (h)(m) | 250,000 | 76,275 | ||
Class G, 4.1544% 9/25/26 (h)(m) | 250,000 | 60,725 | ||
WaMu Asset-Backed Certificates Series 2006-HE5 Class B1, 4.9719% 10/25/36 (h)(m) | 1,330,000 | 211,503 | ||
Wrightwood Capital Real Estate CDO Ltd. Series 2005-1A Class D, 3.6613% 11/21/40 (h)(m) | 305,000 | 146,400 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $74,672,777) | 62,866,543 | |||
Collateralized Mortgage Obligations - 0.8% | ||||
| ||||
Private Sponsor - 0.2% | ||||
ABN AMRO Mortgage Corp.: | ||||
Series 2003-2 Class B4, 5.3302% 3/25/18 (m) | 178,866 | 98,376 | ||
Series 2003-9 Class B5, 4.5164% 8/25/18 (h) | 301,381 | 75,345 | ||
Banc of America Mortgage Securities, Inc. Series 2004-7 Class 15B4, 5.3052% 8/25/19 (h)(m) | 75,938 | 11,391 | ||
Bayview Commercial Asset Trust Series 2006-3A Class IO, 1.1688% 10/25/36 (m)(o) | 14,682,247 | 1,262,673 | ||
Chase Mortgage Finance Trust Series 2007-A1 Class 1A5, 4.3742% 2/25/37 (m) | 1,825,663 | 1,725,252 | ||
Countrywide Alternative Loan Trust Series 2006-OC5N Class N, 7.25% 7/25/37 (h) | 78,237 | 1,234 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-28 Class B3, 5.5% 8/25/33 | 91,974 | 36,790 | ||
Series 2003-35 Class B, 4.639% 9/25/18 (m) | 163,761 | 81,881 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
floater Series 2007-AR7 Class 2A1, 4.5993% 11/25/34 (m) | 1,895,865 | 1,763,186 | ||
Series 2003-17 Class B4, 5.389% 6/25/33 (h)(m) | 382,239 | 152,896 | ||
Series 2004-3 Class DB4, 5.842% 4/25/34 (m) | 116,739 | 2,918 | ||
Diversified REIT Trust Series 1999-1A: | ||||
Class F, 6.78% 3/18/11 (h)(m) | 250,000 | 249,541 | ||
Class G, 6.78% 3/18/11 (h)(m) | 250,000 | 248,894 | ||
GMAC Commercial Mortgage Securities, Inc. Series 1993-C3 Class L, 6.974% 8/15/36 (h) | 282,731 | 105,003 | ||
GMAC Mortgage Loan Trust Series 2003-J10 Class B2, 4.75% 1/25/19 (h) | 154,881 | 46,464 | ||
JPMorgan Mortgage Trust Series 2006-A2 Class 5A1, 3.7741% 11/25/33 (m) | 4,120,699 | 3,884,418 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
LB Commercial Conduit Mortgage Trust Series 1998-C4 Class F, 6% 10/15/35 (h) | $ 125,000 | $ 122,954 | ||
Merrill Lynch Floating Trust floater Series 2006-1 Class TM, 2.9669% 6/15/22 (h)(m) | 8,861,703 | 7,886,916 | ||
Merrill Lynch Mortgage Trust Series 2002-MW1 Class E, 6.219% 7/12/34 (h) | 90,000 | 79,738 | ||
Nomura Home Equity Loan Trust floater Series 2006-FM2 Class B1, 4.7719% 7/25/36 (h)(m) | 3,946,782 | 48,940 | ||
Provident Funding Mortgage Loan Trust Series 2005-2 Class 3A, 4.7027% 10/25/35 (m) | 3,236,118 | 2,982,908 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-CB1: | ||||
Class B4, 4.1131% 6/10/35 (h)(m) | 27,450 | 20,662 | ||
Class B5, 4.7131% 6/10/35 (h)(m) | 20,588 | 16,361 | ||
Class B6, 5.2131% 6/10/35 (h)(m) | 10,294 | 7,417 | ||
RESIX Finance Ltd. floater Series 2007-A Class BB, 5.8169% 2/15/39 (h)(m) | 495,088 | 71,459 | ||
Structured Asset Securities Corp. floater: | ||||
Series 2005-AR1 Class B1, 4.4719% 9/25/35 (h)(m) | 530,000 | 5,300 | ||
Series 2006-BC5 Class B, 4.9719% 12/25/36 (h)(m) | 1,050,000 | 49,035 | ||
Wells Fargo Mortgage Backed Securities Trust: | ||||
Series 2003-12 Class B6, 4.75% 11/25/18 (h) | 295,440 | 59,088 | ||
Series 2005-AR12 Class 2A6, 4.3173% 7/25/35 (m) | 555,987 | 507,294 | ||
Series 2005-AR3 Class 2A1, 4.2121% 3/25/35 (m) | 1,017,735 | 930,120 | ||
TOTAL PRIVATE SPONSOR | 22,534,454 | |||
U.S. Government Agency - 0.6% | ||||
Fannie Mae subordinate REMIC pass-thru certificates: | ||||
planned amortization class: | ||||
Series 2001-68 Class QZ, 5.5% 12/25/16 | 4,460,815 | 4,554,042 | ||
Series 2002-9 Class PC, 6% 3/25/17 | 669,747 | 690,279 | ||
sequential payer Series 2002-77 Class CB, 5% 12/25/17 | 48,250,000 | 48,374,871 | ||
Freddie Mac Multi-class participation certificates guaranteed sequential payer: | ||||
Series 2467 Class NB, 5% 7/15/17 | 5,495,000 | 5,591,020 | ||
Series 2528 Class HN, 5% 11/15/17 | 5,515,000 | 5,609,686 | ||
TOTAL U.S. GOVERNMENT AGENCY | 64,819,898 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $92,764,757) | 87,354,352 | |||
Commercial Mortgage Securities - 2.1% | ||||
| Principal | Value | ||
Asset Securitization Corp.: | ||||
Series 1996-D2 Class B1A, 8.7715% 2/14/29 (h)(m) | $ 750,000 | $ 708,978 | ||
Series 1997-D4: | ||||
Class B2, 7.525% 4/14/29 | 1,494,104 | 1,544,643 | ||
Class B5, 7.525% 4/14/29 | 129,000 | 106,161 | ||
Banc of America Commercial Mortgage Trust Series 2008-1 Class D, 6.2005% 2/10/18 (h)(m) | 125,000 | 86,677 | ||
Banc of America Commercial Mortgage, Inc.: | ||||
sequential payer Series 2007-1 Class A2, 5.381% 1/15/49 | 4,040,000 | 3,890,705 | ||
Series 2003-2 Class BWF, 7.55% 10/11/37 (h) | 95,407 | 106,345 | ||
Series 2004-1 Class F, 5.279% 11/10/39 (h) | 185,000 | 147,979 | ||
Series 2004-5 Class G, 5.3905% 11/10/41 (h)(m) | 135,000 | 77,759 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
Series 1999-C1: | ||||
Class G, 5.64% 2/14/31 (h) | 60,000 | 51,779 | ||
Class I, 5.64% 2/14/31 (h) | 170,000 | 42,500 | ||
Series 2007-BBA8: | ||||
Class K, 3.6669% 3/15/22 (h)(m) | 105,000 | 78,750 | ||
Class L, 4.3669% 3/15/22 (h)(m) | 214,000 | 139,100 | ||
Chase Commercial Mortgage Securities Corp. Series 1998-2 Class J, 6.39% 11/18/30 (h) | 490,787 | 171,776 | ||
Citigroup Commercial Mortgage Trust: | ||||
sequential payer Series 2006-C5 Class A4, 5.431% 10/15/49 | 9,955,000 | 9,095,320 | ||
Series 2006-FL2 Class CNP3, 3.6669% 8/16/21 (h)(m) | 5,182,308 | 4,605,776 | ||
Series 2007-C6 Class A1, 5.622% 12/10/49 (m) | 9,554,003 | 9,383,581 | ||
Series 2007-FL3A Class A2, 2.6069% 4/15/22 (h)(m) | 6,878,000 | 6,190,200 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust sequential payer: | ||||
Series 2006-CD2 Class A4, 5.3623% 1/15/46 (m) | 10,435,000 | 9,600,063 | ||
Series 2007-CD4 Class A2A, 5.237% 12/11/49 | 10,000,000 | 9,645,299 | ||
Claregold Trust Series 2007-2A: | ||||
Class F, 5.01% 5/15/44 (m) | CAD | 138,000 | 70,594 | |
Class G, 5.01% 5/15/44 (m) | CAD | 30,000 | 13,544 | |
Class H, 5.01% 5/15/44 (m) | CAD | 20,000 | 8,377 | |
Class J, 5.01% 5/15/44 (m) | CAD | 20,000 | 7,484 | |
Class K, 5.01% 5/15/44 (m) | CAD | 10,000 | 3,360 | |
Class L, 5.01% 5/15/44 (m) | CAD | 36,000 | 10,911 | |
Class M, 5.01% 5/15/44 (m) | CAD | 165,000 | 36,961 | |
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates Series 2001-J2A Class F, 7.0311% 7/16/34 (h)(m) | $ 190,000 | $ 152,210 | ||
Commercial Mortgage Acceptance Corp. Series 1998-C1 Class G, 6.21% 7/15/31 (h) | 500,000 | 364,649 | ||
Commercial Mortgage Asset Trust Series 1999-C1 Class F, 6.25% 1/17/32 (h) | 550,000 | 428,166 | ||
Credit Suisse Commercial Mortgage Trust sequential payer Series 2007-C2 Class A2, 5.448% 1/15/49 (m) | 10,150,000 | 9,806,041 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
Series 1997-C2 Class F, 7.46% 1/17/35 (m) | 500,000 | 491,409 | ||
Series 1998-C1 Class H, 6% 5/17/40 (h) | 130,000 | 26,000 | ||
Series 2001-SPGA Class C, 6.809% 8/13/18 (h) | 190,000 | 174,908 | ||
Series 2003-C3: | ||||
Class D, 4.131% 5/15/38 | 120,000 | 99,684 | ||
Class J, 4.231% 5/15/38 (h) | 300,000 | 196,542 | ||
Credit Suisse Mortgage Capital Certificates floater Series 2007-TFL1 Class L, 4.3669% 2/15/22 (h)(m) | 100,000 | 65,000 | ||
Crest Ltd. Series 2001-1A Class C, 9% 2/25/34 (h) | 500,657 | 471,861 | ||
Deutsche Mortgage & Asset Receiving Corp. Series 1998-C1 Class J, 6.22% 6/15/31 | 330,000 | 222,637 | ||
DLJ Commercial Mortgage Corp. Series 1998-CG1 Class B4, 7.2174% 6/10/31 (h)(m) | 365,000 | 389,036 | ||
First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 7.9571% 4/29/39 (h)(m) | 100,417 | 100,417 | ||
First Union National Bank-Bank of America Commercial Mortgage Trust Series 2001-C1 Class H, 7.039% 3/15/33 (h) | 50,000 | 46,519 | ||
GE Capital Commercial Mortgage Corp. Series 2002-1A Class H, 7.3918% 12/10/35 (h)(m) | 55,000 | 52,959 | ||
Ginnie Mae guaranteed REMIC pass-thru securities sequential payer Series 2003-47 Class C, 4.227% 10/16/27 | 3,851,221 | 3,848,756 | ||
Global Signal Trust II Series 2004-2A Class E, 5.587% 12/15/14 (h) | 85,000 | 82,386 | ||
Global Signal Trust III Series 2006-1: | ||||
Class D, 6.052% 2/15/36 (h) | 80,000 | 73,382 | ||
Class E, 6.495% 2/15/36 (h) | 40,000 | 36,260 | ||
Class F, 7.036% 2/15/36 | 200,000 | 179,708 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
Series 1997-C1 Class H, 6.6% 7/15/29 | 509,114 | 290,195 | ||
Series 1997-C2 Class G, 6.75% 4/15/29 (m) | 500,000 | 460,000 | ||
Series 1999-C1 Class F, 6.02% 5/15/33 (h) | 500,000 | 425,155 | ||
Series 1999-C2I Class K, 6.481% 9/15/33 (p) | 285,000 | 156,750 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
GMAC Commercial Mortgage Securities, Inc.: - continued | ||||
Series 1999-C3: | ||||
Class J, 6.974% 8/15/36 (h) | $ 226,000 | $ 214,003 | ||
Class K, 6.974% 8/15/36 (h) | 427,000 | 256,114 | ||
Series 2000-C1: | ||||
Class G, 7% 3/15/33 (h) | 120,000 | 117,843 | ||
Class H, 7% 3/15/33 (h) | 100,000 | 96,903 | ||
Class K, 7% 3/15/33 (h) | 90,000 | 81,325 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
Series 2002-C1 Class H, 5.903% 1/11/35 (h) | 86,000 | 74,412 | ||
Series 2003-C2 Class J, 5.234% 11/5/13 (h)(m) | 250,000 | 162,650 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A Class J, 4.2113% 6/6/20 (h)(m) | 250,000 | 157,500 | ||
Series 2007-EOP Class L, 3.7613% 3/1/20 (h)(m) | 400,000 | 387,252 | ||
Series 1998-GLII Class G, 7.751% 4/13/31 (h)(m) | 600,000 | 510,060 | ||
Series 2006-RR2: | ||||
Class M, 5.6903% 6/1/46 (h)(m) | 100,000 | 20,000 | ||
Class N, 5.6903% 6/1/46 (h)(m) | 100,000 | 18,000 | ||
GS Mortgage Securities Trust sequential payer Series 2007-GG10: | ||||
Class A2, 5.778% 8/10/45 | 12,655,000 | 12,284,910 | ||
Class A4, 5.7992% 8/10/45 (m) | 10,000,000 | 9,164,110 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
Series 2002-C1 Class E, 6.135% 7/12/37 (h) | 180,000 | 169,098 | ||
Series 2002-CIB4: | ||||
Class E, 6.7139% 5/12/34 (h)(m) | 190,000 | 185,870 | ||
Class F, 7.1059% 5/12/34 (h)(m) | 78,000 | 74,006 | ||
Series 2003-C1 Class CM1, 5.6896% 1/12/37 (h)(m) | 213,882 | 193,764 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2 Class A2, 2.5969% 11/15/18 (h)(m) | 10,000,000 | 8,600,000 | ||
Series 2004-CBX Class D, 5.097% 1/12/37 (m) | 65,000 | 51,441 | ||
Series 2004-LN2 Class D, 5.206% 7/15/41 (m) | 420,000 | 320,708 | ||
Series 2005-LDP3 Class A3, 4.959% 8/15/42 | 10,750,000 | 10,377,135 | ||
JPMorgan Commercial Mortgage Finance Corp. Series 1999-C7 Class F, 6% 10/15/35 (h) | 95,000 | 94,395 | ||
LB Commercial Conduit Mortgage Trust Series 1998-C4 Class G, 5.6% 10/15/35 (h) | 250,000 | 232,335 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-C6 Class A2, 5.262% 9/15/39 (m) | $ 8,375,000 | $ 8,178,077 | ||
Series 2006-C7 Class A1, 5.279% 11/15/38 | 895,540 | 887,632 | ||
Series 2007-C1 Class A3, 5.398% 2/15/40 | 10,000,000 | 9,265,471 | ||
Series 2007-C6 Class A2, 5.845% 7/15/40 | 10,000,000 | 9,727,937 | ||
Series 2002-C1 Class J, 6.95% 3/15/34 (h)(m) | 86,000 | 71,053 | ||
Series 2004-C2: | ||||
Class G, 4.595% 3/15/36 (h)(m) | 165,000 | 124,608 | ||
Class K, 5.0914% 3/15/36 (h)(m) | 500,000 | 262,420 | ||
LNR CFL Series 2004-1: | ||||
Class I10, 7.72% 2/26/28 (h) | 180,000 | 178,560 | ||
Class I11, 7.72% 2/26/28 (h) | 100,000 | 98,850 | ||
Class I12, 7.72% 2/26/28 (h) | 100,000 | 98,500 | ||
Class I9, 7.72% 2/26/28 (h) | 153,200 | 152,051 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 1997-C2 Class F, 6.25% 12/10/29 (m) | 620,000 | 615,977 | ||
Series 1998-C3 Class E, 6.8541% 12/15/30 (m) | 155,000 | 157,329 | ||
Merrill Lynch Mortgage Trust: | ||||
Series 2004-KEY2 Class K, 5.091% 8/12/39 (h)(m) | 100,000 | 36,355 | ||
Series 2006-KEY2 Class L, 5.091% 8/12/39 (h) | 300,000 | 104,836 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-4 Class A2, 5.112% 12/12/49 (m) | 1,075,000 | 1,039,173 | ||
Series 2007-5 Class A3, 5.364% 8/12/48 | 10,675,000 | 9,683,848 | ||
Series 2006-2 Class A4, 5.9094% 6/12/46 (m) | 15,250,000 | 14,513,646 | ||
Morgan Stanley Capital I Trust: | ||||
sequential payer: | ||||
Series 2004-RR2 Class A2, 5.45% 10/28/33 (h) | 333,394 | 311,971 | ||
Series 2007-IQ13 Class A4, 5.364% 3/15/44 | 10,000,000 | 8,866,256 | ||
Series 2007-T25 Class A2, 5.507% 11/12/49 | 1,555,000 | 1,462,024 | ||
Series 2004-IQ7 Class E, 5.4043% 6/15/38 (h)(m) | 120,000 | 83,328 | ||
Series 2005-HQ7: | ||||
Class E, 5.208% 11/14/42 (m) | 75,000 | 53,394 | ||
Class F, 5.208% 11/14/42 (m) | 150,000 | 103,952 | ||
Series 2007-HQ12 Class A2, 5.6325% 4/12/49 (m) | 12,880,000 | 12,467,535 | ||
Morgan Stanley Dean Witter Capital I Trust Series 2003-TOP9 Class E, 5.7122% 11/13/36 (h)(m) | 70,000 | 56,070 | ||
Mortgage Capital Funding, Inc. Series 1998-MC3 | 131,114 | 130,249 | ||
NationsLink Funding Corp. Series 1998-2 Class J, 5% 8/20/30 (h) | 160,000 | 105,475 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Providence Place Group Ltd. Partnership Series 2000-C1 Class A2, 7.75% 7/20/28 | $ 411,182 | $ 401,402 | ||
Real Estate Asset Liquidity Trust: | ||||
Series 2006-2: | ||||
Class F, 4.456% 9/12/38 (h) | CAD | 107,000 | 82,647 | |
Class G, 4.456% 9/12/38 (h) | CAD | 54,000 | 41,014 | |
Class H, 4.456% 9/12/38 (h) | CAD | 36,000 | 26,444 | |
Class J, 4.456% 9/12/38 (h) | CAD | 36,000 | 22,423 | |
Class K, 4.456% 9/12/38 (h) | CAD | 18,000 | 10,133 | |
Class L, 4.456% 9/12/38 (h) | CAD | 26,000 | 13,665 | |
Class M, 4.456% 9/12/38 (h) | CAD | 130,000 | 36,429 | |
Series 2007-1: | ||||
Class F, 4.57% 4/12/23 | CAD | 126,000 | 96,874 | |
Class G, 4.57% 4/12/23 | CAD | 42,000 | 31,130 | |
Class H, 4.57% 4/12/23 | CAD | 42,000 | 28,673 | |
Class J, 4.57% 4/12/23 | CAD | 42,000 | 25,623 | |
Class K, 4.57% 4/12/23 | CAD | 21,000 | 12,031 | |
Class L, 4.57% 4/12/23 | CAD | 63,000 | 33,927 | |
Class M, 4.57% 4/12/23 | CAD | 185,000 | 54,288 | |
Salomon Brothers Mortgage Securities VII, Inc.: | ||||
Series 2001-C1 Class E, 6.31% 12/18/35 | 135,000 | 129,679 | ||
Series 2001-MMA: | ||||
Class E6, 6.5% 2/18/34 (h)(m) | 165,000 | 155,284 | ||
Class F6, 6.5% 2/18/34 (h)(m) | 37,000 | 34,172 | ||
SBA CMBS Trust Series 2006-1A Class J, 7.825% 11/15/36 (h) | 90,000 | 81,874 | ||
Structured Asset Securities Corp. Series 1997-LLI | 170,000 | 167,928 | ||
UBS Commercial Mortgage Trust Series 2007-FL1: | ||||
Class F, 3.0419% 9/15/09 (h)(m) | 110,000 | 94,600 | ||
Class G, 3.0419% 9/15/09 (h)(m) | 200,000 | 170,000 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2007-C30 Class A4, 5.305% 12/15/43 | 8,045,000 | 7,380,171 | ||
Series 2007-C32 Class A2, 5.7357% 6/15/49 (m) | 13,285,000 | 12,881,485 | ||
Series 2006-C23 Class A5, 5.416% 1/15/45 (m) | 7,870,000 | 7,230,913 | ||
Series 2007-C30 Class B, 5.463% 12/15/43 (m) | 10,505,000 | 6,711,899 | ||
Wachovia Ltd./Wachovia LLC Series 2006-1 Class 1ML, 10.7025% 9/25/26 (h)(m) | 400,000 | 140,000 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $243,154,443) | 233,240,371 | |||
Municipal Securities - 0.3% | ||||
| Principal | Value | ||
Connecticut Gen. Oblig. Series 2007 B, 5% 5/1/15 | $ 10,000,000 | $ 11,039,800 | ||
Montgomery County Gen. Oblig.: | ||||
(Consolidated Pub. Impt. Proj.) Series A, 5% 5/1/13 | 3,300,000 | 3,604,326 | ||
Series A, 5% 1/1/12 | 11,025,000 | 11,895,093 | ||
Ohio Gen. Oblig. (Common Schools Proj.) Series 2006 D, 5% 9/15/12 | 10,195,000 | 11,068,508 | ||
TOTAL MUNICIPAL SECURITIES (Cost $37,434,862) | 37,607,727 | |||
Foreign Government and Government Agency Obligations - 1.2% | ||||
| ||||
Argentine Republic: | ||||
discount (with partial capitalization through 12/31/13) 8.28% 12/31/33 | 2,764,725 | 2,059,720 | ||
par 1.33% 12/31/38 (f) | 3,405,000 | 1,089,600 | ||
7% 3/28/11 | 17,450,000 | 14,648,790 | ||
7% 9/12/13 | 17,420,000 | 12,559,336 | ||
Brazilian Federative Republic: | ||||
6% 1/17/17 | 505,000 | 517,625 | ||
7.125% 1/20/37 | 140,000 | 156,100 | ||
8.25% 1/20/34 | 410,000 | 510,450 | ||
8.75% 2/4/25 | 280,000 | 351,400 | ||
12.25% 3/6/30 | 895,000 | 1,519,263 | ||
12.75% 1/15/20 | 490,000 | 764,400 | ||
Central Bank of Nigeria promissory note 5.092% 1/5/10 | 412,312 | 395,591 | ||
Colombian Republic 7.375% 9/18/37 | 1,830,000 | 2,008,425 | ||
Democratic Socialist Republic of Sri Lanka 8.25% 10/24/12 (h) | 1,385,000 | 1,260,350 | ||
Dominican Republic: | ||||
3.6713% 8/30/24 (m) | 1,100,000 | 1,057,375 | ||
9.04% 1/23/18 (h) | 3,120,449 | 3,190,659 | ||
9.5% 9/27/11 (Reg. S) | 1,606,150 | 1,638,273 | ||
Ecuador Republic: | ||||
5% 2/28/25 | 218,000 | 146,878 | ||
10% 8/15/30 (Reg. S) | 4,550,000 | 4,026,750 | ||
12% 11/15/12 (Reg. S) | 626,280 | 629,411 | ||
Gabonese Republic 8.2% 12/12/17 (h) | 2,580,000 | 2,657,400 | ||
Georgia Republic 7.5% 4/15/13 | 460,000 | 414,000 | ||
Ghana Republic 8.5% 10/4/17 (h) | 2,130,000 | 2,114,025 | ||
Indonesian Republic: | ||||
6.625% 2/17/37 (h) | 1,475,000 | 1,290,625 | ||
6.75% 3/10/14 (h) | 510,000 | 515,100 | ||
Foreign Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
Indonesian Republic: - continued | ||||
6.75% 3/10/14 (Reg. S) | $ 315,000 | $ 318,150 | ||
7.5% 1/15/16 (h) | 485,000 | 505,031 | ||
7.75% 1/17/38 (h) | 1,245,000 | 1,232,550 | ||
8.5% 10/12/35 (h) | 650,000 | 696,345 | ||
8.5% 10/12/35 (Reg. S) | 735,000 | 787,406 | ||
Islamic Republic of Pakistan: | ||||
6.75% 2/19/09 | 3,520,000 | 3,344,000 | ||
7.125% 3/31/16 (h) | 1,450,000 | 942,500 | ||
Lebanese Republic: | ||||
6.1088% 11/30/09 (Reg. S) (m) | 1,645,000 | 1,620,325 | ||
7.125% 3/5/10 | 250,000 | 249,688 | ||
7.5% 8/2/11 | 1,325,000 | 1,301,813 | ||
7.75% 9/7/12 | 400,000 | 396,000 | ||
7.875% 5/20/11 (Reg. S) | 1,080,000 | 1,073,250 | ||
8.625% 6/20/13 (Reg. S) | 3,495,000 | 3,521,213 | ||
9% 5/2/14 | 360,000 | 367,650 | ||
Philippine Republic: | ||||
9.5% 2/2/30 | 1,375,000 | 1,763,438 | ||
10.625% 3/16/25 | 1,365,000 | 1,861,587 | ||
Republic of Fiji 6.875% 9/13/11 | 890,000 | 801,000 | ||
Republic of Serbia 3.75% 11/1/24 (f)(h) | 2,935,000 | 2,744,225 | ||
Russian Federation: | ||||
7.5% 3/31/30 (Reg. S) | 8,990,095 | 10,013,168 | ||
12.75% 6/24/28 (Reg. S) | 1,490,000 | 2,615,397 | ||
Turkish Republic: | ||||
6.75% 4/3/18 | 1,965,000 | 1,964,607 | ||
6.875% 3/17/36 | 3,285,000 | 3,070,161 | ||
7% 9/26/16 | 1,390,000 | 1,422,943 | ||
7.25% 3/15/15 | 765,000 | 800,190 | ||
7.25% 3/5/38 | 1,350,000 | 1,300,725 | ||
7.375% 2/5/25 | 2,200,000 | 2,233,440 | ||
11.875% 1/15/30 | 1,085,000 | 1,636,940 | ||
Ukraine Government: | ||||
6.385% 6/26/12 (h) | 2,240,000 | 2,080,512 | ||
6.75% 11/14/17 (h) | 4,290,000 | 3,635,775 | ||
United Mexican States: | ||||
7.5% 4/8/33 | 700,000 | 816,200 | ||
8.3% 8/15/31 | 420,000 | 528,150 | ||
Uruguay Republic 8% 11/18/22 | 2,431,902 | 2,583,896 | ||
Venezuelan Republic: | ||||
3.7906% 4/20/11 (Reg. S) (m) | 3,130,000 | 2,809,175 | ||
Foreign Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
Venezuelan Republic: - continued | ||||
5.375% 8/7/10 (Reg. S) | $ 1,145,000 | $ 1,090,613 | ||
7% 3/31/38 | 720,000 | 500,400 | ||
8.5% 10/8/14 | 1,690,000 | 1,580,150 | ||
9% 5/7/23 (Reg. S) | 1,160,000 | 1,005,140 | ||
9.25% 9/15/27 | 4,050,000 | 3,766,500 | ||
9.375% 1/13/34 | 1,160,000 | 1,020,800 | ||
10.75% 9/19/13 | 5,460,000 | 5,637,450 | ||
13.625% 8/15/18 | 2,343,000 | 2,764,740 | ||
Vietnamese Socialist Republic: | ||||
4% 3/12/28 (f) | 90,000 | 74,925 | ||
6.875% 1/15/16 (h) | 1,740,000 | 1,687,800 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $142,861,644) | 135,687,514 |
Preferred Stocks - 0.1% | |||
Shares |
| ||
Convertible Preferred Stocks - 0.1% | |||
ENERGY - 0.1% | |||
Oil, Gas & Consumable Fuels - 0.1% | |||
El Paso Corp. 4.99% | 1,927 | 2,629,905 | |
UTILITIES - 0.0% | |||
Electric Utilities - 0.0% | |||
AES Trust III 6.75% | 28,100 | 1,278,550 | |
TOTAL CONVERTIBLE PREFERRED STOCKS | 3,908,455 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
TELECOMMUNICATION SERVICES - 0.0% | |||
Wireless Telecommunication Services - 0.0% | |||
Rural Cellular Corp. 12.25% pay-in-kind (a) | 520 | 715,000 | |
TOTAL PREFERRED STOCKS (Cost $4,527,961) | 4,623,455 |
Floating Rate Loans - 0.3% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 0.1% | ||||
Auto Components - 0.0% | ||||
Federal-Mogul Corp.: | ||||
Tranche B, term loan 4.4075% 12/27/14 (m) | $ 1,551,735 | $ 1,194,836 | ||
Tranche C, term loan 4.4075% 12/27/15 (m) | 1,201,347 | 925,037 | ||
| 2,119,873 | |||
Hotels, Restaurants & Leisure - 0.0% | ||||
OSI Restaurant Partners, Inc.: | ||||
Credit-Linked Deposit 5.0263% 6/14/13 (m) | 80,120 | 61,893 | ||
term loan 5.125% 6/14/14 (m) | 1,004,266 | 775,795 | ||
| 837,688 | |||
Media - 0.1% | ||||
CSC Holdings, Inc. Tranche B, term loan 4.2138% 3/31/13 (m) | 1,516,709 | 1,440,874 | ||
Education Media and Publishing Group Ltd. Tranche 2LN, term loan 11.9638% 12/12/14 (m) | 2,477,791 | 1,982,233 | ||
Univision Communications, Inc. Tranche 1LN, term loan 5.0288% 9/29/14 (m) | 1,795,000 | 1,442,731 | ||
Zuffa LLC term loan 4.5625% 6/19/15 (m) | 3,621,002 | 3,041,642 | ||
| 7,907,480 | |||
Specialty Retail - 0.0% | ||||
Toys 'R' US, Inc. term loan 5.4638% 12/9/08 (m) | 160,000 | 148,800 | ||
Textiles, Apparel & Luxury Goods - 0.0% | ||||
Hanesbrands, Inc.: | ||||
term loan 6.545% 3/5/14 (m) | 165,000 | 161,081 | ||
Tranche B 1LN, term loan 4.546% 9/5/13 (m) | 610,000 | 593,225 | ||
Levi Strauss & Co. term loan 4.7131% 4/4/14 (m) | 790,000 | 639,900 | ||
| 1,394,206 | |||
TOTAL CONSUMER DISCRETIONARY | 12,408,047 | |||
FINANCIALS - 0.0% | ||||
Diversified Financial Services - 0.0% | ||||
LandSource Holding Co. LLC term loan 8.25% 5/31/09 (m) | 59,525 | 38,394 | ||
Real Estate Investment Trusts - 0.0% | ||||
General Growth Properties, Inc. Tranche A1, term loan 3.62% 2/24/10 (m) | 209,211 | 183,582 | ||
Floating Rate Loans - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - 0.0% | ||||
Tishman Speyer Properties term loan 4.22% 12/27/12 (m) | $ 143,000 | $ 117,260 | ||
TOTAL FINANCIALS | 339,236 | |||
HEALTH CARE - 0.1% | ||||
Health Care Providers & Services - 0.0% | ||||
Community Health Systems, Inc.: | ||||
term loan 4.9776% 7/25/14 (m) | 2,065,032 | 1,948,874 | ||
Tranche DD, term loan 7/25/14 (m)(q) | 105,648 | 99,705 | ||
HCA, Inc. Tranche B, term loan 5.0506% 11/17/13 (m) | 2,198,839 | 2,061,411 | ||
| 4,109,990 | |||
Pharmaceuticals - 0.1% | ||||
PTS Acquisition Corp. term loan 5.0506% 4/10/14 (m) | 4,717,196 | 4,115,753 | ||
TOTAL HEALTH CARE | 8,225,743 | |||
INDUSTRIALS - 0.1% | ||||
Airlines - 0.1% | ||||
United Air Lines, Inc. Tranche B, term loan 4.5733% 2/1/14 (m) | 2,775,378 | 2,026,026 | ||
Commercial Services & Supplies - 0.0% | ||||
ARAMARK Corp.: | ||||
Credit-Linked Deposit 4.6756% 1/26/14 (m) | 120,664 | 114,028 | ||
term loan 4.6756% 1/26/14 (m) | 1,899,336 | 1,794,872 | ||
| 1,908,900 | |||
Machinery - 0.0% | ||||
Dresser, Inc. Tranche 2LN, term loan 8.5569% 5/4/15 pay-in-kind (m) | 1,255,000 | 1,207,938 | ||
TOTAL INDUSTRIALS | 5,142,864 | |||
INFORMATION TECHNOLOGY - 0.0% | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Flextronics International Ltd.: | ||||
Tranche B-A, term loan 5.041% 10/1/14 (m) | 640,670 | 576,603 | ||
Tranche B-A1, term loan 5.0406% 10/1/14 (m) | 99,330 | 89,397 | ||
Texas Competitive Electric Holdings Co. LLC Tranche B3, term loan 6.269% 10/10/14 (m) | 1,532,281 | 1,426,936 | ||
| 2,092,936 | |||
Floating Rate Loans - continued | ||||
| Principal | Value | ||
INFORMATION TECHNOLOGY - continued | ||||
Software - 0.0% | ||||
Kronos, Inc. Tranche 1LN, term loan 5.0506% 6/11/14 (m) | $ 1,800,441 | $ 1,638,401 | ||
SS&C Technologies, Inc. term loan 4.7808% 11/23/12 (m) | 1,064,386 | 995,201 | ||
| 2,633,602 | |||
TOTAL INFORMATION TECHNOLOGY | 4,726,538 | |||
MATERIALS - 0.0% | ||||
Containers & Packaging - 0.0% | ||||
Anchor Glass Container Corp. term loan 7.75% 6/20/14 (m) | 2,858,000 | 2,800,840 | ||
Paper & Forest Products - 0.0% | ||||
Georgia-Pacific Corp. Tranche B1, term loan 4.4395% 12/23/12 (m) | 1,172,053 | 1,109,055 | ||
TOTAL MATERIALS | 3,909,895 | |||
TELECOMMUNICATION SERVICES - 0.0% | ||||
Diversified Telecommunication Services - 0.0% | ||||
Insight Midwest Holdings LLC Tranche B, term loan 4.47% 4/6/14 (m) | 465,000 | 446,400 | ||
Intelsat Ltd. Tranche B, term loan 5.2875% 7/3/13 (m) | 980,025 | 943,274 | ||
| 1,389,674 | |||
Wireless Telecommunication Services - 0.0% | ||||
Crown Castle International Corp. Tranche B, term loan 4.3006% 3/6/14 (m) | 9,875 | 9,233 | ||
TOTAL TELECOMMUNICATION SERVICES | 1,398,907 | |||
UTILITIES - 0.0% | ||||
Multi-Utilities - 0.0% | ||||
Ashmore Energy International: | ||||
Revolving Credit-Linked Deposit 5.8006% 3/30/12 (m) | 355,590 | 323,548 | ||
term loan 5.8006% 3/30/14 (m) | 845,023 | 768,971 | ||
| 1,092,519 | |||
TOTAL FLOATING RATE LOANS (Cost $37,602,554) | 37,243,749 |
Fixed-Income Funds - 53.3% | |||
Shares | Value | ||
Fidelity 1-3 Year Duration Securitized Bond Central Fund (n) | 3,366,821 | $ 283,991,380 | |
Fidelity Commercial Mortgage-Backed Securities Central Fund (n) | 7,414,807 | 658,434,817 | |
Fidelity Corporate Bond 1-10 Year Central Fund (n) | 18,851,759 | 1,816,743,999 | |
Fidelity Floating Rate Central Fund (n) | 4,475,644 | 408,626,297 | |
Fidelity Mortgage Backed Securities Central Fund (n) | 21,787,296 | 2,138,641,000 | |
Fidelity Ultra-Short Central Fund (n) | 7,340,076 | 599,904,422 | |
TOTAL FIXED-INCOME FUNDS (Cost $6,228,917,563) | 5,906,341,915 | ||
Preferred Securities - 0.1% | |||
Principal |
| ||
CONSUMER DISCRETIONARY - 0.0% | |||
Media - 0.0% | |||
Globo Comunicacoes e Participacoes SA 9.375% | $ 3,765,000 | 3,880,584 | |
Net Servicos de Comunicacao SA 9.25% (h) | 1,623,000 | 1,681,437 | |
| 5,562,021 | ||
ENERGY - 0.1% | |||
Oil, Gas & Consumable Fuels - 0.1% | |||
Pemex Project Funding Master Trust 7.75% | 6,834,000 | 6,994,450 | |
TOTAL PREFERRED SECURITIES (Cost $12,428,953) | 12,556,471 | ||
Cash Equivalents - 7.2% | |||
Maturity Amount |
| ||
Investments in repurchase agreements in a joint trading account at: | |||
2.01%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Treasury Obligations) # | $ 2,755,616 | 2,755,000 | |
Cash Equivalents - continued | |||
Maturity Amount | Value | ||
Investments in repurchase agreements in a joint trading account at: - continued | |||
2.12%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Government Obligations) # | $ 436,212,763 | $ 436,110,000 | |
2.14%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Government Obligations) # (b) | 353,592,056 | 353,508,000 | |
TOTAL CASH EQUIVALENTS (Cost $792,373,000) | 792,373,000 | ||
TOTAL INVESTMENT PORTFOLIO - 108.3% (Cost $12,390,318,621) | 11,996,564,286 | ||
NET OTHER ASSETS - (8.3)% | (914,582,124) | ||
NET ASSETS - 100% | $ 11,081,982,162 |
Swap Agreements | |||||
| Expiration Date | Notional Amount |
| ||
Credit Default Swaps | |||||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34 | Oct. 2034 | $ 43,728 | (35,417) | ||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 6.3950% 8/25/34 | Sept. 2034 | 39,167 | (36,249) | ||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7 Class B3, 7.6913% 7/25/34 | August 2034 | 57,619 | (52,395) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive from Citibank upon credit event of Bristol-Myers Squibb Co., par value of the notional amount of Bristol-Myers Squibb Co. 5.25% 8/15/13, and pay quarterly notional amount multiplied by .32% | Sept. 2017 | $ 1,500,000 | $ 9,615 | ||
Receive from Citibank upon credit event of Merrill Lynch & Co., Inc., par value of the notional amount of Merrill Lynch & Co., Inc. 5% 1/15/15, and pay quarterly notional amount multiplied by .90% | Dec. 2012 | 4,000,000 | 323,342 | ||
Receive from Deutsche Bank upon credit event of Household Finance Corp., par value of the notional amount of Household Finance Corp. 7% 5/15/12, and pay quarterly notional amount multiplied by .73% | Sept. 2012 | 5,900,000 | 478,878 | ||
Receive from Deutsche Bank upon credit event of Southwest Airlines Co., par value of the notional amount of Southwest Airlines Co. 5.25% 10/1/14, and pay quarterly notional amount multiplied by 1.4% | June 2013 | 14,400,000 | 135,376 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.18% | March 2013 | 2,429,000 | 21,381 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.18% | March 2013 | 2,429,000 | 21,381 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.19% | March 2018 | 2,143,000 | 66,824 | ||
Receive from Goldman Sachs upon credit event of Lowe's Companies, Inc., par value of the notional amount of Lowe's Companies, Inc. 8.25% 6/1/10, and pay quarterly notional amount multiplied by 1.07% | March 2013 | 3,800,000 | (57,737) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive from Lehman Brothers, Inc. upon credit event of Lowe's Companies, Inc., par value of the notional amount of Lowe's Companies, Inc. 8.25% 6/1/10, and pay quarterly notional amount multiplied by 1.03% | March 2013 | $ 3,800,000 | $ (51,175) | ||
Receive from Morgan Stanley, Inc. upon credit event of H.J. Heinz Co., par value of the notional amount of H.J. Heinz Co. 6% 3/15/08, and pay quarterly notional amount multiplied by .65% | March 2013 | 5,000,000 | (34,679) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Credit Suisse First Boston upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 4,000,000 | (3,640,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Credit Suisse First Boston upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 4,600,000 | (4,186,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to JPMorgan Chase, Inc. upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 2,800,000 | (2,548,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Lehman Brothers, Inc. upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 6,000,000 | (5,460,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to UBS upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | August 2037 | 7,200,000 | (6,552,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to UBS upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | August 2037 | 2,600,000 | (2,366,000) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive monthly notional amount multiplied by .82% and pay UBS upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34 | August 2034 | $ 34,860 | $ (16,996) | ||
Receive monthly notional amount multiplied by .85% and pay UBS upon credit event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34 | Nov. 2034 | 134,000 | (62,264) | ||
Receive monthly notional amount multiplied by .85% and pay UBS upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34 | Oct. 2034 | 120,859 | (25,494) | ||
Receive monthly notional amount multiplied by 1.6% and pay Morgan Stanley, Inc. upon credit event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M7, 5.4413% 5/25/35 | June 2035 | 100,000 | (94,250) | ||
Receive monthly notional amount multiplied by 2.22% and pay JPMorgan Chase, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2005-HE3 Class B2, 6.87% 7/25/35 | August 2035 | 5,325,000 | (4,737,537) | ||
Receive monthly notional amount multiplied by 2.39% and pay UBS upon credit event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.73% 2/25/34 | March 2034 | 57,176 | (43,756) | ||
Receive monthly notional amount multiplied by 2.4% and pay Deutsche Bank upon credit event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.2288% 1/25/34 | Feb. 2034 | 787 | (693) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon credit event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32 | April 2032 | $ 11,800 | $ (10,517) | ||
Receive monthly notional amount multiplied by 3% and pay UBS upon credit event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2005-R4 Class M9, 7.07% 7/25/35 | August 2035 | 1,200,000 | (1,061,024) | ||
Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon credit event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33 | May 2033 | 134,000 | (100,184) | ||
Receive monthly notional amount multiplied by 5.55% and pay Deutsche Bank upon credit event of Carrington Mortgage Loan Trust, par value of the notional amount of Carrington Mortgage Loan Trust Series 2006-FRE1 Class M10, 7.74% 7/25/36 | August 2036 | 1,200,000 | (1,102,156) | ||
Receive monthly notional amount multiplied by 6.25% and pay Deutsche Bank upon credit event of Residential Asset Mortgage Products, Inc., par value of the notional amount of Residential Asset Mortgage Products, Inc. Series 2006-RS5, 7.17% 9/25/36 | Oct. 2036 | 1,200,000 | (1,084,294) | ||
Receive quarterly notional amount multiplied by .72% and pay Bank of America upon credit event of Allegheny Energy Supply Co. LLC, par value of the notional amount of Allegheny Energy Supply Co. LLC 8.25% 4/15/12 | June 2012 | 4,000,000 | (80,377) | ||
Receive quarterly notional amount multiplied by .78% and pay Deutsche Bank upon credit event of Allegheny Energy Supply Co. LLC, par value of the notional amount of Allegheny Energy Supply Co. LLC 8.25% 4/15/12 | June 2012 | 3,955,000 | (70,727) | ||
TOTAL CREDIT DEFAULT SWAPS | 90,214,996 | (32,453,124) | |||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Interest Rate Swaps | |||||
Receive quarterly a fixed rate equal to 4.3875% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | March 2010 | $ 1,250,000 | $ 27,972 | ||
Receive quarterly a fixed rate equal to 4.774% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | March 2015 | 1,250,000 | 60,703 | ||
Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | July 2014 | 1,135,000 | 46,173 | ||
Receive semi-annually a fixed rate equal to 3.567% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2011 | 293,294,000 | 2,517,342 | ||
Receive semi-annually a fixed rate equal to 4.449% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2018 | 102,760,000 | 878,228 | ||
Receive semi-annually a fixed rate equal to 4.87% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | Oct. 2012 | 100,000,000 | 5,181,070 | ||
Receive semi-annually a fixed rate equal to 5.015% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2012 | 50,000,000 | 2,819,225 | ||
Receive semi-annually a fixed rate equal to 5.062% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2012 | 75,000,000 | 4,223,055 | ||
Receive semi-annually a fixed rate equal to 5.09% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | Jan. 2012 | 75,000,000 | 3,376,635 | ||
Receive semi-annually a fixed rate equal to 5.144% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2012 | 100,000,000 | 6,074,970 | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Interest Rate Swaps - continued | |||||
Receive semi-annually a fixed rate equal to 5.263% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | Feb. 2012 | $ 50,000,000 | $ 2,482,665 | ||
Receive semi-annually a fixed rate equal to 5.276% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | April 2011 | 20,000,000 | 1,195,664 | ||
Receive semi-annually a fixed rate equal to 5.375% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | April 2009 | 30,000,000 | 941,400 | ||
Receive semi-annually a fixed rate equal to 5.44% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | July 2012 | 50,000,000 | 2,985,640 | ||
Receive semi-annually a fixed rate equal to 5.556% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | June 2012 | 25,000,000 | 1,661,915 | ||
Receive semi-annually a fixed rate equal to 5.636% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | July 2009 | 100,000,000 | 2,614,710 | ||
Receive semi-annually a fixed rate equal to 5.6485% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | July 2010 | 100,000,000 | 4,609,320 | ||
TOTAL INTEREST RATE SWAPS | 1,174,689,000 | 41,696,687 | |||
| $ 1,264,903,996 | $ 9,243,563 |
Currency Abbreviation | ||
CAD | - | Canadian dollar |
Legend |
(a) Non-income producing |
(b) Includes investment made with cash collateral received from securities on loan. |
(c) Non-income producing - Issuer is in default. |
(d) Principal amount is stated in United States dollars unless otherwise noted. |
(e) Security 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. |
(f) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(g) Security or a portion of the security is on loan at period end. |
(h) 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 end of the period, the value of these securities amounted to $411,251,869 or 3.7% of net assets. |
(i) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(j) A portion of the security is subject to a forward commitment to sell. |
(k) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $16,020,498. |
(l) Represents a tradable index of credit default swaps on home equity asset-backed debt securities. |
(m) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(n) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's web site at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's web site or upon request. |
(o) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool held as of the end of the period. |
(p) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $156,750 or 0.0% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
GMAC Commercial Mortgage Securities, Inc. Series 1999-C2I Class K, 6.481% 9/15/33 | 3/23/07 | $ 163,875 |
(q) Position or a portion of the position represents an unfunded loan commitment. At period end, the total principal amount and market value of unfunded commitments totaled $105,648 and $99,705, respectively. The coupon rate will be determined at time of settlement. |
# Additional Information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$2,755,000 due 9/02/08 at 2.01% | |
BNP Paribas Securities Corp. | $ 1,012,105 |
Banc of America Securities LLC | 546,770 |
Barclays Capital, Inc. | 766,747 |
Deutsche Bank Securities, Inc. | 429,378 |
| $ 2,755,000 |
$436,110,000 due 9/02/08 at 2.12% | |
ABN AMRO Bank N.V., New York Branch | $ 12,638,373 |
Banc of America Securities LLC | 34,165,795 |
Bank of America, NA | 126,383,734 |
Barclays Capital, Inc. | 227,490,039 |
Greenwich Capital Markets, Inc. | 12,638,373 |
ING Financial Markets LLC | 16,474,499 |
RBC Capital Markets Corp. | 6,319,187 |
| $ 436,110,000 |
$353,508,000 due 9/02/08 at 2.14% | |
Banc of America Securities LLC | $ 112,434,096 |
Bank of America, NA | 241,073,904 |
| $ 353,508,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | $ 14,792,274 |
Fidelity Commercial Mortgage-Backed Securities Central Fund | 29,162,743 |
Fidelity Corporate Bond 1-10 Year Central Fund | 81,406,674 |
Fidelity Floating Rate Central Fund | 24,729,364 |
Fidelity Mortgage Backed Securities Central Fund | 96,892,856 |
Fidelity Ultra-Short Central Fund | 33,658,178 |
Total | $ 280,642,089 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, end of |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | $ 310,910,980 | $ 62,786,499 | $ 48,982,775 | $ 283,991,380 | 18.9% |
Fidelity Commercial Mortgage-Backed Securities Central Fund | 402,255,147 | 308,170,881 | - | 658,434,817 | 19.0% |
Fidelity Corporate Bond 1-10 Year Central Fund | 763,168,246 | 1,105,094,191 | - | 1,816,743,999 | 23.0% |
Fidelity Floating Rate Central Fund | 228,686,671 | 223,302,409 | 23,315,935 | 408,626,297 | 15.3% |
Fidelity Mortgage Backed Securities Central Fund | 964,085,734 | 1,235,465,746 | 49,866,701 | 2,138,641,000 | 23.8% |
Fidelity Ultra-Short Central Fund | 875,572,723 | 377,273,786 | 529,852,254 | 599,904,422 | 16.9% |
Total | $ 3,544,679,501 | $ 3,312,093,512 | $ 652,017,665 | $ 5,906,341,915 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
| August 31, 2008 | |
|
|
|
Assets | ||
Investment in securities, at value (including securities loaned of $345,134,698 and repurchase agreements of $792,373,000) - See accompanying schedule: Unaffiliated issuers (cost $6,161,401,058) | $ 6,090,222,371 |
|
Fidelity Central Funds (cost $6,228,917,563) | 5,906,341,915 |
|
Total Investments (cost $12,390,318,621) |
| $ 11,996,564,286 |
Commitment to sell securities on a delayed delivery basis | (24,201,442) | |
Receivable for securities sold on a delayed delivery basis | 24,142,500 | (58,942) |
Receivable for investments sold, regular delivery | 26,097,269 | |
Cash | 391,339 | |
Receivable for swap agreements | 30,562 | |
Receivable for fund shares sold | 6,324,418 | |
Interest receivable | 56,922,769 | |
Distributions receivable from Fidelity Central Funds | 25,743,229 | |
Unrealized appreciation on swap agreements | 42,753,484 | |
Other receivables | 36,971 | |
Total assets | 12,154,805,385 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 66,643,753 | |
Delayed delivery | 608,653,056 | |
Payable for fund shares redeemed | 4,295,845 | |
Distributions payable | 1,067,348 | |
Unrealized depreciation on swap agreements | 33,509,921 | |
Accrued management fee | 2,918,053 | |
Distribution fees payable | 55,295 | |
Other affiliated payables | 1,315,009 | |
Other payables and accrued expenses | 856,943 | |
Collateral on securities loaned, at value | 353,508,000 | |
Total liabilities | 1,072,823,223 | |
|
|
|
Net Assets | $ 11,081,982,162 | |
Net Assets consist of: |
| |
Paid in capital | $ 11,370,457,234 | |
Undistributed net investment income | 8,813,868 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 83,267,778 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (380,556,718) | |
Net Assets | $ 11,081,982,162 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| August 31, 2008 | |
|
|
|
Calculation of Maximum Offering Price | $ 10.07 | |
|
|
|
Maximum offering price per share (100/96.00 of $10.07) | $ 10.49 | |
Class T: | $ 10.06 | |
|
|
|
Maximum offering price per share (100/96.00 of $10.06) | $ 10.48 | |
Class B: | $ 10.07 | |
|
|
|
Class C: | $ 10.07 | |
|
|
|
Total Bond: | $ 10.07 | |
|
|
|
Institutional Class: | $ 10.06 |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
| Year ended August 31, 2008 | |
|
|
|
Investment Income |
|
|
Dividends |
| $ 1,204,234 |
Interest |
| 283,244,652 |
Income from Fidelity Central Funds |
| 280,642,089 |
Total income |
| 565,090,975 |
|
|
|
Expenses | ||
Management fee | $ 31,993,893 | |
Transfer agent fees | 10,846,695 | |
Distribution fees | 633,899 | |
Fund wide operations fee | 3,495,827 | |
Independent trustees' compensation | 40,783 | |
Miscellaneous | 17,948 | |
Total expenses before reductions | 47,029,045 | |
Expense reductions | (352,777) | 46,676,268 |
Net investment income | 518,414,707 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 143,164,408 | |
Fidelity Central Funds | (55,342,894) |
|
Foreign currency transactions | (891) | |
Swap agreements | 7,472,837 |
|
Total net realized gain (loss) |
| 95,293,460 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (338,543,318) | |
Assets and liabilities in foreign currencies | (131) | |
Swap agreements | 6,488,170 | |
Delayed delivery commitments | (58,942) |
|
Total change in net unrealized appreciation (depreciation) |
| (332,114,221) |
Net gain (loss) | (236,820,761) | |
Net increase (decrease) in net assets resulting from operations | $ 281,593,946 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income | $ 518,414,707 | $ 212,551,890 |
Net realized gain (loss) | 95,293,460 | (6,020,604) |
Change in net unrealized appreciation (depreciation) | (332,114,221) | (85,266,164) |
Net increase (decrease) in net assets resulting | 281,593,946 | 121,265,122 |
Distributions to shareholders from net investment income | (501,867,517) | (198,338,706) |
Distributions to shareholders from net realized gain | (24,508,784) | (4,857,769) |
Total distributions | (526,376,301) | (203,196,475) |
Share transactions - net increase (decrease) | 4,412,741,476 | 4,556,920,613 |
Total increase (decrease) in net assets | 4,167,959,121 | 4,474,989,260 |
|
|
|
Net Assets | ||
Beginning of period | 6,914,023,041 | 2,439,033,781 |
End of period (including undistributed net investment income of $8,813,868 and undistributed net investment income of $4,530,397, respectively) | $ 11,081,982,162 | $ 6,914,023,041 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .488 | .508 | .043 | .476 | .387 | .046 |
Net realized and unrealized gain (loss) | (.189) | (.141) | .105 | (.294) H | .183 | .145 |
Total from investment operations | .299 | .367 | .148 | .182 | .570 | .191 |
Distributions from net investment income | (.474) | (.470) | (.038) | (.432) | (.370) | (.041) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.499) | (.487) | (.038) | (.472) | (.460) | (.041) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.93% | 3.57% | 1.44% | 1.78% | 5.52% | 1.85% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | .80% | .77% | .73% A | .79% | .96% | .87% A |
Expenses net of fee waivers, if any | .80% | .77% | .73% A | .79% | .80% | .80% A |
Expenses net of all reductions | .80% | .77% | .73% A | .79% | .80% | .80% A |
Net investment income | 4.77% | 4.93% | 4.98% A | 4.61% | 3.69% | 3.51% A |
Supplemental Data |
|
|
|
|
| |
Net assets, | $ 80,755 | $ 48,076 | $ 6,780 | $ 4,545 | $ 2,974 | $ 102 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.56 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .489 | .508 | .042 | .466 | .377 | .045 |
Net realized and unrealized gain (loss) | (.191) | (.143) | .105 | (.296) H | .173 | .144 |
Total from investment operations | .298 | .365 | .147 | .170 | .550 | .189 |
Distributions from net investment income | (.473) | (.468) | (.037) | (.420) | (.360) | (.039) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.498) | (.485) | (.037) | (.460) | (.450) | (.039) |
Net asset value, | $ 10.06 | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.56 | $ 10.46 |
Total Return B, C, D | 2.92% | 3.55% | 1.43% | 1.66% | 5.33% | 1.84% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | .81% | .78% | .87% A | .91% | 1.13% | .96% A |
Expenses net of fee waivers, if any | .81% | .78% | .87% A | .90% | .90% | .90% A |
Expenses net of all reductions | .80% | .78% | .87% A | .90% | .90% | .90% A |
Net investment income | 4.76% | 4.92% | 4.84% A | 4.50% | 3.59% | 3.41% A |
Supplemental Data |
|
|
|
|
| |
Net assets, | $ 38,574 | $ 42,191 | $ 6,293 | $ 4,583 | $ 5,739 | $ 102 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .413 | .432 | .037 | .399 | .309 | .036 |
Net realized and unrealized gain (loss) | (.190) | (.145) | .104 | (.296) H | .182 | .145 |
Total from investment operations | .223 | .287 | .141 | .103 | .491 | .181 |
Distributions from net investment income | (.398) | (.390) | (.031) | (.353) | (.291) | (.031) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.423) | (.407) | (.031) | (.393) | (.381) | (.031) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.17% | 2.77% | 1.38% | 1.01% | 4.74% | 1.76% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | 1.54% | 1.53% | 1.51% A | 1.59% | 1.75% | 1.62% A |
Expenses net of fee waivers, if any | 1.54% | 1.53% | 1.51% A | 1.55% | 1.55% | 1.55% A |
Expenses net of all reductions | 1.54% | 1.53% | 1.51% A | 1.55% | 1.55% | 1.55% A |
Net investment income | 4.03% | 4.17% | 4.22% A | 3.85% | 2.94% | 2.76% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 9,645 | $ 6,054 | $ 1,720 | $ 1,667 | $ 2,029 | $ 104 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .413 | .429 | .036 | .389 | .299 | .035 |
Net realized and unrealized gain (loss) | (.189) | (.145) | .105 | (.293) H | .181 | .145 |
Total from investment operations | .224 | .284 | .141 | .096 | .480 | .180 |
Distributions from net investment income | (.399) | (.387) | (.031) | (.346) | (.280) | (.030) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.424) | (.404) | (.031) | (.386) | (.370) | (.030) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.18% | 2.75% | 1.37% | .94% | 4.63% | 1.74% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | 1.53% | 1.55% | 1.60% A | 1.62% | 1.74% | 1.74% A |
Expenses net of fee waivers, if any | 1.53% | 1.55% | 1.60% A | 1.62% | 1.65% | 1.65% A |
Expenses net of all reductions | 1.53% | 1.55% | 1.60% A | 1.62% | 1.65% | 1.65% A |
Net investment income | 4.03% | 4.15% | 4.13% A | 3.78% | 2.84% | 2.66% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 28,786 | $ 18,890 | $ 2,106 | $ 1,770 | $ 677 | $ 142 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Total Bond
Years ended August 31, | 2008 | 2007 | 2006 K | 2006 I | 2005 I | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.28 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income D | .524 | .543 | .046 | .506 | .411 | .340 |
Net realized and unrealized gain (loss) | (.189) | (.143) | .105 | (.290) G | .182 | .237 |
Total from investment operations | .335 | .400 | .151 | .216 | .593 | .577 |
Distributions from net investment income | (.510) | (.503) | (.041) | (.466) | (.393) | (.337) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | (.060) |
Total distributions | (.535) | (.520) | (.041) | (.506) | (.483) | (.397) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C | 3.29% | 3.89% | 1.46% | 2.11% | 5.75% | 5.68% |
Ratios to Average Net Assets E, H |
|
|
|
|
| |
Expenses before reductions | .45% | .45% | .45% A | .45% | .64% | .75% |
Expenses net of fee waivers, if any | .45% | .45% | .45% A | .45% | .61% | .65% |
Expenses net of all reductions | .45% | .45% | .45% A | .45% | .61% | .65% |
Net investment income | 5.12% | 5.25% | 5.26% A | 4.95% | 3.87% | 3.25% |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 9,976,432 | $ 6,450,177 | $ 2,421,077 | $ 2,306,817 | $ 420,225 | $ 373,699 |
Portfolio turnover rate F | 122% | 116% J | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I For the period ended July 31.
J Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
K For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended August 31, | 2008 | 2007 | 2006 L | 2006 J | 2005 J | 2004 H |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income D | .516 | .527 | .045 | .493 | .410 | .048 |
Net realized and unrealized gain (loss) | (.186) | (.134) | .105 | (.294) G | .182 | .145 |
Total from investment operations | .330 | .393 | .150 | .199 | .592 | .193 |
Distributions from net investment income | (.505) | (.496) | (.040) | (.459) | (.392) | (.043) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.530) | (.513) | (.040) | (.499) | (.482) | (.043) |
Net asset value, end of period | $ 10.06 | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.57 | $ 10.46 |
Total Return B, C | 3.24% | 3.83% | 1.46% | 1.95% | 5.74% | 1.87% |
Ratios to Average Net Assets E, I |
|
|
|
|
| |
Expenses before reductions | .51% | .50% | .54% A | .56% | .62% | .71% A |
Expenses net of fee waivers, if any | .51% | .50% | .54% A | .56% | .62% | .65% A |
Expenses net of all reductions | .51% | .49% | .54% A | .56% | .61% | .65% A |
Net investment income | 5.06% | 5.21% | 5.16% A | 4.84% | 3.87% | 3.66% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 947,791 | $ 348,636 | $ 1,058 | $ 933 | $ 114 | $ 102 |
Portfolio turnover rate F | 122% | 116% K | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J For the period ended July 31.
K Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
L For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended August 31, 2008
1. Organization.
Fidelity Total Bond Fund (the Fund) is a fund of Fidelity Income Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund offers Class A, Class T, Class B, Class C, Total Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
2. Investments in Fidelity Central Funds.
The Fund may invest in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on their investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. The following summarizes the Fund's investment in each Fidelity Central Fund.
Annual Report
Notes to Financial Statements - continued
2. Investments in Fidelity Central Funds - continued
Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | Fidelity Investment Money Management, Inc. (FIMM) | Seeks a high level of income by normally investing in investment-grade securitized debt securities and repurchase agreements for those securities. | Futures Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Commercial Mortgage-Backed Securities Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade commercial mortgage-backed securities and repurchase agreements for those securities. | Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Corporate Bond 1-10 Year Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade corporate bonds and other corporate debt securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Floating Rate Central Fund | Fidelity Management & Research Company, Inc. (FMRC) | Seeks a high level of income by normally investing in floating rate loans and other floating rate securities. | Loans & Direct Debt Instruments Repurchase Agreements Restricted Securities
|
Fidelity Mortgage Backed Securities Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade mortgage-related securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Futures Mortgage Dollar Rolls Repurchase Agreements Swap Agreements |
Fidelity Ultra-Short Central Fund | FIMM | Seeks to obtain a high level of current income consistent with preservation of capital by investing in U.S. dollar denominated money market and investment-grade debt securities. | Futures Repurchase Agreements Restricted Securities Swap Agreements |
Annual Report
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com,as applicable. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the SEC's web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC's web site or upon request.
3. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Fund:
Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Debt securities, including restricted securities, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value. Actual prices received at disposition may differ.
When current market prices or quotations are not readily available or reliable, valuations may be determined in good faith in accordance with procedures adopted by the Board of Trustees. Factors used in determining value may include significant market or security specific events, changes in interest rates and credit quality, and developments in foreign markets which are monitored by evaluating the performance of ADRs, futures contracts
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Security Valuation - continued
and exchange-traded funds. The frequency with which these procedures are used cannot be predicted and may be utilized to a significant extent. The value of securities used for net asset value (NAV) calculation under these procedures may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 pm Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which 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 and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
3. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing substantially all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code and filing its U.S. federal tax return. As a result, no provision for income taxes is required. The Fund is subject to the provisions of FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the Fund's federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service (IRS). Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swap agreements, foreign currency transactions, market discount, partnerships (including allocations from Fidelity Central Funds), deferred trustees compensation and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 79,456,091 |
|
Unrealized depreciation | (416,279,836) |
|
Net unrealized appreciation (depreciation) | $ (336,823,745) |
|
Undistributed ordinary income | 74,595,018 |
|
|
|
|
Cost for federal income tax purposes | $ 12,333,388,031 |
|
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
| August 31, 2008 | August 31, 2007 |
Ordinary Income | $ 521,474,544 | $ 203,196,475 |
Long-term Capital Gains | 4,901,757 | - |
Total | $ 526,376,301 | $ 203,196,475 |
New Accounting Pronouncements. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and results in expanded disclosures about fair value measurements.
In addition, in March 2008, Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), was issued and is effective for reporting periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures to provide information about the reasons the Fund invests in derivative instruments, the accounting treatment and the effect derivatives have on financial performance.
4. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Annual Report
4. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities. The Fund may purchase or sell securities on a delayed delivery or when-issued 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. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued 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 or when-issued 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 value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Restricted Securities. The Fund may 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. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The Fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the Fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments.
Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.
Annual Report
Notes to Financial Statements - continued
4. Operating Policies - continued
Swap Agreements - continued
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The Fund may enter into credit default swaps in which either it or its counterparty act as guarantors. By acting as the guarantor of a swap, a fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value.
Periodic payments and premiums received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $5,714,855,579 and $1,275,500,461, respectively.
6. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and a group fee rate that averaged .12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.
Annual Report
6. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
| Distribution | Service | Paid to | Retained |
Class A | 0% | .25% | $ 182,737 | $ 37,558 |
Class T | 0% | .25% | 115,549 | 1,138 |
Class B | .65% | .25% | 83,546 | 60,524 |
Class C | .75% | .25% | 252,067 | 75,748 |
|
|
| $ 633,899 | $ 174,968 |
Sales Load. FDC receives a front-end sales charge of up to 4.00% for selling Class A shares and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, ..75% to .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 25,515 |
Class T | 5,823 |
Class B* | 11,561 |
Class C* | 3,836 |
| $ 46,735 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
Notes to Financial Statements - continued
6. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of each respective class of the Fund. FIIOC receives an asset-based fee of .10% of Total Bond's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. Prior to January 1, 2008, Fidelity Service Company, Inc. (FSC), also an affiliate of FMR, was the sub-transfer agent for Total Bond shares. For the period, each class paid the following transfer agent fees:
| Amount | % of |
Class A | $ 143,015 | .20 |
Class T | 94,941 | .21 |
Class B | 26,504 | .29 |
Class C | 46,393 | .18 |
Total Bond | 9,096,927 | .10 |
Institutional Class | 1,438,915 | .16 |
| $ 10,846,695 |
|
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.
7. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounted to $17,948 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Annual Report
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, 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, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities during the period amounted to $5,167,155.
9. Expense Reductions.
Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's management fee by $79,612. During the period, credits reduced each class' transfer agent expense as noted in the table below.
| Transfer Agent |
|
Total Bond | $ 249,985 |
|
Institutional Class | 23,180 |
|
| $ 273,165 |
|
10. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
Notes to Financial Statements - continued
10. Other - continued
At the end of the period, the Fidelity Advisor Freedom Funds and Fidelity Freedom Funds were owners of record, in the aggregate, of approximately 34% of the total outstanding shares of the Fund.
11. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended August 31, | 2008 | 2007 |
From net investment income |
|
|
Class A | $ 3,361,032 | $ 1,100,606 |
Class T | 2,139,983 | 1,373,421 |
Class B | 357,685 | 136,878 |
Class C | 975,717 | 457,270 |
Total Bond | 451,129,055 | 191,143,423 |
Institutional Class | 43,904,045 | 4,127,108 |
Total | $ 501,867,517 | $ 198,338,706 |
From net realized gain |
|
|
Class A | $ 158,977 | $ 27,576 |
Class T | 118,778 | 34,295 |
Class B | 17,979 | 5,072 |
Class C | 58,576 | 16,001 |
Total Bond | 22,110,637 | 4,768,190 |
Institutional Class | 2,043,837 | 6,635 |
Total | $ 24,508,784 | $ 4,857,769 |
12. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Years ended | Years ended | Years ended | Years ended |
Class A |
|
|
|
|
Shares sold | 5,588,201 | 5,058,526 | $ 57,565,572 | $ 52,475,077 |
Reinvestment of distributions | 305,321 | 89,369 | 3,130,894 | 927,501 |
Shares redeemed | (2,555,919) | (1,118,505) | (26,109,819) | (11,603,024) |
Net increase (decrease) | 3,337,603 | 4,029,390 | $ 34,586,647 | $ 41,799,554 |
Annual Report
12. Share Transactions - continued
| Shares | Dollars | ||
| Years ended | Years ended | Years ended | Years ended |
Class T |
|
|
|
|
Shares sold | 2,804,342 | 4,727,867 | $ 28,824,011 | $ 49,238,640 |
Reinvestment of distributions | 209,490 | 129,776 | 2,149,894 | 1,346,799 |
Shares redeemed | (3,292,088) | (1,351,158) | (33,740,425) | (13,923,481) |
Net increase (decrease) | (278,256) | 3,506,485 | $ (2,766,520) | $ 36,661,958 |
Class B |
|
|
|
|
Shares sold | 792,814 | 539,386 | $ 8,188,014 | $ 5,591,610 |
Reinvestment of distributions | 25,155 | 9,450 | 258,101 | 98,229 |
Shares redeemed | (449,829) | (124,884) | (4,577,167) | (1,299,404) |
Net increase (decrease) | 368,140 | 423,952 | $ 3,868,948 | $ 4,390,435 |
Class C |
|
|
|
|
Shares sold | 1,925,088 | 1,926,281 | $ 19,771,131 | $ 20,051,168 |
Reinvestment of distributions | 87,624 | 38,210 | 898,560 | 397,140 |
Shares redeemed | (993,539) | (327,493) | (10,165,574) | (3,406,204) |
Net increase (decrease) | 1,019,173 | 1,636,998 | $ 10,504,117 | $ 17,042,104 |
Total Bond |
|
|
|
|
Shares sold | 547,722,071 | 449,525,248 | $ 5,645,252,478 | $ 4,670,295,711 |
Reinvestment of distributions | 45,012,353 | 18,043,057 | 461,616,494 | 187,426,399 |
Shares redeemed | (230,103,358) | (72,384,207) | (2,368,082,060) | (750,709,047) |
Net increase (decrease) | 362,631,066 | 395,184,098 | $ 3,738,786,912 | $ 4,107,013,063 |
Institutional Class |
|
|
|
|
Shares sold | 78,780,201 | 34,101,050 | $ 814,530,864 | $ 352,256,185 |
Reinvestment of distributions | 4,451,142 | 377,910 | 45,563,586 | 3,888,447 |
Shares redeemed | (22,980,579) | (594,798) | (232,333,078) | (6,131,133) |
Net increase (decrease) | 60,250,764 | 33,884,162 | $ 627,761,372 | $ 350,013,499 |
Annual Report
Notes to Financial Statements - continued
13. Credit Risk.
The Fund invests a portion of its assets, directly or indirectly, in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults. Continuing shifts in the market's perception of credit quality on structured securities have resulted in increased volatility of market price and periods of decreased market activity that have adversely impacted the valuation of certain issuers of the Fund.
Subsequent to period end, Lehman Brothers Holdings, Inc. (LBHI) and certain of its affiliates sought protection under the insolvency laws of their jurisdictions of organization, including the United States, the United Kingdom and Japan. During this period, the Fund had outstanding securities trades and other transactions with counterparties affiliated with LBHI, which may include interest rate and credit default swap agreements, and commitments to purchase securities on a delayed delivery or when-issued basis. As a result of these events, LBHI's affiliates are unable to fulfill their commitments and, in certain cases, the Fund may have terminated its trades and related agreements with the relevant entities and, where appropriate, is in the process of initiating claims for damages. FMR believes that the financial impact to the Fund relating to these events is immaterial.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Total Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Total Bond Fund (a fund of Fidelity Income Fund) at August 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Total Bond Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2008 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 23, 2008
Annual Report
Trustees and Officers
The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for Edward C. Johnson 3d and James C. Curvey, each of the Trustees oversees 158 funds advised by FMR or an affiliate. Messrs. Johnson and Curvey oversee 376 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (78) | |
| Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR LLC; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of FIL Limited. Previously, Mr. Johnson served as President of FMR LLC (2006-2007). Mr. Edward C. Johnson 3d and Mr. Arthur E. Johnson are not related. |
James C. Curvey (73) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2006- present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR. FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (66) | |
| Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities), a member of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. Previously, Mr. Gamper served as Chairman of the Board of Governors, Rutgers University (2004-2007). |
George H. Heilmeier (72) | |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology), Compaq, Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing), INET Technologies Inc. (telecommunications network surveillance, 2001- 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. |
Arthur E. Johnson (61) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor). In addition, Mr. Johnson serves as a member of the Board of Directors of AGL Resources, Inc. (holding company), and IKON Office Solutions, Inc. (document management systems and services). Mr. Arthur E. Johnson and Mr. Edward C. Johnson 3d are not related. |
James H. Keyes (67) | |
| Year of Election or Appointment: 2007 Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines) and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). Previously, Mr. Keyes served as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (61) | |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of McKesson Corporation (healthcare service). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007). |
Kenneth L. Wolfe (69) | |
| Year of Election or Appointment: 2005 Mr. Wolfe is Chairman and a Director of Hershey Foods Corporation (2007-present), where prior to his retirement in 2001, he was Chairman and Chief Executive Officer. Mr. Wolfe currently serves as a member of the board of Revlon Inc. (2004-present). Previously, Mr. Wolfe served as a member of the boards of Adelphia Communications Corporation (2003-2006) and Bausch & Lomb, Inc. (1993-2007). |
Advisory Board Member and Executive Officers**:
Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Peter S. Lynch (64) | |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. |
John R. Hebble (50) | |
| Year of Election or Appointment: 2008 President and Treasurer of Total Bond. Mr. Hebble also serves as President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2003-present). Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds. |
Boyce I. Greer (52) | |
| Year of Election or Appointment: 2006 Vice President of Total Bond. Mr. Greer also serves as Vice President of Asset Allocation Funds (2005-present), Fixed-Income Funds (2006- present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). Mr. Greer is President and a Director of Fidelity Investments Money Management, Inc. (2007-present), and an Executive Vice President of FMR and FMR Co., Inc. (2005-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005). |
Dwight D. Churchill (54) | |
| Year of Election or Appointment: 2008 Vice President of Total Bond. Mr. Churchill also serves as Vice President of Fidelity's Bond Funds (2008-present). Mr. Churchill is Executive Vice President of FMR (2005-present), FMR Co., Inc. (2005-present) and Fidelity Investments Money Management, Inc. (2008-present). Previously, Mr. Churchill served as Senior Vice President of FMR (1997-2005) and Senior Vice President of Fidelity Investments Money Management, Inc. (2000-2006). |
Scott C. Goebel (40) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of Total Bond. Mr. Goebel also serves as Secretary and CLO of other Fidelity funds (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008- present); and Deputy General Counsel of FMR LLC. Previously, Mr. Goebel served as Assistant Secretary of the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Nancy D. Prior (41) | |
| Year of Election or Appointment: 2008 Assistant Secretary of Total Bond. Ms. Prior also serves as Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds (2008- present) and is an employee of FMR (2002-present). |
Holly C. Laurent (54) | |
| Year of Election or Appointment: 2008 Anti-Money Laundering (AML) Officer of Total Bond. Ms. Laurent also serves as AML Officer of other Fidelity funds (2008-present) and is an employee of FMR LLC. Previously, Ms. Laurent was Senior Vice President and Head of Legal for Fidelity Business Services India Pvt. Ltd. (2006- 2008), Senior Vice President, Deputy General Counsel and Group Head for FMR LLC (2005-2006). |
Christine Reynolds (49) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of Total Bond. Ms. Reynolds also serves as Chief Financial Officer of other Fidelity funds (2008-present). Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. She served as Chief Operating Officer of FPCMS from 2007 through July 2008. Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980- 2002), where she was an audit partner with PwC's investment management practice. |
Michael H. Whitaker (41) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of Total Bond. Mr. Whitaker also serves as Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Bryan A. Mehrmann (47) | |
| Year of Election or Appointment: 2005 Deputy Treasurer of Total Bond. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). |
Robert G. Byrnes (41) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of Total Bond. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). |
Peter L. Lydecker (54) | |
| Year of Election or Appointment: 2004 Assistant Treasurer of Total Bond. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004-present) and is an employee of FMR. |
Paul M. Murphy (61) | |
| Year of Election or Appointment: 2007 Assistant Treasurer of Total Bond. Mr. Murphy also serves as Assistant Treasurer of other Fidelity funds (2007-present) and is an employee of FMR (2007-present). Previously, Mr. Murphy served as Chief Financial Officer of the Fidelity Funds (2005-2006), Vice President and Associate General Counsel of FMR (2007), and Senior Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (1994-2007). |
Gary W. Ryan (50) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of Total Bond. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
** FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.
Annual Report
Distributions
The Board of Trustees of Fidelity Total Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:
| Pay Date | Record Date | Capital Gains |
Total Bond | 10/13/08 | 10/10/08 | $.065 |
The fund hereby designates as a capital gain dividend with respect to the taxable year ended August 31, 2008 $3,879,500, or, if subsequently determined to be different, the net capital gain of such year.
A total of 6.69% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $426,216,385 of distributions paid during the period January 1, 2008 to August 31, 2008 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2009 of amounts for use in preparing 2008 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Total Bond Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly and, acting directly and through its separate committees, requests and receives information concerning, and considers at each of its meetings factors that are relevant to, its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has a written charter outlining the structure and purposes of the committee. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts.
At its June 2008 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expenses; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders. The Board also approved agreements with foreign sub-advisers Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Japan) Inc., and Fidelity Management & Research (Hong Kong) Limited.
In considering whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. The Board's decision to renew the Advisory Contracts was not based on any single factor noted above, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that Fidelity has taken a number of actions over the previous year that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) contractually agreeing to reduce the management fees on Fidelity's Institutional Money Market Funds and launching Class IV and Institutional Class of certain of these funds; (iii) reducing the transfer agent fees for the Fidelity Select Portfolios and Investor Class of the VIP funds; and (iv) launching Class K of 29 equity funds as a lower-fee class available to certain employer-sponsored retirement plans.
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2007, as available, the cumulative total returns of Fidelity Total Bond (retail class) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Fidelity Total Bond (retail class) and Class C show the performance of the highest and lowest performing classes, respectively (based on three-year performance). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Fidelity Total Bond Fund
The Board reviewed the fund's relative investment performance against its peer group and stated that the performance of Fidelity Total Bond (retail class) of the fund was in the fourth quartile for the one-year period, the second quartile for the three-year period, and the first quartile for the five-year period. The Board also stated that the investment performance of the fund was lower than its benchmark for all periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board discussed with FMR actions that may be taken by FMR to improve the fund's below-benchmark performance and how investment personnel evaluate potential for incremental return against the risks involved in obtaining that incremental return. The Board considered the steps that FMR has taken to strengthen and refine its risk management processes in light of recent credit events that have affected various sectors of the fixed-income markets.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Total Bond Fund
Annual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2007.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that the current contractual arrangements for the fund (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Total Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Total Bond (retail class) to 45 basis points. These contractual arrangements may not be increased without the approval of the Board and the shareholders of the applicable class. The fund's Advisor classes are subject to different class-level expenses (transfer agent fees and 12b-1 fees).
The Board noted that each class's total expenses ranked below its competitive median for 2007.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR determines the group fee rates based on a tiered asset "breakpoint" schedule. The Board noted, however, that because the current contractual arrangements set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including (i) fund performance trends and actions to be taken by FMR to improve certain funds' overall performance; (ii) portfolio manager changes that have occurred during the past year; (iii) Fidelity's fund profitability methodology, the profitability of certain fund service providers, and profitability trends for certain funds; (iv) Fidelity's compensation structure for portfolio managers and key personnel, including its effects on fund profitability and the extent to which portfolio manager compensation is linked to fund performance; (v) Fidelity's fee structures; (vi) the funds' sub-advisory arrangements; and (vii) accounts managed by Fidelity other than the Fidelity funds.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
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 (FAST®)
1-800-544-5555
Press
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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
* 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.
Annual Report
To Write Fidelity
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
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
Selling shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
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 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
General Correspondence
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
Annual Report
To Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
15445 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
2000 Avenue of the Stars
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
123 South Lake Avenue
Pasadena, CA
16656 Bernardo Ctr. Drive
Rancho Bernardo, CA
1220 Roseville Parkway
Roseville, CA
1740 Arden Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
11943 El Camino Real
San Diego, CA
8 Montgomery Street
San Francisco, CA
3793 State Street
Santa Barbara, CA
1200 Wilshire Boulevard
Santa Monica, CA
398 West El Camino Real
Sunnyvale, CA
111 South Westlake Blvd
Thousand Oaks, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6326 Canoga Avenue
Woodland Hills, CA
Colorado
281 East Flatiron Circle
Broomfield, CO
1625 Broadway
Denver, CO
9185 Westview Road
Lone Tree, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
400 Delaware Avenue
Wilmington, DE
Florida
175 East Altamonte Drive
Altamonte Springs, FL
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
4671 Town Center Parkway
Jacksonville, FL
8880 Tamiami Trail, North
Naples, FL
230 Royal Palm Way
Palm Beach, FL
3501 PGA Boulevard
Palm Beach Gardens, FL
3550 Tamiami Trail, South
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
2465 State Road 7
Wellington, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
401 North Michigan Avenue
Chicago, IL
One Skokie Valley Road
Highland Park, IL
1415 West 22nd Street
Oak Brook, IL
15105 S LaGrange Road
Orland Park, IL
1572 East Golf Road
Schaumburg, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
8480 Keystone Crossing
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7315 Wisconsin Avenue
Bethesda, MD
610 York Road
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
238 Main Street
Cambridge, MA
200 Endicott Street
Danvers, MA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
405 Cochituate Road
Framingham, MA
551 Boston Turnpike
Shrewsbury, MA
Michigan
500 E. Eisenhower Pkwy.
Ann Arbor, MI
280 Old N. Woodward Ave.
Birmingham, MI
30200 Northwestern Hwy.
Farmington Hills, MI
43420 Grand River Avenue
Novi, MI
Minnesota
7740 France Avenue South
Edina, MN
8342 3rd Street North
Oakdale, MN
Missouri
1524 South Lindbergh Blvd.
St. Louis, MO
Nevada
2225 Village Walk Drive
Henderson, NV
New Jersey
501 Route 73 South
Marlton, NJ
150 Essex Street
Millburn, NJ
35 Morris Street
Morristown, NJ
396 Route 17, North
Paramus, NJ
3518 Route 1 North
Princeton, NJ
530 Broad Street
Shrewsbury, NJ
New Mexico
2261 Q Street NE
Albuquerque, NM
New York
1130 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
980 Madison Avenue
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
200 Fifth Avenue
New York, NY
733 Third Avenue
New York, NY
11 Penn Plaza
New York, NY
2070 Broadway
New York, NY
1075 Northern Blvd.
Roslyn, NY
799 Central Park Avenue
Scarsdale, NY
North Carolina
4611 Sharon Road
Charlotte, NC
7011 Fayetteville Road
Durham, NC
Ohio
3805 Edwards Road
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1324 Polaris Parkway
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1800 Crocker Road
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28699 Chagrin Boulevard
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Oregon
7493 SW Bridgeport Road
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Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
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Rhode Island
10 Memorial Boulevard
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Tennessee
3018 Peoples Street
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7628 West Farmington Blvd.
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2035 Mallory Lane
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Texas
10000 Research Boulevard
Austin, TX
4001 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
6560 Fannin Street
Houston, TX
1701 Lake Robbins Drive
The Woodlands, TX
6500 N. MacArthur Blvd.
Irving, TX
6005 West Park Boulevard
Plano, TX
14100 San Pedro
San Antonio, TX
1576 East Southlake Blvd.
Southlake, TX
Utah
279 West South Temple
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
10500 NE 8th Street
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
16020 West Bluemound Road
Brookfield, WI
Annual Report
Investment Adviser
Fidelity Management & Research Company
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(U.K.) Ltd.
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Citibank, N.A.
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Fidelity Advisor
Total Bond
Fund - Class A, Class T, Class B
and Class C
Annual Report
August 31, 2008
(2_fidelity_logos) (Registered_Trademark)
Class A, Class T, Class B,
and Class C are classes of
Fidelity Total Bond Fund
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Trustees and Officers |
| |
Distributions |
| |
Board Approval of Investment Advisory Contracts and Management Fees |
|
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com (search for "proxy voting guidelines") or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company.
Annual Report
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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com or http://www.advisor.fidelity.com, as applicable.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Most domestic and international equity indexes continued to dwell in negative territory, pressured by unfavorable
credit-market conditions, particularly in the United States. On the upside,
investment-grade bonds and money markets generally have served investors well so far this year. Financial markets are always unpredictable, but there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best-performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended August 31, 2008 | Past 1 | Past 5 | Life of |
Class A (incl. 4.00% sales charge) B | -1.18% | 3.16% | 3.68% |
Class T (incl. 4.00% sales charge) C | -1.19% | 3.08% | 3.62% |
Class B (incl. contingent deferred sales charge) D | -2.73% | 3.00% | 3.70% |
Class C (incl. contingent deferred sales charge) E | 1.20% | 3.30% | 3.81% |
A From October 15, 2002.
B As of April 1, 2007, Class A shares bear a 0.25% 12b-1 fee. The initial offering of Class A shares took place on June 16, 2004. Returns between June 16, 2004 and March 31, 2007 reflect a 0.15% 12b-1 fee. Returns prior to June 16, 2004 are those of Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class A shares' current 12b-1 fee been reflected, returns prior to April 1, 2007 would have been lower.
C Class T shares bear a 0.25% 12b-1 fee. The initial offering of Class T shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
D Class B shares bear a 0.90% 12b-1 fee. The initial offering of Class B shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower. Class B shares' contingent deferred sales charges included in past one year, past five years, and life of fund total return figures are 5%, 2%, and 1%, respectively.
E Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
Annual Report
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Total Bond Fund - Class A on October 15, 2002, when the fund started, and the current 4.00% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® U.S. Aggregate Index performed over the same period. The initial offering of Class A took place on June 16, 2004. See the previous page for additional information regarding the performance of Class A.
In prior years, the performance from year to year was represented by the performance of Class T. Going forward, the fund's performance will be represented by Class A for consistency with other fund materials.
Annual Report
Management's Discussion of Fund Performance
Comments from Ford O'Neil, Lead Portfolio Manager of Fidelity Advisor Total Bond Fund
Several years of healthy economic growth and a hearty appetite for risk abruptly reversed during the 12-month period ending August 31, 2008, as a meltdown in the subprime mortgage market led to an unnerving credit crisis. Bond investors fled from lower-quality debt instruments and flocked to those with an explicit or implicit guarantee from the U.S. government. The investment-grade bond market as a whole, as measured by the Lehman Brothers® U.S. Aggregate Index, rose 5.86%. Treasuries did the best, benefiting from their reputation as one of the world's safest investments. The Lehman Brothers U.S. Treasury Index gained 8.65% during the period - one of the highest returns of any domestic or international asset class over the past 12 months. At the opposite end of the spectrum, the asset-backed sector - home to weak-performing subprime debt - fell 3.48% according to the Lehman Brothers U.S. Fixed-Rate Asset-Backed Securities Index.
The fund's Class A, Class T, Class B and Class C shares gained 2.93%, 2.92%, 2.17% and 2.18%, respectively (excluding sales charges), trailing the Lehman Brothers U.S. Universal Index, which returned 5.21%, and the Lehman Brothers U.S. Aggregate Index. In this review, I'll address the aggregate of my direct investments and those I made in Fidelity fixed-income central funds. Underweighting index-topping U.S. Treasuries and government agency securities and overweighting weak securitized bonds accounted for the bulk of the fund's shortfall versus the Aggregate index. Specifically, holdings in asset-backed securities backed by subprime mortgages and commercial mortgage-backed securities - with sizable exposure coming from our stake in Fidelity® Ultra-Short Central Fund, one of the central funds discussed above - caused most of the damage. I significantly reduced the fund's exposure to Ultra-Short Central and cut direct investments in securitized bonds by period end. The market's growing aversion to riskier assets meant our out-of-index stake in emerging-markets debt and overexposure to corporate bonds worked against us, because both segments struggled. Similar factors hurt our high-yield bond positions, which significantly lagged the index. Conversely, out-of-index exposure to Treasury Inflation-Protected Securities (TIPS) helped. Another plus was yield-curve positioning, with my decisions to overweight better-performing intermediate bonds and underweight lagging long-term bonds benefiting performance. To manage the fund's yield-curve positioning, I used interest rate swaps - contracts that usually involve the exchange of fixed-rate interest payments for floating-rate payments.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2008 to August 31, 2008).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
| Beginning | Ending | Expenses Paid |
Class A |
|
|
|
Actual | $ 1,000.00 | $ 992.50 | $ 3.96 |
Hypothetical A | $ 1,000.00 | $ 1,021.17 | $ 4.01 |
Class T |
|
|
|
Actual | $ 1,000.00 | $ 992.30 | $ 4.11 |
Hypothetical A | $ 1,000.00 | $ 1,021.01 | $ 4.17 |
Class B |
|
|
|
Actual | $ 1,000.00 | $ 987.80 | $ 7.64 |
Hypothetical A | $ 1,000.00 | $ 1,017.44 | $ 7.76 |
Class C |
|
|
|
Actual | $ 1,000.00 | $ 988.80 | $ 7.65 |
Hypothetical A | $ 1,000.00 | $ 1,017.44 | $ 7.76 |
Total Bond |
|
|
|
Actual | $ 1,000.00 | $ 994.20 | $ 2.26 |
Hypothetical A | $ 1,000.00 | $ 1,022.87 | $ 2.29 |
Institutional Class |
|
|
|
Actual | $ 1,000.00 | $ 993.90 | $ 2.56 |
Hypothetical A | $ 1,000.00 | $ 1,022.57 | $ 2.59 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
| Annualized |
Class A | .79% |
Class T | .82% |
Class B | 1.53% |
Class C | 1.53% |
Total Bond | .45% |
Institutional Class | .51% |
Annual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of its investments in each non-money market Fidelity Central Fund.
Quality Diversification (% of fund's net assets) | |||||||
As of August 31, 2008 | As of February 29, 2008 | ||||||
![]() | U.S. Government and |
| ![]() | U.S. Government and |
| ||
![]() | AAA 11.0% |
| ![]() | AAA 10.8% |
| ||
![]() | AA 5.9% |
| ![]() | AA 4.2% |
| ||
![]() | A 8.8% |
| ![]() | A 7.0% |
| ||
![]() | BBB 15.1% |
| ![]() | BBB 12.8% |
| ||
![]() | BB and Below 10.2% |
| ![]() | BB and Below 9.6% |
| ||
![]() | Not Rated 0.9% |
| ![]() | Not Rated 0.6% |
| ||
![]() | Equities 0.1% |
| ![]() | Equities 0.0% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. All ratings are as of the report date and do not reflect subsequent downgrades. |
Weighted Average Maturity as of August 31, 2008 | ||
|
| 6 months ago |
Years | 6.2 | 5.7 |
The weighted average maturity is based on the dollar-weighted average length of time until principal payments are expected or until securities reach maturity, taking into account any maturity shortening feature such as a call, refunding or redemption provision. |
Duration as of August 31, 2008 | ||
|
| 6 months ago |
Years | 4.6 | 4.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of August 31, 2008* | As of February 29, 2008** | ||||||
![]() | Corporate Bonds 31.9% |
| ![]() | Corporate Bonds 25.7% |
| ||
![]() | U.S. Government and |
| ![]() | U.S. Government and |
| ||
![]() | Asset-Backed |
| ![]() | Asset-Backed |
| ||
![]() | CMOs and Other Mortgage Related Securities 10.4% |
| ![]() | CMOs and Other Mortgage Related Securities 9.8% |
| ||
![]() | Municipal Bonds 0.3% |
| ![]() | Municipal Bonds 0.0% |
| ||
![]() | Stocks 0.1% |
| ![]() | Stocks 0.0% |
| ||
![]() | Other Investments 5.2% |
| ![]() | Other Investments 4.8% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
* Foreign investments | 9.8% |
| ** Foreign investments | 9.5% |
| ||
* Futures and Swaps | 12.6% |
| ** Futures and Swaps | 12.1% |
|
† Short-term Investments and Net Other Assets are not included in the pie chart.
A holdings listing for the Fund, which presents direct holdings as well as the pro rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable.
Annual Report
Investments August 31, 2008
Showing Percentage of Net Assets
Corporate Bonds - 16.5% | ||||
| Principal | Value | ||
Convertible Bonds - 0.1% | ||||
ENERGY - 0.0% | ||||
Oil, Gas & Consumable Fuels - 0.0% | ||||
Chesapeake Energy Corp. 2.5% 5/15/37 | $ 1,300,000 | $ 1,750,710 | ||
INFORMATION TECHNOLOGY - 0.1% | ||||
Communications Equipment - 0.1% | ||||
Lucent Technologies, Inc. 2.875% 6/15/25 | 3,838,000 | 2,943,516 | ||
Nortel Networks Corp.: | ||||
1.75% 4/15/12 (h) | 6,339,000 | 4,468,995 | ||
1.75% 4/15/12 | 870,000 | 613,350 | ||
| 8,025,861 | |||
Semiconductors & Semiconductor Equipment - 0.0% | ||||
Advanced Micro Devices, Inc. 6% 5/1/15 | 3,200,000 | 1,815,040 | ||
TOTAL INFORMATION TECHNOLOGY | 9,840,901 | |||
TOTAL CONVERTIBLE BONDS | 11,591,611 | |||
Nonconvertible Bonds - 16.4% | ||||
CONSUMER DISCRETIONARY - 2.4% | ||||
Auto Components - 0.0% | ||||
Tenneco, Inc. 8.125% 11/15/15 | 855,000 | 767,363 | ||
Automobiles - 0.0% | ||||
Ford Motor Co.: | ||||
6.5% 8/1/18 | 750,000 | 397,500 | ||
7.45% 7/16/31 | 1,450,000 | 746,750 | ||
| 1,144,250 | |||
Diversified Consumer Services - 0.0% | ||||
Service Corp. International: | ||||
6.75% 4/1/15 | 650,000 | 611,000 | ||
7.5% 4/1/27 | 1,935,000 | 1,548,000 | ||
| 2,159,000 | |||
Hotels, Restaurants & Leisure - 0.8% | ||||
Boyd Gaming Corp. 7.75% 12/15/12 | 650,000 | 581,750 | ||
Cap Cana SA 9.625% 11/3/13 (h) | 600,000 | 528,000 | ||
Carrols Corp. 9% 1/15/13 | 85,000 | 71,188 | ||
Chukchansi Economic Development Authority 8% 11/15/13 (h) | 565,000 | 457,650 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Fontainebleau Las Vegas Holdings LLC/Fontainebleau Las Vegas Capital Corp. 10.25% 6/15/15 (h) | $ 1,270,000 | $ 571,500 | ||
Galaxy Entertainment Finance Co. Ltd. | 1,440,000 | 1,384,200 | ||
Harrah's Operating Co., Inc.: | ||||
5.375% 12/15/13 | 1,795,000 | 816,725 | ||
5.5% 7/1/10 | 420,000 | 352,800 | ||
Host Marriott LP: | ||||
6.375% 3/15/15 | 250,000 | 215,300 | ||
7.125% 11/1/13 | 4,590,000 | 4,280,175 | ||
ITT Corp. 7.375% 11/15/15 | 250,000 | 237,500 | ||
Landry's Restaurants, Inc. 9.5% 12/15/14 | 2,385,000 | 2,361,150 | ||
Mandalay Resort Group 9.375% 2/15/10 | 700,000 | 686,000 | ||
Mashantucket Western Pequot Tribe 8.5% 11/15/15 (h) | 5,740,000 | 4,218,900 | ||
McDonald's Corp. 6.3% 3/1/38 | 7,590,000 | 7,519,656 | ||
MGM Mirage, Inc.: | ||||
5.875% 2/27/14 | 3,295,000 | 2,644,238 | ||
6.625% 7/15/15 | 4,055,000 | 3,244,000 | ||
6.75% 9/1/12 | 5,985,000 | 5,191,988 | ||
6.75% 4/1/13 | 3,650,000 | 3,102,500 | ||
6.875% 4/1/16 | 1,710,000 | 1,368,000 | ||
7.625% 1/15/17 | 4,555,000 | 3,661,081 | ||
8.375% 2/1/11 | 1,585,000 | 1,428,481 | ||
Mohegan Tribal Gaming Authority: | ||||
6.125% 2/15/13 | 1,825,000 | 1,533,000 | ||
7.125% 8/15/14 | 3,515,000 | 2,565,950 | ||
Park Place Entertainment Corp.: | ||||
7.875% 3/15/10 | 700,000 | 598,500 | ||
8.125% 5/15/11 | 3,780,000 | 2,646,000 | ||
Royal Caribbean Cruises Ltd.: | ||||
7.25% 3/15/18 | 790,000 | 667,550 | ||
yankee: | ||||
7% 6/15/13 | 3,350,000 | 2,998,250 | ||
7.25% 6/15/16 | 4,190,000 | 3,561,500 | ||
7.5% 10/15/27 | 2,125,000 | 1,615,000 | ||
Scientific Games Corp.: | ||||
6.25% 12/15/12 | 875,000 | 824,688 | ||
7.875% 6/15/16 (h) | 1,950,000 | 1,911,000 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Seminole Hard Rock Entertainment, Inc. 5.2763% 3/15/14 (h)(m) | $ 3,010,000 | $ 2,377,900 | ||
Seneca Gaming Corp.: | ||||
Series B, 7.25% 5/1/12 | 1,215,000 | 1,087,425 | ||
7.25% 5/1/12 | 3,395,000 | 3,038,525 | ||
Snoqualmie Entertainment Authority: | ||||
6.875% 2/1/14 (h)(m) | 140,000 | 102,550 | ||
9.125% 2/1/15 (h) | 1,805,000 | 1,322,163 | ||
Station Casinos, Inc.: | ||||
6% 4/1/12 | 940,000 | 648,600 | ||
7.75% 8/15/16 | 710,000 | 479,250 | ||
Times Square Hotel Trust 8.528% 8/1/26 (h) | 111,072 | 111,072 | ||
Town Sports International Holdings, Inc. 0% 2/1/14 (e) | 2,270,000 | 2,020,300 | ||
Universal City Florida Holding Co. I/II 8.375% 5/1/10 | 3,025,000 | 2,926,688 | ||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.: | ||||
6.625% 12/1/14 | 1,590,000 | 1,442,925 | ||
6.625% 12/1/14 | 6,460,000 | 5,878,600 | ||
| 85,280,218 | |||
Household Durables - 0.2% | ||||
D.R. Horton, Inc. 6.5% 4/15/16 | 1,170,000 | 936,000 | ||
Fortune Brands, Inc. 5.875% 1/15/36 | 13,274,000 | 10,754,077 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.375% 12/15/14 | 710,000 | 426,000 | ||
8.875% 4/1/12 | 425,000 | 284,750 | ||
11.5% 5/1/13 (h) | 120,000 | 122,556 | ||
KB Home: | ||||
6.25% 6/15/15 | 535,000 | 446,725 | ||
6.375% 8/15/11 | 650,000 | 598,000 | ||
Newell Rubbermaid, Inc. 6.25% 4/15/18 | 3,105,000 | 2,809,522 | ||
Pulte Homes, Inc. 5.25% 1/15/14 | 645,000 | 548,250 | ||
Urbi, Desarrollos Urbanos, SA de CV 8.5% 4/19/16 (h) | 505,000 | 513,206 | ||
| 17,439,086 | |||
Media - 1.3% | ||||
AOL Time Warner, Inc. 7.625% 4/15/31 | 500,000 | 500,312 | ||
Cablemas SA de CV 9.375% 11/15/15 (Reg. S) | 2,015,000 | 2,178,618 | ||
Cablevision Systems Corp.: | ||||
7.1325% 4/1/09 (m) | 340,000 | 342,975 | ||
8% 4/15/12 | 3,070,000 | 3,046,975 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Charter Communications Holdings I LLC: | ||||
9.92% 4/1/14 | $ 1,495,000 | $ 717,600 | ||
11.125% 1/15/14 | 505,000 | 252,500 | ||
Charter Communications Holdings I LLC/Charter Communications Holdings I Capital Corp. 11% 10/1/15 | 5,490,000 | 4,090,050 | ||
Charter Communications Holdings II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 | 3,865,000 | 3,671,750 | ||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp.: | ||||
8.375% 4/30/14 (h) | 2,220,000 | 2,120,100 | ||
10.875% 9/15/14 (h) | 890,000 | 934,500 | ||
Clear Channel Communications, Inc.: | ||||
5% 3/15/12 | 885,000 | 550,913 | ||
6.25% 3/15/11 | 705,000 | 558,713 | ||
7.65% 9/15/10 | 700,000 | 670,250 | ||
Comcast Corp.: | ||||
5.7% 5/15/18 | 9,000,000 | 8,552,781 | ||
6.45% 3/15/37 | 8,838,000 | 8,151,243 | ||
COX Communications, Inc. 6.45% 12/1/36 (h) | 1,365,000 | 1,277,684 | ||
CSC Holdings, Inc.: | ||||
6.75% 4/15/12 | 2,735,000 | 2,680,300 | ||
7.625% 4/1/11 | 1,235,000 | 1,241,175 | ||
8.5% 6/15/15 (h) | 2,340,000 | 2,351,700 | ||
EchoStar Communications Corp.: | ||||
6.375% 10/1/11 | 2,810,000 | 2,743,263 | ||
7% 10/1/13 | 5,770,000 | 5,495,925 | ||
Kabel Deutschland GmbH 10.625% 7/1/14 | 3,690,000 | 3,800,700 | ||
Lamar Media Corp.: | ||||
Series B, 6.625% 8/15/15 | 535,000 | 474,813 | ||
6.625% 8/15/15 | 1,030,000 | 914,125 | ||
News America Holdings, Inc. 7.75% 12/1/45 | 170,000 | 174,986 | ||
News America, Inc.: | ||||
6.15% 3/1/37 | 2,970,000 | 2,687,069 | ||
6.2% 12/15/34 | 5,330,000 | 4,843,691 | ||
6.65% 11/15/37 | 15,817,000 | 15,248,157 | ||
Nexstar Broadcasting, Inc. 7% 1/15/14 | 1,120,000 | 907,200 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Nexstar Finance Holdings LLC/Nexstar Finance Holdings, Inc. 11.375% 4/1/13 | $ 639,181 | $ 575,263 | ||
Nielsen Finance LLC/Nielsen Finance Co.: | ||||
0% 8/1/16 (e) | 1,505,000 | 1,030,925 | ||
10% 8/1/14 | 2,975,000 | 3,004,750 | ||
Quebecor Media, Inc.: | ||||
7.75% 3/15/16 | 3,590,000 | 3,392,550 | ||
7.75% 3/15/16 | 1,790,000 | 1,691,550 | ||
The Reader's Digest Association, Inc. 9% 2/15/17 | 2,805,000 | 1,654,950 | ||
Time Warner Cable, Inc.: | ||||
5.85% 5/1/17 | 2,607,000 | 2,488,574 | ||
6.75% 7/1/18 | 12,300,000 | 12,417,932 | ||
7.3% 7/1/38 | 9,000,000 | 9,043,443 | ||
Time Warner, Inc.: | ||||
6.5% 11/15/36 | 7,565,000 | 6,683,352 | ||
6.625% 5/15/29 | 4,415,000 | 4,038,228 | ||
TL Acquisitions, Inc.: | ||||
0% 7/15/15 (e)(h) | 1,305,000 | 947,756 | ||
10.5% 1/15/15 (h) | 4,155,000 | 3,562,913 | ||
Umbrella Acquisition, Inc. 9.75% 3/15/15 pay-in-kind (h)(m) | 720,000 | 513,000 | ||
Viacom, Inc.: | ||||
6.125% 10/5/17 | 4,235,000 | 3,984,826 | ||
6.75% 10/5/37 | 1,460,000 | 1,312,422 | ||
Videotron Ltd. 9.125% 4/15/18 (h) | 1,150,000 | 1,207,500 | ||
Visant Holding Corp. 8.75% 12/1/13 | 450,000 | 428,625 | ||
| 139,158,627 | |||
Multiline Retail - 0.0% | ||||
Matahari Finance BV 9.5% 10/6/09 | 995,000 | 996,269 | ||
Specialty Retail - 0.1% | ||||
AutoNation, Inc. 7% 4/15/14 | 1,290,000 | 1,119,075 | ||
Michaels Stores, Inc. 10% 11/1/14 | 1,405,000 | 1,046,725 | ||
Nebraska Book Co., Inc. 8.625% 3/15/12 | 1,000,000 | 807,500 | ||
Sally Holdings LLC: | ||||
9.25% 11/15/14 | 1,410,000 | 1,417,050 | ||
10.5% 11/15/16 | 700,000 | 707,000 | ||
Sonic Automotive, Inc. 8.625% 8/15/13 | 700,000 | 532,000 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Specialty Retail - continued | ||||
Toys 'R' US, Inc.: | ||||
7.375% 10/15/18 | $ 445,000 | $ 311,500 | ||
7.625% 8/1/11 | 4,470,000 | 3,922,425 | ||
| 9,863,275 | |||
Textiles, Apparel & Luxury Goods - 0.0% | ||||
Hanesbrands, Inc. 6.5081% 12/15/14 (h)(m) | 2,345,000 | 2,034,288 | ||
Levi Strauss & Co.: | ||||
8.875% 4/1/16 | 1,780,000 | 1,535,250 | ||
9.75% 1/15/15 | 2,180,000 | 1,978,350 | ||
| 5,547,888 | |||
TOTAL CONSUMER DISCRETIONARY | 262,355,976 | |||
CONSUMER STAPLES - 1.3% | ||||
Beverages - 0.1% | ||||
Constellation Brands, Inc.: | ||||
7.25% 9/1/16 | 2,050,000 | 2,009,000 | ||
7.25% 5/15/17 | 775,000 | 757,563 | ||
8.375% 12/15/14 | 2,395,000 | 2,466,850 | ||
Diageo Capital PLC 5.75% 10/23/17 | 8,133,000 | 8,060,673 | ||
| 13,294,086 | |||
Food & Staples Retailing - 0.3% | ||||
Albertsons, Inc.: | ||||
7.45% 8/1/29 | 250,000 | 238,110 | ||
7.75% 6/15/26 | 210,000 | 195,300 | ||
CVS Caremark Corp.: | ||||
6.036% 12/10/28 (h) | 12,277,725 | 11,334,304 | ||
6.302% 6/1/37 (m) | 8,615,000 | 7,311,981 | ||
Rite Aid Corp.: | ||||
6.875% 8/15/13 | 735,000 | 444,675 | ||
7.5% 3/1/17 | 3,030,000 | 2,522,475 | ||
9.375% 12/15/15 | 735,000 | 474,075 | ||
10.375% 7/15/16 | 1,425,000 | 1,362,656 | ||
SUPERVALU, Inc. 7.5% 11/15/14 | 1,150,000 | 1,138,500 | ||
Wal-Mart Stores, Inc. 6.2% 4/15/38 | 10,570,000 | 10,456,034 | ||
| 35,478,110 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER STAPLES - continued | ||||
Food Products - 0.6% | ||||
Bertin Ltda. 10.25% 10/5/16 (h) | $ 505,000 | $ 517,625 | ||
Cargill, Inc.: | ||||
6% 11/27/17 (h) | 8,750,000 | 8,651,554 | ||
6.625% 9/15/37 (h) | 8,334,000 | 8,027,751 | ||
Dean Foods Co.: | ||||
6.9% 10/15/17 | 4,170,000 | 3,753,000 | ||
7% 6/1/16 | 3,235,000 | 2,992,375 | ||
General Mills, Inc. 5.2% 3/17/15 | 7,738,000 | 7,600,798 | ||
Gruma SA de CV 7.75% | 1,685,000 | 1,672,363 | ||
Kraft Foods, Inc.: | ||||
6.125% 2/1/18 | 5,261,000 | 5,166,807 | ||
6.875% 2/1/38 | 11,635,000 | 11,382,800 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | 1,595,000 | 1,595,000 | ||
Pierre Foods, Inc. 9.875% 7/15/12 (c) | 540,000 | 43,200 | ||
Pilgrims Pride Corp.: | ||||
7.625% 5/1/15 | 1,725,000 | 1,509,375 | ||
8.375% 5/1/17 | 1,425,000 | 1,129,313 | ||
Smithfield Foods, Inc. 7.75% 7/1/17 | 5,140,000 | 4,548,900 | ||
| 58,590,861 | |||
Personal Products - 0.0% | ||||
Revlon Consumer Products Corp. 9.5% 4/1/11 | 1,205,000 | 1,156,800 | ||
Tobacco - 0.3% | ||||
Philip Morris International, Inc.: | ||||
4.875% 5/16/13 | 7,558,000 | 7,487,166 | ||
5.65% 5/16/18 | 7,161,000 | 7,045,035 | ||
6.375% 5/16/38 | 12,110,000 | 11,910,476 | ||
Reynolds American, Inc. 7.25% 6/15/37 | 4,865,000 | 4,794,866 | ||
| 31,237,543 | |||
TOTAL CONSUMER STAPLES | 139,757,400 | |||
ENERGY - 2.4% | ||||
Energy Equipment & Services - 0.1% | ||||
Compagnie Generale de Geophysique SA: | ||||
7.5% 5/15/15 | 1,640,000 | 1,627,700 | ||
7.75% 5/15/17 | 2,970,000 | 2,947,725 | ||
Complete Production Services, Inc. 8% 12/15/16 | 740,000 | 727,050 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Energy Equipment & Services - continued | ||||
Helix Energy Solutions Group, Inc. 9.5% 1/15/16 (h) | $ 1,295,000 | $ 1,290,144 | ||
Seitel, Inc. 9.75% 2/15/14 | 2,545,000 | 2,245,963 | ||
Weatherford International Ltd. 7% 3/15/38 | 5,880,000 | 5,857,991 | ||
| 14,696,573 | |||
Oil, Gas & Consumable Fuels - 2.3% | ||||
Anadarko Petroleum Corp.: | ||||
5.95% 9/15/16 | 8,600,000 | 8,380,691 | ||
6.45% 9/15/36 | 2,115,000 | 1,943,911 | ||
Arch Western Finance LLC 6.75% 7/1/13 | 1,600,000 | 1,588,000 | ||
Atlas Pipeline Partners LP 8.125% 12/15/15 | 2,145,000 | 2,037,750 | ||
Canadian Natural Resources Ltd.: | ||||
5.7% 5/15/17 | 14,850,000 | 14,331,869 | ||
6.25% 3/15/38 | 3,050,000 | 2,809,227 | ||
6.75% 2/1/39 | 2,980,000 | 2,931,381 | ||
Chaparral Energy, Inc.: | ||||
8.5% 12/1/15 | 1,530,000 | 1,327,275 | ||
8.875% 2/1/17 | 1,140,000 | 986,100 | ||
Chesapeake Energy Corp.: | ||||
6.5% 8/15/17 | 1,925,000 | 1,780,625 | ||
6.875% 1/15/16 | 740,000 | 706,700 | ||
7.5% 9/15/13 | 1,300,000 | 1,322,750 | ||
7.5% 6/15/14 | 1,790,000 | 1,798,950 | ||
7.625% 7/15/13 | 600,000 | 606,000 | ||
Connacher Oil and Gas Ltd. 10.25% 12/15/15 (h) | 1,145,000 | 1,182,213 | ||
Drummond Co., Inc. 7.375% 2/15/16 (h) | 4,035,000 | 3,500,363 | ||
Duke Capital LLC 6.75% 2/15/32 | 10,542,000 | 9,867,460 | ||
Duke Energy Field Services 6.45% 11/3/36 (h) | 2,400,000 | 2,178,998 | ||
El Paso Performance-Linked Trust 7.75% 7/15/11 (h) | 1,165,000 | 1,173,738 | ||
Energy Partners Ltd. 9.75% 4/15/14 | 3,070,000 | 2,724,625 | ||
Forest Oil Corp.: | ||||
7.25% 6/15/19 | 1,080,000 | 990,900 | ||
7.75% 5/1/14 | 675,000 | 671,625 | ||
KazMunaiGaz Finance Sub BV 9.125% 7/2/18 (h) | 510,000 | 521,475 | ||
Massey Energy Co. 6.875% 12/15/13 | 4,565,000 | 4,450,875 | ||
Nakilat, Inc. 6.067% 12/31/33 (h) | 2,885,000 | 2,519,095 | ||
National Gas Co. of Trinidad & Tobago Ltd. 6.05% 1/15/36 (h) | 240,000 | 223,704 | ||
Newfield Exploration Co. 7.125% 5/15/18 | 1,285,000 | 1,207,900 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Nexen, Inc.: | ||||
5.875% 3/10/35 | $ 240,000 | $ 203,393 | ||
6.4% 5/15/37 | 3,645,000 | 3,269,306 | ||
NGPL PipeCo LLC 6.514% 12/15/12 (h) | 4,600,000 | 4,666,452 | ||
OPTI Canada, Inc.: | ||||
7.875% 12/15/14 | 2,280,000 | 2,254,464 | ||
8.25% 12/15/14 | 3,965,000 | 3,945,175 | ||
Pan American Energy LLC 7.75% 2/9/12 (h) | 3,120,000 | 3,042,000 | ||
Pemex Project Funding Master Trust: | ||||
5.75% 3/1/18 (h) | 860,000 | 844,950 | ||
6.625% 6/15/35 | 625,000 | 620,313 | ||
6.625% 6/15/35 (h) | 260,000 | 258,050 | ||
Petro-Canada: | ||||
6.05% 5/15/18 | 3,850,000 | 3,727,967 | ||
6.8% 5/15/38 | 18,950,000 | 18,027,779 | ||
Petrohawk Energy Corp.: | ||||
7.875% 6/1/15 (h) | 1,725,000 | 1,604,250 | ||
9.125% 7/15/13 | 4,270,000 | 4,227,300 | ||
Petroleos de Venezuela SA: | ||||
5.25% 4/12/17 | 9,205,000 | 6,282,413 | ||
5.375% 4/12/27 | 3,045,000 | 1,728,038 | ||
Petroleum Development Corp. 12% 2/15/18 | 1,605,000 | 1,685,250 | ||
Petrozuata Finance, Inc.: | ||||
7.63% 4/1/09 (h) | 1,258,137 | 1,258,137 | ||
8.22% 4/1/17 (h) | 2,178,398 | 2,254,642 | ||
Pioneer Natural Resources Co. 6.65% 3/15/17 | 2,935,000 | 2,678,188 | ||
Plains All American Pipeline LP: | ||||
6.125% 1/15/17 | 6,185,000 | 6,032,670 | ||
6.65% 1/15/37 | 4,430,000 | 4,003,918 | ||
Plains Exploration & Production Co.: | ||||
7% 3/15/17 | 4,040,000 | 3,625,900 | ||
7.75% 6/15/15 | 485,000 | 461,963 | ||
Range Resources Corp.: | ||||
6.375% 3/15/15 (Reg. S) | 1,085,000 | 1,022,613 | ||
7.375% 7/15/13 | 2,060,000 | 2,060,000 | ||
7.5% 5/15/16 | 2,615,000 | 2,595,388 | ||
Ras Laffan Liquid Natural Gas Co. Ltd. III 6.332% 9/30/27 (h) | 1,840,000 | 1,669,726 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
SandRidge Energy, Inc.: | ||||
6.4163% 4/1/14 (h)(m) | $ 2,720,000 | $ 2,529,600 | ||
8.625% 4/1/15 pay-in-kind (h) | 6,045,000 | 5,863,650 | ||
Ship Finance International Ltd. 8.5% 12/15/13 | 330,000 | 326,700 | ||
Southwestern Energy Co. 7.5% 2/1/18 (h) | 965,000 | 977,063 | ||
Spectra Energy Capital, LLC 6.2% 4/15/18 | 14,500,000 | 14,153,305 | ||
Suncor Energy, Inc.: | ||||
6.1% 6/1/18 | 9,625,000 | 9,558,443 | ||
6.85% 6/1/39 | 10,460,000 | 10,474,529 | ||
Teekay Corp. 8.875% 7/15/11 | 2,115,000 | 2,231,325 | ||
TEPPCO Partners LP: | ||||
6.65% 4/15/18 | 4,741,000 | 4,770,508 | ||
7.55% 4/15/38 | 9,095,000 | 9,136,582 | ||
Tesoro Corp. 6.5% 6/1/17 | 365,000 | 305,688 | ||
Texas Eastern Transmission LP 6% 9/15/17 (h) | 4,381,000 | 4,273,666 | ||
TNK-BP Finance SA: | ||||
6.875% 7/18/11 (h) | 1,200,000 | 1,146,000 | ||
7.5% 3/13/13 (Reg. S) | 1,145,000 | 1,079,163 | ||
Valero Energy Corp. 6.625% 6/15/37 | 2,785,000 | 2,457,339 | ||
XTO Energy, Inc.: | ||||
6.375% 6/15/38 | 13,285,000 | 11,975,949 | ||
6.75% 8/1/37 | 10,380,000 | 9,790,323 | ||
YPF SA 10% 11/2/28 | 1,475,000 | 1,430,750 | ||
| 250,295,028 | |||
TOTAL ENERGY | 264,991,601 | |||
FINANCIALS - 4.0% | ||||
Capital Markets - 0.9% | ||||
Bear Stearns Companies, Inc. 6.95% 8/10/12 | 9,630,000 | 10,002,498 | ||
BlackRock, Inc. 6.25% 9/15/17 | 6,750,000 | 6,629,729 | ||
Goldman Sachs Group, Inc.: | ||||
5.625% 1/15/17 | 3,200,000 | 2,897,322 | ||
6.75% 10/1/37 | 28,895,000 | 25,423,352 | ||
JPMorgan Chase Capital XX 6.55% 9/29/36 | 10,020,000 | 8,244,616 | ||
JPMorgan Chase Capital XXV 6.8% 10/1/37 | 7,405,000 | 6,321,019 | ||
Lehman Brothers Holdings, Inc.: | ||||
6.75% 12/28/17 | 4,235,000 | 3,798,185 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Lehman Brothers Holdings, Inc.: - continued | ||||
6.875% 5/2/18 | $ 6,600,000 | $ 6,144,765 | ||
7% 9/27/27 | 5,000,000 | 4,458,450 | ||
Merrill Lynch & Co., Inc.: | ||||
6.15% 4/25/13 | 3,165,000 | 2,999,265 | ||
6.875% 4/25/18 | 557,000 | 513,002 | ||
Morgan Stanley 4.75% 4/1/14 | 1,635,000 | 1,435,569 | ||
Northern Trust Corp. 5.5% 8/15/13 | 2,275,000 | 2,314,533 | ||
UBS AG Stamford Branch: | ||||
5.75% 4/25/18 | 12,400,000 | 11,871,128 | ||
5.875% 12/20/17 | 12,585,000 | 12,268,663 | ||
| 105,322,096 | |||
Commercial Banks - 0.7% | ||||
American Express Bank FSB 6% 9/13/17 | 10,000,000 | 9,186,950 | ||
Bank of America NA: | ||||
5.3% 3/15/17 | 1,515,000 | 1,374,775 | ||
6% 10/15/36 | 690,000 | 595,837 | ||
BB&T Capital Trust IV 6.82% 6/12/77 (m) | 2,314,000 | 1,803,738 | ||
Credit Suisse First Boston 6% 2/15/18 | 13,365,000 | 12,823,089 | ||
Development Bank of Philippines 8.375% (m) | 1,355,000 | 1,365,163 | ||
Ex-Im Ukraine 7.65% 9/7/11 (Issued by Credit Suisse London Branch for Ex-Im Ukraine) | 3,665,000 | 3,426,775 | ||
EXIM of Ukraine 7.75% 9/23/09 (Issued by Dresdner Bank AG for EXIM Ukraine) | 445,000 | 440,550 | ||
HBOS PLC 6.75% 5/21/18 (h) | 10,175,000 | 9,189,500 | ||
HSBC Holdings PLC 6.5% 9/15/37 | 8,400,000 | 7,659,481 | ||
HSBK (Europe) B.V. 9.25% 10/16/13 (h) | 1,085,000 | 1,047,025 | ||
KeyCorp Capital Trust VII 5.7% 6/15/35 | 2,600,000 | 1,660,451 | ||
Standard Chartered Bank 6.4% 9/26/17 (h) | 11,244,000 | 10,642,131 | ||
UBS Luxembourg SA (Reg. S) 8.375% 10/22/11 | 1,545,000 | 1,552,725 | ||
Vimpel Communications 8% 2/11/10 (Issued by UBS Luxembourg SA for Vimpel Communications) | 195,000 | 196,950 | ||
Wachovia Bank NA 6.6% 1/15/38 | 9,000,000 | 7,051,041 | ||
Wells Fargo & Co. 5.625% 12/11/17 | 10,423,000 | 10,018,379 | ||
| 80,034,560 | |||
Consumer Finance - 0.7% | ||||
American Express Co. 8.15% 3/19/38 | 9,010,000 | 9,196,264 | ||
American General Finance Corp. 6.9% 12/15/17 | 5,510,000 | 4,413,857 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Ford Motor Credit Co. LLC: | ||||
5.7% 1/15/10 | $ 1,415,000 | $ 1,234,623 | ||
7% 10/1/13 | 280,000 | 203,000 | ||
7.25% 10/25/11 | 840,000 | 643,474 | ||
7.375% 10/28/09 | 1,420,000 | 1,319,782 | ||
7.875% 6/15/10 | 710,000 | 612,041 | ||
9.875% 8/10/11 | 1,410,000 | 1,157,470 | ||
General Electric Capital Corp.: | ||||
5.625% 9/15/17 | 4,445,000 | 4,344,530 | ||
5.625% 5/1/18 | 25,000,000 | 24,305,525 | ||
5.875% 1/14/38 | 14,000,000 | 12,606,090 | ||
6.375% 11/15/67 (m) | 9,000,000 | 8,242,956 | ||
SLM Corp.: | ||||
2.94% 7/27/09 (m) | 1,827,000 | 1,731,463 | ||
2.96% 7/26/10 (m) | 6,515,000 | 5,872,543 | ||
4% 1/15/09 | 1,885,000 | 1,870,806 | ||
4.5% 7/26/10 | 4,120,000 | 3,748,162 | ||
| 81,502,586 | |||
Diversified Financial Services - 0.5% | ||||
Bank of America Corp. 5.75% 12/1/17 | 4,590,000 | 4,281,837 | ||
GlaxoSmithKline Capital, Inc.: | ||||
5.65% 5/15/18 | 5,941,000 | 5,958,015 | ||
6.375% 5/15/38 | 7,549,000 | 7,553,069 | ||
Hilcorp Energy I LP/Hilcorp Finance Co.: | ||||
7.75% 11/1/15 (h) | 5,185,000 | 4,692,425 | ||
9% 6/1/16 (h) | 1,000,000 | 970,000 | ||
International Lease Finance Corp. 5.65% 6/1/14 | 1,600,000 | 1,340,848 | ||
Leucadia National Corp.: | ||||
7% 8/15/13 | 6,420,000 | 6,259,500 | ||
7.125% 3/15/17 | 880,000 | 836,000 | ||
NSG Holdings II, LLC 7.75% 12/15/25 (h) | 5,470,000 | 5,251,200 | ||
OAO TMK 8.5% 9/29/09 (Issued by TMK Capital SA for OAO TMK) | 4,200,000 | 4,200,000 | ||
Pakistan International Sukuk Co. Ltd. 5.3569% 1/27/10 (m) | 500,000 | 450,000 | ||
Sunwest Management, Inc. 8.385% 6/9/10 (m) | 325,000 | 298,415 | ||
ZFS Finance USA Trust V 6.5% 5/9/67 (h)(m) | 12,400,000 | 10,682,265 | ||
| 52,773,574 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Insurance - 0.3% | ||||
American International Group, Inc.: | ||||
5.85% 1/16/18 | $ 8,920,000 | $ 7,510,631 | ||
8.175% 5/15/58 (h)(m) | 7,875,000 | 6,082,508 | ||
Pacific Life Global Funding 5.15% 4/15/13 (h) | 7,895,000 | 7,899,713 | ||
The Chubb Corp.: | ||||
5.75% 5/15/18 | 4,035,000 | 3,871,506 | ||
6.5% 5/15/38 | 3,390,000 | 3,211,011 | ||
USI Holdings Corp. 6.6794% 11/15/14 (h)(m) | 150,000 | 117,000 | ||
| 28,692,369 | |||
Real Estate Investment Trusts - 0.4% | ||||
Duke Realty LP: | ||||
5.4% 8/15/14 | 4,695,000 | 4,301,578 | ||
5.875% 8/15/12 | 895,000 | 880,649 | ||
5.95% 2/15/17 | 490,000 | 451,404 | ||
6.25% 5/15/13 | 14,190,000 | 13,993,199 | ||
6.5% 1/15/18 | 3,795,000 | 3,540,226 | ||
Highwoods/Forsyth LP 5.85% 3/15/17 | 80,000 | 68,000 | ||
HMB Capital Trust V 6.37% 12/15/36 (c)(h)(m) | 270,000 | 2,700 | ||
Hospitality Properties Trust 6.7% 1/15/18 | 5,000,000 | 4,144,435 | ||
Host Hotels & Resorts LP 6.875% 11/1/14 | 835,000 | 749,413 | ||
iStar Financial, Inc. 5.95% 10/15/13 | 300,000 | 211,500 | ||
Liberty Property LP 6.625% 10/1/17 | 3,785,000 | 3,532,892 | ||
Omega Healthcare Investors, Inc.: | ||||
7% 4/1/14 | 4,880,000 | 4,672,600 | ||
7% 1/15/16 | 400,000 | 373,000 | ||
Reckson Operating Partnership LP 6% 3/31/16 | 4,021,000 | 3,430,653 | ||
Rouse Co. 5.375% 11/26/13 | 100,000 | 76,171 | ||
Rouse Co. LP/TRC, Inc. 6.75% 5/1/13 (h) | 100,000 | 82,000 | ||
Senior Housing Properties Trust 8.625% 1/15/12 | 250,000 | 255,000 | ||
UDR, Inc. 5.5% 4/1/14 | 2,755,000 | 2,597,320 | ||
Ventas Realty LP: | ||||
6.5% 6/1/16 | 105,000 | 98,700 | ||
6.625% 10/15/14 | 1,350,000 | 1,292,625 | ||
6.75% 4/1/17 | 1,285,000 | 1,220,750 | ||
| 45,974,815 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Real Estate Management & Development - 0.2% | ||||
American Real Estate Partners/American Real Estate Finance Corp.: | ||||
7.125% 2/15/13 | $ 7,880,000 | $ 6,885,150 | ||
8.125% 6/1/12 | 2,465,000 | 2,295,531 | ||
ERP Operating LP: | ||||
5.375% 8/1/16 | 2,170,000 | 1,932,695 | ||
5.5% 10/1/12 | 3,140,000 | 3,012,924 | ||
5.75% 6/15/17 | 6,260,000 | 5,642,514 | ||
Forest City Enterprises, Inc. 7.625% 6/1/15 | 100,000 | 90,000 | ||
Inversiones y Representaciones SA 8.5% 2/2/17 (h) | 910,000 | 618,800 | ||
| 20,477,614 | |||
Thrifts & Mortgage Finance - 0.3% | ||||
Bank of America Corp.: | ||||
4.9% 5/1/13 | 13,200,000 | 12,775,224 | ||
5.65% 5/1/18 | 13,300,000 | 12,269,396 | ||
Credit Suisse First Boston (New York Branch) 5% 5/15/13 | 6,309,000 | 6,145,124 | ||
Wrightwood Capital LLC 10.5% 6/1/14 (h) | 100,000 | 87,000 | ||
| 31,276,744 | |||
TOTAL FINANCIALS | 446,054,358 | |||
HEALTH CARE - 0.5% | ||||
Health Care Equipment & Supplies - 0.1% | ||||
Bausch & Lomb, Inc. 9.875% 11/1/15 (h) | 3,055,000 | 3,139,013 | ||
Biomet, Inc.: | ||||
10% 10/15/17 | 4,825,000 | 5,198,938 | ||
10.375% 10/15/17 pay-in-kind | 3,155,000 | 3,300,919 | ||
11.625% 10/15/17 | 2,045,000 | 2,152,363 | ||
FMC Finance III SA 6.875% 7/15/17 | 1,030,000 | 988,800 | ||
| 14,780,033 | |||
Health Care Providers & Services - 0.2% | ||||
Community Health Systems, Inc. 8.875% 7/15/15 | 4,865,000 | 4,859,162 | ||
DASA Finance Corp. 8.75% 5/29/18 (h) | 590,000 | 595,900 | ||
HCA, Inc.: | ||||
6.5% 2/15/16 | 1,420,000 | 1,166,175 | ||
9.125% 11/15/14 | 1,665,000 | 1,712,869 | ||
9.25% 11/15/16 | 3,450,000 | 3,557,813 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
HEALTH CARE - continued | ||||
Health Care Providers & Services - continued | ||||
HCA, Inc.: - continued | ||||
9.625% 11/15/16 pay-in-kind | $ 9,515,000 | $ 9,693,406 | ||
HealthSouth Corp. 10.75% 6/15/16 | 1,280,000 | 1,382,400 | ||
IASIS Healthcare LLC/IASIS Capital Corp. 8.75% 6/15/14 | 1,350,000 | 1,356,750 | ||
Skilled Healthcare Group, Inc. 11% 1/15/14 | 64,000 | 67,520 | ||
Sun Healthcare Group, Inc. 9.125% 4/15/15 | 10,000 | 10,000 | ||
Tenet Healthcare Corp.: | ||||
6.5% 6/1/12 | 285,000 | 272,175 | ||
7.375% 2/1/13 | 1,975,000 | 1,871,313 | ||
Viant Holdings, Inc. 10.125% 7/15/17 (h) | 71,000 | 59,995 | ||
| 26,605,478 | |||
Health Care Technology - 0.1% | ||||
DJO Finance LLC / DJO Finance Corp. 10.875% 11/15/14 | 6,520,000 | 6,568,900 | ||
Pharmaceuticals - 0.1% | ||||
AstraZeneca PLC: | ||||
5.9% 9/15/17 | 3,520,000 | 3,656,129 | ||
6.45% 9/15/37 | 2,600,000 | 2,666,362 | ||
| 6,322,491 | |||
TOTAL HEALTH CARE | 54,276,902 | |||
INDUSTRIALS - 0.9% | ||||
Aerospace & Defense - 0.1% | ||||
Alliant Techsystems, Inc. 6.75% 4/1/16 | 2,045,000 | 1,978,538 | ||
BE Aerospace, Inc. 8.5% 7/1/18 | 520,000 | 542,100 | ||
Bombardier, Inc.: | ||||
6.3% 5/1/14 (h) | 1,575,000 | 1,512,000 | ||
7.45% 5/1/34 (h) | 425,000 | 405,875 | ||
8% 11/15/14 (h) | 1,915,000 | 1,972,450 | ||
| 6,410,963 | |||
Airlines - 0.2% | ||||
American Airlines, Inc. pass-thru trust certificates: | ||||
6.817% 5/23/11 | 3,390,000 | 2,627,250 | ||
6.977% 11/23/22 | 1,212,061 | 787,840 | ||
8.608% 10/1/12 | 960,000 | 806,400 | ||
AMR Corp. 9% 8/1/12 | 485,000 | 276,450 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Airlines - continued | ||||
Continental Airlines, Inc. pass-thru trust certificates: | ||||
7.566% 9/15/21 | $ 396,970 | $ 345,364 | ||
7.73% 9/15/12 | 19,588 | 17,090 | ||
7.875% 7/2/18 | 1,555,470 | 1,042,165 | ||
9.558% 9/1/19 | 251,878 | 181,352 | ||
9.798% 4/1/21 | 798,009 | 670,327 | ||
Delta Air Lines, Inc. pass-thru trust certificates: | ||||
7.57% 11/18/10 | 7,640,000 | 7,200,700 | ||
8.021% 8/10/22 | 1,002,104 | 751,578 | ||
8.954% 8/10/14 | 1,573,111 | 1,179,833 | ||
Northwest Airlines, Inc. pass-thru trust certificates 8.028% 11/1/17 | 1,165,000 | 932,000 | ||
United Air Lines, Inc. pass-thru trust certificates: | ||||
Class B, 7.336% 7/2/19 | 904,705 | 624,246 | ||
7.032% 4/1/12 | 750,105 | 738,853 | ||
7.186% 10/1/12 | 1,862,895 | 1,837,280 | ||
| 20,018,728 | |||
Building Products - 0.0% | ||||
Nortek, Inc. 10% 12/1/13 (h) | 3,025,000 | 2,767,875 | ||
Ply Gem Industries, Inc. 11.75% 6/15/13 (h) | 1,415,000 | 1,266,425 | ||
| 4,034,300 | |||
Commercial Services & Supplies - 0.2% | ||||
Allied Waste North America, Inc.: | ||||
6.875% 6/1/17 | 1,025,000 | 1,008,344 | ||
7.125% 5/15/16 | 395,000 | 398,950 | ||
7.25% 3/15/15 | 800,000 | 810,000 | ||
7.875% 4/15/13 | 120,000 | 122,850 | ||
ARAMARK Corp.: | ||||
6.3006% 2/1/15 (m) | 3,270,000 | 3,041,100 | ||
8.5% 2/1/15 | 3,130,000 | 3,153,475 | ||
FTI Consulting, Inc.: | ||||
7.625% 6/15/13 | 2,105,000 | 2,178,675 | ||
7.75% 10/1/16 | 915,000 | 947,025 | ||
Iron Mountain, Inc.: | ||||
6.625% 1/1/16 | 2,670,000 | 2,516,475 | ||
7.75% 1/15/15 | 2,545,000 | 2,545,000 | ||
8.625% 4/1/13 | 210,000 | 211,050 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Commercial Services & Supplies - continued | ||||
JohnsonDiversey, Inc. 9.625% 5/15/12 | $ 210,000 | $ 212,100 | ||
Rental Service Corp. 9.5% 12/1/14 | 1,405,000 | 1,124,000 | ||
US Investigations Services, Inc.: | ||||
10.5% 11/1/15 (h) | 1,250,000 | 1,118,750 | ||
11.75% 5/1/16 (h) | 950,000 | 779,000 | ||
| 20,166,794 | |||
Electrical Equipment - 0.0% | ||||
General Cable Corp. 7.125% 4/1/17 | 700,000 | 665,000 | ||
Sensus Metering Systems, Inc. 8.625% 12/15/13 | 4,885,000 | 4,787,300 | ||
| 5,452,300 | |||
Industrial Conglomerates - 0.2% | ||||
Covidien International Finance SA 6.55% 10/15/37 | 3,620,000 | 3,682,289 | ||
General Electric Co. 5.25% 12/6/17 | 15,620,000 | 15,095,730 | ||
Nell AF Sarl 8.375% 8/15/15 (h) | 500,000 | 292,500 | ||
Sequa Corp.: | ||||
11.75% 12/1/15 (h) | 1,415,000 | 1,195,675 | ||
13.5% 12/1/15 pay-in-kind (h) | 705,000 | 572,460 | ||
| 20,838,654 | |||
Machinery - 0.1% | ||||
Case Corp. 7.25% 1/15/16 | 1,040,000 | 1,007,500 | ||
Terex Corp. 8% 11/15/17 | 5,965,000 | 5,913,105 | ||
| 6,920,605 | |||
Marine - 0.0% | ||||
Navios Maritime Holdings, Inc. 9.5% 12/15/14 | 490,000 | 467,950 | ||
Road & Rail - 0.1% | ||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.: | ||||
7.625% 5/15/14 | 1,895,000 | 1,383,350 | ||
7.75% 5/15/16 | 2,145,000 | 1,490,775 | ||
CSX Corp. 6.25% 4/1/15 | 2,470,000 | 2,420,175 | ||
Hertz Corp.: | ||||
8.875% 1/1/14 | 3,020,000 | 2,808,600 | ||
10.5% 1/1/16 | 1,920,000 | 1,680,000 | ||
Kansas City Southern Railway Co. 8% 6/1/15 | 2,415,000 | 2,463,300 | ||
| 12,246,200 | |||
Trading Companies & Distributors - 0.0% | ||||
Ashtead Capital, Inc. 9% 8/15/16 (h) | 300,000 | 272,250 | ||
Ashtead Holdings PLC 8.625% 8/1/15 (h) | 275,000 | 248,188 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Trading Companies & Distributors - continued | ||||
Penhall International Corp. 12% 8/1/14 (h) | $ 60,000 | $ 42,000 | ||
VWR Funding, Inc. 10.25% 7/15/15 | 1,155,000 | 1,051,050 | ||
| 1,613,488 | |||
TOTAL INDUSTRIALS | 98,169,982 | |||
INFORMATION TECHNOLOGY - 0.5% | ||||
Communications Equipment - 0.1% | ||||
Lucent Technologies, Inc.: | ||||
6.45% 3/15/29 | 2,700,000 | 1,863,000 | ||
6.5% 1/15/28 | 1,940,000 | 1,338,600 | ||
Nortel Networks Corp.: | ||||
7.0406% 7/15/11 (m) | 485,000 | 449,838 | ||
10.125% 7/15/13 | 1,005,000 | 934,650 | ||
| 4,586,088 | |||
Computers & Peripherals - 0.0% | ||||
Seagate Technology HDD Holdings 6.8% 10/1/16 | 2,650,000 | 2,385,000 | ||
Electronic Equipment & Instruments - 0.2% | ||||
Celestica, Inc. 7.875% 7/1/11 | 1,450,000 | 1,460,875 | ||
Flextronics International Ltd.: | ||||
6.25% 11/15/14 | 420,000 | 386,400 | ||
6.5% 5/15/13 | 2,510,000 | 2,371,950 | ||
Jabil Circuit, Inc. 8.25% 3/15/18 | 5,260,000 | 5,285,143 | ||
NXP BV: | ||||
5.5406% 10/15/13 (m) | 435,000 | 341,475 | ||
9.5% 10/15/15 | 1,125,000 | 765,000 | ||
Texas Competitive Electric Holdings Co. LLC: | ||||
Series A, 10.25% 11/1/15 (h) | 4,110,000 | 4,099,725 | ||
Series B, 10.25% 11/1/15 (h) | 3,900,000 | 3,890,250 | ||
10.5% 11/1/16 pay-in-kind (h)(m) | 3,965,000 | 3,806,400 | ||
Tyco Electronics Group SA 7.125% 10/1/37 | 1,895,000 | 1,908,104 | ||
| 24,315,322 | |||
IT Services - 0.0% | ||||
First Data Corp. 9.875% 9/24/15 (h) | 2,050,000 | 1,773,250 | ||
Iron Mountain, Inc. 8% 6/15/20 | 705,000 | 683,850 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INFORMATION TECHNOLOGY - continued | ||||
IT Services - continued | ||||
SunGard Data Systems, Inc.: | ||||
9.125% 8/15/13 | $ 995,000 | $ 1,004,950 | ||
10.25% 8/15/15 | 990,000 | 996,188 | ||
| 4,458,238 | |||
Office Electronics - 0.1% | ||||
Xerox Capital Trust I 8% 2/1/27 | 4,835,000 | 4,641,600 | ||
Semiconductors & Semiconductor Equipment - 0.1% | ||||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 | 2,280,000 | 2,126,100 | ||
9.25% 6/1/16 | 710,000 | 690,475 | ||
Avago Technologies Finance Ltd.: | ||||
10.125% 12/1/13 | 2,130,000 | 2,300,400 | ||
11.875% 12/1/15 | 710,000 | 781,000 | ||
Freescale Semiconductor, Inc.: | ||||
6.6513% 12/15/14 (m) | 1,045,000 | 768,075 | ||
8.875% 12/15/14 | 1,140,000 | 924,882 | ||
9.125% 12/15/14 pay-in-kind | 1,110,000 | 861,693 | ||
10.125% 12/15/16 | 1,150,000 | 879,750 | ||
Spansion LLC 11.25% 1/15/16 (h) | 700,000 | 437,500 | ||
| 9,769,875 | |||
Software - 0.0% | ||||
SS&C Technologies, Inc. 11.75% 12/1/13 | 95,000 | 100,225 | ||
TOTAL INFORMATION TECHNOLOGY | 50,256,348 | |||
MATERIALS - 0.8% | ||||
Chemicals - 0.1% | ||||
Berry Plastics Corp. 7.5406% 2/15/15 (m) | 1,350,000 | 1,275,750 | ||
Chemtura Corp. 6.875% 6/1/16 | 735,000 | 620,193 | ||
Equistar Chemicals LP 7.55% 2/15/26 | 350,000 | 227,500 | ||
JohnsonDiversey Holdings, Inc. 10.67% 5/15/13 | 480,000 | 470,400 | ||
Momentive Performance Materials, Inc. 9.75% 12/1/14 | 4,500,000 | 4,005,000 | ||
Nalco Co. 7.75% 11/15/11 | 1,400,000 | 1,424,500 | ||
NOVA Chemicals Corp.: | ||||
5.9525% 11/15/13 (m) | 1,560,000 | 1,343,550 | ||
6.5% 1/15/12 | 5,650,000 | 5,141,500 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
MATERIALS - continued | ||||
Chemicals - continued | ||||
Pliant Corp. 11.35% 6/15/09 (f) | $ 60,253 | $ 48,805 | ||
PolyOne Corp. 8.875% 5/1/12 | 1,410,000 | 1,420,575 | ||
| 15,977,773 | |||
Construction Materials - 0.0% | ||||
Texas Industries, Inc. 7.25% 7/15/13 (h) | 940,000 | 878,900 | ||
Containers & Packaging - 0.1% | ||||
BWAY Corp. 10% 10/15/10 | 940,000 | 935,300 | ||
Crown Americas LLC/Crown Americas Capital Corp. 7.75% 11/15/15 | 700,000 | 722,750 | ||
Crown Cork & Seal, Inc.: | ||||
7.375% 12/15/26 | 280,000 | 238,000 | ||
8% 4/15/23 | 335,000 | 298,150 | ||
Graphic Packaging International, Inc. 8.5% 8/15/11 | 1,005,000 | 969,825 | ||
Greif, Inc. 6.75% 2/1/17 | 3,195,000 | 3,099,150 | ||
Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 | 170,000 | 140,250 | ||
Vitro SAB de CV 8.625% 2/1/12 | 2,415,000 | 2,113,125 | ||
| 8,516,550 | |||
Metals & Mining - 0.5% | ||||
Evraz Group SA: | ||||
8.875% 4/24/13 (h) | 4,505,000 | 4,414,900 | ||
9.5% 4/24/18 (h) | 715,000 | 691,763 | ||
FMG Finance Property Ltd.: | ||||
6.6819% 9/1/11 (h)(m) | 1,490,000 | 1,467,650 | ||
10% 9/1/13 (h) | 6,810,000 | 7,150,500 | ||
10.625% 9/1/16 (h) | 884,000 | 990,080 | ||
Freeport-McMoRan Copper & Gold, Inc.: | ||||
8.25% 4/1/15 | 4,030,000 | 4,221,425 | ||
8.375% 4/1/17 | 1,480,000 | 1,568,800 | ||
Noranda Aluminium Acquisition Corp. 6.8275% 5/15/15 pay-in-kind (m) | 500,000 | 426,250 | ||
OAO Severstal 9.75% 7/29/13 (Issued by Steel Capital SA for OAO Severstal) (h) | 750,000 | 748,125 | ||
RathGibson, Inc. 11.25% 2/15/14 | 350,000 | 336,875 | ||
Rio Tinto Finance Ltd.: | ||||
6.5% 7/15/18 | 7,128,000 | 7,171,581 | ||
7.125% 7/15/28 | 8,900,000 | 9,019,242 | ||
Steel Dynamics, Inc.: | ||||
6.75% 4/1/15 | 3,860,000 | 3,599,450 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Steel Dynamics, Inc.: - continued | ||||
7.375% 11/1/12 | $ 1,235,000 | $ 1,210,300 | ||
7.75% 4/15/16 (h) | 1,285,000 | 1,249,663 | ||
United States Steel Corp. 6.65% 6/1/37 | 3,395,000 | 2,881,652 | ||
Vale Overseas Ltd. 6.25% 1/23/17 | 2,685,000 | 2,685,814 | ||
Vedanta Resources PLC 6.625% 2/22/10 (h) | 2,000,000 | 2,002,600 | ||
| 51,836,670 | |||
Paper & Forest Products - 0.1% | ||||
Catalyst Paper Corp. 8.625% 6/15/11 | 845,000 | 686,563 | ||
Domtar Corp.: | ||||
5.375% 12/1/13 | 705,000 | 613,350 | ||
7.125% 8/15/15 | 975,000 | 928,688 | ||
Georgia-Pacific Corp.: | ||||
7% 1/15/15 (h) | 6,505,000 | 6,098,438 | ||
8.125% 5/15/11 | 3,130,000 | 3,145,650 | ||
8.875% 5/15/31 | 1,510,000 | 1,404,300 | ||
Stone Container Corp. 8.375% 7/1/12 | 2,545,000 | 2,239,600 | ||
Stone Container Finance Co. 7.375% 7/15/14 | 300,000 | 241,500 | ||
| 15,358,089 | |||
TOTAL MATERIALS | 92,567,982 | |||
TELECOMMUNICATION SERVICES - 1.7% | ||||
Diversified Telecommunication Services - 1.2% | ||||
AT&T, Inc.: | ||||
6.3% 1/15/38 | 40,171,000 | 37,879,807 | ||
6.8% 5/15/36 | 11,484,000 | 11,414,407 | ||
BellSouth Capital Funding Corp. 7.875% 2/15/30 | 1,060,000 | 1,141,395 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 | 3,465,000 | 3,274,425 | ||
Citizens Communications Co.: | ||||
6.25% 1/15/13 | 1,300,000 | 1,238,250 | ||
9% 8/15/31 | 650,000 | 565,500 | ||
Indosat Finance Co. BV 7.75% 11/5/10 | 1,085,000 | 1,095,850 | ||
Intelsat Ltd.: | ||||
6.5% 11/1/13 | 3,700,000 | 2,830,500 | ||
7.625% 4/15/12 | 5,385,000 | 4,563,788 | ||
11.25% 6/15/16 | 975,000 | 1,023,750 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
Level 3 Financing, Inc.: | ||||
6.845% 2/15/15 (m) | $ 350,000 | $ 280,875 | ||
8.75% 2/15/17 | 1,465,000 | 1,274,550 | ||
9.25% 11/1/14 | 185,000 | 169,738 | ||
Qwest Corp.: | ||||
6.0263% 6/15/13 (m) | 70,000 | 64,750 | ||
7.5% 10/1/14 | 2,440,000 | 2,250,900 | ||
7.625% 6/15/15 | 1,850,000 | 1,711,250 | ||
SBC Communications, Inc.: | ||||
6.15% 9/15/34 | 350,000 | 325,697 | ||
6.45% 6/15/34 | 370,000 | 353,526 | ||
Sistema Capital SA 8.875% 1/28/11 (Reg. S) | 1,280,000 | 1,288,000 | ||
Sprint Capital Corp.: | ||||
6.875% 11/15/28 | 15,675,000 | 13,323,750 | ||
7.625% 1/30/11 | 1,010,000 | 1,010,000 | ||
8.375% 3/15/12 | 1,295,000 | 1,304,713 | ||
8.75% 3/15/32 | 815,000 | 792,588 | ||
Telecom Italia Capital SA 7.2% 7/18/36 | 9,915,000 | 9,117,834 | ||
Telefonica Emisiones SAU 7.045% 6/20/36 | 4,999,000 | 5,076,190 | ||
Time Warner Telecom Holdings, Inc. 9.25% 2/15/14 | 3,795,000 | 3,813,975 | ||
U.S. West Communications: | ||||
6.875% 9/15/33 | 890,000 | 658,600 | ||
7.5% 6/15/23 | 920,000 | 745,200 | ||
Verizon Communications, Inc.: | ||||
6.1% 4/15/18 | 6,000,000 | 5,984,862 | ||
6.25% 4/1/37 | 2,348,000 | 2,156,309 | ||
6.4% 2/15/38 | 7,621,000 | 7,090,990 | ||
6.9% 4/15/38 | 6,295,000 | 6,233,208 | ||
Verizon Global Funding Corp. 7.75% 12/1/30 | 5,296,000 | 5,635,315 | ||
| 135,690,492 | |||
Wireless Telecommunication Services - 0.5% | ||||
Cricket Communications, Inc. 10% 7/15/15 (h) | 1,755,000 | 1,772,550 | ||
Digicel Group Ltd.: | ||||
8.875% 1/15/15 (h) | 7,220,000 | 6,732,650 | ||
9.125% 1/15/15 pay-in-kind (h)(m) | 2,575,000 | 2,401,188 | ||
9.25% 9/1/12 (h) | 820,000 | 840,500 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: | ||||
6.375% 6/15/15 | 1,525,000 | 1,441,125 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: - continued | ||||
7.625% 5/15/16 (h) | $ 1,485,000 | $ 1,481,288 | ||
8.375% 3/15/13 | 3,395,000 | 3,509,581 | ||
Intelsat Jackson Holdings Ltd.: | ||||
9.5% 6/15/16 (h) | 4,755,000 | 4,766,888 | ||
11.5% 6/15/16 (h) | 765,000 | 799,425 | ||
Intelsat Subsidiary Holding Co. Ltd. 8.875% 1/15/15 (h) | 5,155,000 | 5,097,264 | ||
Millicom International Cellular SA 10% 12/1/13 | 3,110,000 | 3,281,050 | ||
Mobile Telesystems Finance SA 8% 1/28/12 (h) | 2,695,000 | 2,688,263 | ||
Nextel Communications, Inc.: | ||||
5.95% 3/15/14 | 650,000 | 520,000 | ||
6.875% 10/31/13 | 5,490,000 | 4,515,525 | ||
7.375% 8/1/15 | 970,000 | 788,125 | ||
Orascom Telecom Finance SCA 7.875% 2/8/14 (h) | 3,800,000 | 3,477,000 | ||
Pakistan Mobile Communications Ltd. 8.625% 11/13/13 (h) | 1,870,000 | 1,421,200 | ||
Rural Cellular Corp. 8.25% 3/15/12 | 360,000 | 372,600 | ||
Sprint Nextel Corp. 6% 12/1/16 | 3,260,000 | 2,974,750 | ||
Telecom Personal SA 9.25% 12/22/10 (h) | 4,220,000 | 4,177,800 | ||
Vimpel Communications: | ||||
8.375% 4/30/13 (Issued by VIP Finance Ireland Ltd. for Vimpel Communications) (h) | 3,055,000 | 2,963,350 | ||
9.125% 4/30/18 (Issued by VIP Finance Ireland Ltd. for Vimpel Communications) (h) | 1,150,000 | 1,098,250 | ||
| 57,120,372 | |||
TOTAL TELECOMMUNICATION SERVICES | 192,810,864 | |||
UTILITIES - 1.9% | ||||
Electric Utilities - 0.9% | ||||
Commonwealth Edison Co.: | ||||
5.4% 12/15/11 | 1,923,000 | 1,943,997 | ||
5.8% 3/15/18 | 10,485,000 | 10,212,726 | ||
6.15% 9/15/17 | 5,140,000 | 5,152,557 | ||
Duke Energy Carolinas LLC: | ||||
5.25% 1/15/18 | 4,710,000 | 4,670,554 | ||
6.05% 4/15/38 | 4,552,000 | 4,436,689 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Edison Mission Energy: | ||||
7% 5/15/17 | $ 2,095,000 | $ 2,005,963 | ||
7.2% 5/15/19 | 3,810,000 | 3,667,125 | ||
7.625% 5/15/27 | 1,650,000 | 1,493,250 | ||
EDP Finance BV 6% 2/2/18 (h) | 5,953,000 | 5,904,584 | ||
Enel Finance International SA: | ||||
6.25% 9/15/17 (h) | 2,667,000 | 2,704,735 | ||
6.8% 9/15/37 (h) | 16,141,000 | 16,412,411 | ||
Energy Future Holdings: | ||||
10.875% 11/1/17 (h) | 4,420,000 | 4,519,450 | ||
11.25% 11/1/17 pay-in-kind (h)(m) | 4,680,000 | 4,586,400 | ||
Illinois Power Co. 6.125% 11/15/17 | 2,700,000 | 2,579,391 | ||
Intergen NV 9% 6/30/17 (h) | 4,595,000 | 4,686,900 | ||
IPALCO Enterprises, Inc. 7.25% 4/1/16 (h) | 4,440,000 | 4,395,600 | ||
Majapahit Holding BV 7.75% 10/17/16 | 840,000 | 802,200 | ||
Mirant Americas Generation LLC: | ||||
8.3% 5/1/11 | 1,060,000 | 1,078,550 | ||
8.5% 10/1/21 | 2,575,000 | 2,201,625 | ||
9.125% 5/1/31 | 340,000 | 292,400 | ||
National Power Corp. 6.875% 11/2/16 (h) | 2,005,000 | 1,949,863 | ||
Nevada Power Co. 6.5% 5/15/18 | 790,000 | 790,000 | ||
PPL Capital Funding, Inc. 6.7% 3/30/67 (m) | 2,290,000 | 1,929,641 | ||
Southern California Edison Co. 5.95% 2/1/38 | 3,750,000 | 3,719,903 | ||
Virginia Electric & Power Co. 5.4% 4/30/18 | 12,750,000 | 12,408,938 | ||
| 104,545,452 | |||
Gas Utilities - 0.1% | ||||
Dynegy Holdings, Inc.: | ||||
8.375% 5/1/16 | 3,070,000 | 3,000,925 | ||
8.75% 2/15/12 | 1,325,000 | 1,338,250 | ||
Intergas Finance BV: | ||||
6.375% 5/14/17 (Reg. S) | 1,250,000 | 1,093,750 | ||
6.875% 11/4/11 (Reg. S) | 2,170,000 | 2,094,050 | ||
Transportadora de Gas del Sur SA 7.875% 5/14/17 (h) | 2,580,000 | 2,031,750 | ||
| 9,558,725 | |||
Independent Power Producers & Energy Traders - 0.5% | ||||
AES Corp.: | ||||
7.75% 3/1/14 | 5,400,000 | 5,319,000 | ||
7.75% 10/15/15 | 3,805,000 | 3,757,438 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
UTILITIES - continued | ||||
Independent Power Producers & Energy Traders - continued | ||||
AES Corp.: - continued | ||||
8% 10/15/17 | $ 1,090,000 | $ 1,070,925 | ||
Allegheny Energy Supply Co. LLC 7.8% 3/15/11 | 9,060,000 | 9,331,800 | ||
Mirant North America LLC 7.375% 12/31/13 | 2,000,000 | 1,987,500 | ||
NRG Energy, Inc.: | ||||
7.25% 2/1/14 | 3,290,000 | 3,240,650 | ||
7.375% 2/1/16 | 3,750,000 | 3,684,375 | ||
7.375% 1/15/17 | 4,070,000 | 3,947,900 | ||
PPL Energy Supply LLC 6.5% 5/1/18 | 6,895,000 | 6,719,074 | ||
Reliant Energy, Inc.: | ||||
7.625% 6/15/14 | 5,230,000 | 5,073,100 | ||
7.875% 6/15/17 | 2,895,000 | 2,793,675 | ||
Tenaska Alabama Partners LP 7% 6/30/21 (h) | 453,070 | 423,621 | ||
TXU Corp. 5.55% 11/15/14 | 3,140,000 | 2,449,200 | ||
| 49,798,258 | |||
Multi-Utilities - 0.4% | ||||
Aquila, Inc. 11.875% 7/1/12 (m) | 155,000 | 179,025 | ||
CMS Energy Corp. 6.55% 7/17/17 | 5,620,000 | 5,342,749 | ||
Dominion Resources, Inc. 7.5% 6/30/66 (m) | 9,800,000 | 8,825,841 | ||
MidAmerican Energy Holdings, Co.: | ||||
5.75% 4/1/18 | 5,000,000 | 4,958,420 | ||
6.5% 9/15/37 | 17,430,000 | 17,388,813 | ||
NiSource Finance Corp.: | ||||
5.45% 9/15/20 | 1,650,000 | 1,408,923 | ||
6.8% 1/15/19 | 10,000,000 | 9,725,880 | ||
| 47,829,651 | |||
TOTAL UTILITIES | 211,732,086 | |||
TOTAL NONCONVERTIBLE BONDS | 1,812,973,499 | |||
TOTAL CORPORATE BONDS (Cost $1,904,437,007) | 1,824,565,110 | |||
U.S. Government and Government Agency Obligations - 12.0% | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - 2.9% | ||||
Fannie Mae: | ||||
3.625% 2/12/13 (g) | $ 43,445,000 | $ 42,949,032 | ||
4.375% 7/17/13 (k) | 8,745,000 | 8,854,750 | ||
4.75% 11/19/12 | 24,650,000 | 25,491,748 | ||
5% 2/16/12 | 8,000,000 | 8,319,624 | ||
Freddie Mac: | ||||
3.5% 5/29/13 (g) | 73,300,000 | 71,484,506 | ||
4.125% 12/21/12 | 55,225,000 | 55,486,049 | ||
5.25% 7/18/11 (g) | 100,000,000 | 104,675,900 | ||
Tennessee Valley Authority 5.375% 4/1/56 | 385,000 | 394,932 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 317,656,541 | |||
U.S. Treasury Inflation Protected Obligations - 6.5% | ||||
U.S. Treasury Inflation-Indexed Notes: | ||||
1.625% 1/15/18 | 78,310,500 | 78,028,088 | ||
2% 1/15/14 (k) | 334,070,632 | 346,244,167 | ||
2% 7/15/14 | 75,430,550 | 78,314,711 | ||
2.375% 4/15/11 | 57,042,626 | 59,068,005 | ||
2.625% 7/15/17 | 124,540,740 | 134,954,818 | ||
3.5% 1/15/11 (k) | 25,136,600 | 26,733,544 | ||
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | 723,343,333 | |||
U.S. Treasury Obligations - 2.6% | ||||
U.S. Treasury Bonds 6.25% 5/15/30 | 22,776,000 | 28,409,507 | ||
U.S. Treasury Notes: | ||||
3.375% 6/30/13 (g) | 126,233,000 | 128,008,088 | ||
4.125% 8/31/12 | 35,285,000 | 36,925,188 | ||
4.5% 9/30/11 (k) | 91,855,000 | 96,885,531 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 290,228,314 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $1,293,596,571) | 1,331,228,188 | |||
U.S. Government Agency - Mortgage Securities - 13.8% | ||||
| ||||
Fannie Mae - 12.3% | ||||
3.736% 10/1/33 (m) | 1,656,106 | 1,653,023 | ||
4.36% 5/1/35 (m) | 2,457,990 | 2,469,144 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
4.378% 5/1/35 (m) | $ 2,547,427 | $ 2,561,002 | ||
4.5% 4/1/20 | 2,293,272 | 2,263,814 | ||
5% 8/1/18 to 3/1/23 | 22,398,232 | 22,321,970 | ||
5% 9/1/38 (i) | 100,000,000 | 96,052,390 | ||
5% 9/1/38 (i) | 138,000,000 | 132,552,298 | ||
5.29% 2/1/36 (m) | 2,085,980 | 2,115,611 | ||
5.303% 12/1/35 (m) | 1,189,471 | 1,205,710 | ||
5.5% 10/1/17 to 11/1/37 | 458,233,709 | 457,705,328 | ||
5.5% 9/1/23 (i)(j) | 24,000,000 | 24,201,442 | ||
5.5% 9/1/38 (i) | 100,000,000 | 98,701,220 | ||
5.5% 9/1/38 (i) | 100,000,000 | 98,701,220 | ||
5.616% 7/1/37 (m) | 1,335,609 | 1,359,396 | ||
6% 6/1/22 to 3/1/38 | 256,492,937 | 260,644,009 | ||
6% 9/1/38 (i) | 50,000,000 | 50,473,480 | ||
6.028% 4/1/36 (m) | 1,048,137 | 1,072,406 | ||
6.252% 6/1/36 (m) | 406,689 | 413,927 | ||
6.309% 4/1/36 (m) | 1,017,138 | 1,043,936 | ||
6.5% 12/1/34 to 8/1/37 | 30,501,592 | 31,546,999 | ||
6.5% 9/1/38 (i) | 50,000,000 | 51,402,855 | ||
6.5% 9/1/38 (i) | 18,000,000 | 18,505,028 | ||
TOTAL FANNIE MAE | 1,358,966,208 | |||
Freddie Mac - 1.5% | ||||
4.392% 1/1/35 (m) | 4,843,444 | 4,857,635 | ||
4.617% 2/1/35 (m) | 4,994,663 | 5,020,296 | ||
4.737% 10/1/35 (m) | 10,754,965 | 10,770,076 | ||
5.5% 11/1/17 | 3,873,871 | 3,942,672 | ||
5.735% 10/1/35 (m) | 735,744 | 747,066 | ||
5.853% 6/1/36 (m) | 1,233,777 | 1,256,531 | ||
5.984% 7/1/37 (m) | 6,129,619 | 6,253,762 | ||
6% 10/1/35 to 3/1/38 | 86,575,645 | 87,373,379 | ||
6% 9/1/38 (i) | 47,000,000 | 47,367,963 | ||
6.045% 6/1/36 (m) | 1,160,487 | 1,184,320 | ||
6.063% 4/1/36 (m) | 1,909,574 | 1,948,759 | ||
6.11% 6/1/36 (m) | 1,161,978 | 1,187,224 | ||
TOTAL FREDDIE MAC | 171,909,683 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,525,546,529) | 1,530,875,891 | |||
Asset-Backed Securities - 0.6% | ||||
| Principal | Value | ||
ACE Securities Corp. Home Equity Loan Trust Series 2005-SD1 Class A1, 2.8719% 11/25/50 (m) | $ 14,187 | $ 11,462 | ||
Advanta Business Card Master Trust Series 2007-D1 | 2,590,000 | 1,459,740 | ||
Airspeed Ltd. Series 2007-1A Class C1, 4.9669% 6/15/32 (h)(m) | 4,731,465 | 2,223,788 | ||
AmeriCredit Prime Automobile Receivables Trust Series 2007-1 Class E, 6.96% 3/31/16 (h) | 2,215,000 | 1,674,511 | ||
Ameriquest Mortgage Securities, Inc. Series 2004-R8 Class M9, 5.2219% 9/25/34 (m) | 177,014 | 16,622 | ||
Anthracite CDO II Ltd. Series 2002-2A: | ||||
Class F, 7.6% 12/24/37 (h) | 160,000 | 139,200 | ||
Class G, 9.75% 12/24/37 (h) | 210,000 | 180,600 | ||
Anthracite CDO III Ltd./Anthracite CDO III Corp. Series 2004-1A Class A, 2.8319% 3/23/19 (h)(m) | 295,980 | 232,821 | ||
Capital Auto Receivables Asset Trust Series 2006-1: | ||||
Class C, 5.55% 1/18/11 | 1,500,000 | 1,497,792 | ||
Class D, 7.16% 1/15/13 (h) | 160,000 | 149,384 | ||
Capital Trust RE CDO Ltd./Capital Trust RE CDO Corp. Series 2005-3A Class A2, 5.16% 6/25/35 (h) | 460,000 | 386,400 | ||
CapitalSource Real Estate Loan Trust Series 2006-1A Class A2A, 3.0675% 1/20/37 (h)(m) | 250,000 | 165,000 | ||
Capmark VII Ltd. Series 2006-7A Class H, 4.0169% 8/20/36 (h)(m) | 500,000 | 150,000 | ||
Carrington Mortgage Loan Trust Series 2006-NC3 Class M10, 4.4719% 8/25/36 (h)(m) | 290,000 | 13,862 | ||
Concord Real Estate CDO Ltd./LLC Series 2006-1A | 250,000 | 65,000 | ||
Countrywide Home Loan Trust Series 2006-13N Class N, 7% 8/25/37 (h) | 480,708 | 22,883 | ||
Crest Clarendon Street Ltd./Crest Clarendon Corp. Series 2002-1A: | ||||
Class B1, 6.065% 12/28/35 (h) | 500,000 | 425,000 | ||
Class B2, 4.0213% 12/28/35 (h)(m) | 500,000 | 420,000 | ||
Crest Dartmouth Street Ltd./Crest Dartmouth Street Corp. Series 2003-1A Class D, 9% 6/28/38 (h) | 100,000 | 85,000 | ||
DB Master Finance LLC Series 2006-1 Class M1, 8.285% 6/20/31 (h) | 235,000 | 176,250 | ||
Ford Credit Auto Owner Trust: | ||||
Series 2006-B Class D, 7.26% 2/15/13 (h) | 1,175,000 | 1,087,713 | ||
Series 2006-C Class D, 6.89% 5/15/13 (h) | 915,000 | 828,746 | ||
Series 2007-A Class D, 7.05% 12/15/13 (h) | 970,000 | 846,502 | ||
GS Auto Loan Trust Series 2006-1 Class D, 6.25% 1/15/14 (h) | 830,696 | 785,692 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
GSAMP Trust Series 2004-AR1 Class B4, 5% 6/25/34 (h)(m) | $ 421,734 | $ 37,165 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class E, 4.1219% 9/25/46 (h)(m) | 250,000 | 92,500 | ||
Home Equity Asset Trust Series 2006-3N Class B, 6.5% 8/27/36 (h) | 250,000 | 25 | ||
Kent Funding III Ltd. Series 2006-3A Class D, 5.8988% 10/29/47 (m) | 267,490 | 2,675 | ||
Leafs CMBS I Ltd. Series 2002-1A Class D, 4.13% 11/20/37 (h) | 155,000 | 114,169 | ||
Marathon Real Estate CDO Ltd. Series 2006-1A Class B, 2.9019% 5/25/46 (h)(m) | 250,000 | 134,727 | ||
Merna Reinsurance Ltd. Series 2007-1 Class B, 4.5506% 6/30/12 (h)(m) | 5,400,000 | 5,187,240 | ||
N-Star Real Estate CDO Ltd. Series 1A: | ||||
Class B1, 4.4844% 8/28/38 (h)(m) | 195,000 | 163,800 | ||
Class C1B, 7.696% 8/28/38 (h) | 63,000 | 44,781 | ||
Newcastle CDO VIII Series 2006-8A Class 10, 4.7219% 11/1/52 (h)(m) | 250,000 | 17,500 | ||
Park Place Securities, Inc. Series 2005-WHQ2 Class M7, 3.7219% 5/25/35 (m) | 134,000 | 7,705 | ||
Prima Capital CDO Ltd./Prima Capital CDO Corp. Series 2005-1A Class A2, 4.646% 7/24/39 (h) | 353,271 | 323,905 | ||
Residential Asset Securities Corp. Series 2007-KS2 Class AI1, 2.5419% 2/25/37 (m) | 2,445,212 | 2,384,081 | ||
Resource Real Estate Funding CDO Series 2007-1A | 250,000 | 92,500 | ||
ROCK 1 CRE CDO LLC Series 2006-1A Class H, 4.0763% 12/15/26 (h)(m) | 185,000 | 64,750 | ||
SIRENS B.V. Series 2007-2 Class A1, 4.5881% 4/13/10 (h)(m) | 10,000,000 | 8,512,000 | ||
Structured Asset Securities Corp.: | ||||
Series 2006-BC1 Class B1, 4.9719% 3/25/36 (h)(m) | 80,986 | 1,013 | ||
Series 2007-BC4 Class A3, 2.7219% 11/25/37 (m) | 15,977,484 | 14,159,822 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 2.9169% 3/15/11 (h)(m) | 14,070,000 | 14,045,814 | ||
Swift Master Auto Receivables Trust Series 2007-1 Class B, 2.6869% 6/15/12 (m) | 3,285,000 | 2,728,156 | ||
TIAA Real Estate CDO Ltd./TIAA Real Estate CDO Corp.: | ||||
Series 2002-1A: | ||||
Class IIFX, 6.77% 5/22/37 (h) | 225,000 | 202,500 | ||
Class IV, 6.84% 5/22/37 (h) | 235,000 | 195,293 | ||
Series 2003-1A Class B2, 5.4802% 12/28/38 (h) | 100,000 | 80,000 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Wachovia Auto Loan Owner Trust Series 2006-2A | $ 1,390,000 | $ 735,551 | ||
Wachovia Ltd./Wachovia LLC Series 2006-1A: | ||||
Class F, 3.9544% 9/25/26 (h)(m) | 250,000 | 76,275 | ||
Class G, 4.1544% 9/25/26 (h)(m) | 250,000 | 60,725 | ||
WaMu Asset-Backed Certificates Series 2006-HE5 Class B1, 4.9719% 10/25/36 (h)(m) | 1,330,000 | 211,503 | ||
Wrightwood Capital Real Estate CDO Ltd. Series 2005-1A Class D, 3.6613% 11/21/40 (h)(m) | 305,000 | 146,400 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $74,672,777) | 62,866,543 | |||
Collateralized Mortgage Obligations - 0.8% | ||||
| ||||
Private Sponsor - 0.2% | ||||
ABN AMRO Mortgage Corp.: | ||||
Series 2003-2 Class B4, 5.3302% 3/25/18 (m) | 178,866 | 98,376 | ||
Series 2003-9 Class B5, 4.5164% 8/25/18 (h) | 301,381 | 75,345 | ||
Banc of America Mortgage Securities, Inc. Series 2004-7 Class 15B4, 5.3052% 8/25/19 (h)(m) | 75,938 | 11,391 | ||
Bayview Commercial Asset Trust Series 2006-3A Class IO, 1.1688% 10/25/36 (m)(o) | 14,682,247 | 1,262,673 | ||
Chase Mortgage Finance Trust Series 2007-A1 Class 1A5, 4.3742% 2/25/37 (m) | 1,825,663 | 1,725,252 | ||
Countrywide Alternative Loan Trust Series 2006-OC5N Class N, 7.25% 7/25/37 (h) | 78,237 | 1,234 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-28 Class B3, 5.5% 8/25/33 | 91,974 | 36,790 | ||
Series 2003-35 Class B, 4.639% 9/25/18 (m) | 163,761 | 81,881 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
floater Series 2007-AR7 Class 2A1, 4.5993% 11/25/34 (m) | 1,895,865 | 1,763,186 | ||
Series 2003-17 Class B4, 5.389% 6/25/33 (h)(m) | 382,239 | 152,896 | ||
Series 2004-3 Class DB4, 5.842% 4/25/34 (m) | 116,739 | 2,918 | ||
Diversified REIT Trust Series 1999-1A: | ||||
Class F, 6.78% 3/18/11 (h)(m) | 250,000 | 249,541 | ||
Class G, 6.78% 3/18/11 (h)(m) | 250,000 | 248,894 | ||
GMAC Commercial Mortgage Securities, Inc. Series 1993-C3 Class L, 6.974% 8/15/36 (h) | 282,731 | 105,003 | ||
GMAC Mortgage Loan Trust Series 2003-J10 Class B2, 4.75% 1/25/19 (h) | 154,881 | 46,464 | ||
JPMorgan Mortgage Trust Series 2006-A2 Class 5A1, 3.7741% 11/25/33 (m) | 4,120,699 | 3,884,418 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
LB Commercial Conduit Mortgage Trust Series 1998-C4 Class F, 6% 10/15/35 (h) | $ 125,000 | $ 122,954 | ||
Merrill Lynch Floating Trust floater Series 2006-1 Class TM, 2.9669% 6/15/22 (h)(m) | 8,861,703 | 7,886,916 | ||
Merrill Lynch Mortgage Trust Series 2002-MW1 Class E, 6.219% 7/12/34 (h) | 90,000 | 79,738 | ||
Nomura Home Equity Loan Trust floater Series 2006-FM2 Class B1, 4.7719% 7/25/36 (h)(m) | 3,946,782 | 48,940 | ||
Provident Funding Mortgage Loan Trust Series 2005-2 Class 3A, 4.7027% 10/25/35 (m) | 3,236,118 | 2,982,908 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-CB1: | ||||
Class B4, 4.1131% 6/10/35 (h)(m) | 27,450 | 20,662 | ||
Class B5, 4.7131% 6/10/35 (h)(m) | 20,588 | 16,361 | ||
Class B6, 5.2131% 6/10/35 (h)(m) | 10,294 | 7,417 | ||
RESIX Finance Ltd. floater Series 2007-A Class BB, 5.8169% 2/15/39 (h)(m) | 495,088 | 71,459 | ||
Structured Asset Securities Corp. floater: | ||||
Series 2005-AR1 Class B1, 4.4719% 9/25/35 (h)(m) | 530,000 | 5,300 | ||
Series 2006-BC5 Class B, 4.9719% 12/25/36 (h)(m) | 1,050,000 | 49,035 | ||
Wells Fargo Mortgage Backed Securities Trust: | ||||
Series 2003-12 Class B6, 4.75% 11/25/18 (h) | 295,440 | 59,088 | ||
Series 2005-AR12 Class 2A6, 4.3173% 7/25/35 (m) | 555,987 | 507,294 | ||
Series 2005-AR3 Class 2A1, 4.2121% 3/25/35 (m) | 1,017,735 | 930,120 | ||
TOTAL PRIVATE SPONSOR | 22,534,454 | |||
U.S. Government Agency - 0.6% | ||||
Fannie Mae subordinate REMIC pass-thru certificates: | ||||
planned amortization class: | ||||
Series 2001-68 Class QZ, 5.5% 12/25/16 | 4,460,815 | 4,554,042 | ||
Series 2002-9 Class PC, 6% 3/25/17 | 669,747 | 690,279 | ||
sequential payer Series 2002-77 Class CB, 5% 12/25/17 | 48,250,000 | 48,374,871 | ||
Freddie Mac Multi-class participation certificates guaranteed sequential payer: | ||||
Series 2467 Class NB, 5% 7/15/17 | 5,495,000 | 5,591,020 | ||
Series 2528 Class HN, 5% 11/15/17 | 5,515,000 | 5,609,686 | ||
TOTAL U.S. GOVERNMENT AGENCY | 64,819,898 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $92,764,757) | 87,354,352 | |||
Commercial Mortgage Securities - 2.1% | ||||
| Principal | Value | ||
Asset Securitization Corp.: | ||||
Series 1996-D2 Class B1A, 8.7715% 2/14/29 (h)(m) | $ 750,000 | $ 708,978 | ||
Series 1997-D4: | ||||
Class B2, 7.525% 4/14/29 | 1,494,104 | 1,544,643 | ||
Class B5, 7.525% 4/14/29 | 129,000 | 106,161 | ||
Banc of America Commercial Mortgage Trust Series 2008-1 Class D, 6.2005% 2/10/18 (h)(m) | 125,000 | 86,677 | ||
Banc of America Commercial Mortgage, Inc.: | ||||
sequential payer Series 2007-1 Class A2, 5.381% 1/15/49 | 4,040,000 | 3,890,705 | ||
Series 2003-2 Class BWF, 7.55% 10/11/37 (h) | 95,407 | 106,345 | ||
Series 2004-1 Class F, 5.279% 11/10/39 (h) | 185,000 | 147,979 | ||
Series 2004-5 Class G, 5.3905% 11/10/41 (h)(m) | 135,000 | 77,759 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
Series 1999-C1: | ||||
Class G, 5.64% 2/14/31 (h) | 60,000 | 51,779 | ||
Class I, 5.64% 2/14/31 (h) | 170,000 | 42,500 | ||
Series 2007-BBA8: | ||||
Class K, 3.6669% 3/15/22 (h)(m) | 105,000 | 78,750 | ||
Class L, 4.3669% 3/15/22 (h)(m) | 214,000 | 139,100 | ||
Chase Commercial Mortgage Securities Corp. Series 1998-2 Class J, 6.39% 11/18/30 (h) | 490,787 | 171,776 | ||
Citigroup Commercial Mortgage Trust: | ||||
sequential payer Series 2006-C5 Class A4, 5.431% 10/15/49 | 9,955,000 | 9,095,320 | ||
Series 2006-FL2 Class CNP3, 3.6669% 8/16/21 (h)(m) | 5,182,308 | 4,605,776 | ||
Series 2007-C6 Class A1, 5.622% 12/10/49 (m) | 9,554,003 | 9,383,581 | ||
Series 2007-FL3A Class A2, 2.6069% 4/15/22 (h)(m) | 6,878,000 | 6,190,200 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust sequential payer: | ||||
Series 2006-CD2 Class A4, 5.3623% 1/15/46 (m) | 10,435,000 | 9,600,063 | ||
Series 2007-CD4 Class A2A, 5.237% 12/11/49 | 10,000,000 | 9,645,299 | ||
Claregold Trust Series 2007-2A: | ||||
Class F, 5.01% 5/15/44 (m) | CAD | 138,000 | 70,594 | |
Class G, 5.01% 5/15/44 (m) | CAD | 30,000 | 13,544 | |
Class H, 5.01% 5/15/44 (m) | CAD | 20,000 | 8,377 | |
Class J, 5.01% 5/15/44 (m) | CAD | 20,000 | 7,484 | |
Class K, 5.01% 5/15/44 (m) | CAD | 10,000 | 3,360 | |
Class L, 5.01% 5/15/44 (m) | CAD | 36,000 | 10,911 | |
Class M, 5.01% 5/15/44 (m) | CAD | 165,000 | 36,961 | |
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates Series 2001-J2A Class F, 7.0311% 7/16/34 (h)(m) | $ 190,000 | $ 152,210 | ||
Commercial Mortgage Acceptance Corp. Series 1998-C1 Class G, 6.21% 7/15/31 (h) | 500,000 | 364,649 | ||
Commercial Mortgage Asset Trust Series 1999-C1 Class F, 6.25% 1/17/32 (h) | 550,000 | 428,166 | ||
Credit Suisse Commercial Mortgage Trust sequential payer Series 2007-C2 Class A2, 5.448% 1/15/49 (m) | 10,150,000 | 9,806,041 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
Series 1997-C2 Class F, 7.46% 1/17/35 (m) | 500,000 | 491,409 | ||
Series 1998-C1 Class H, 6% 5/17/40 (h) | 130,000 | 26,000 | ||
Series 2001-SPGA Class C, 6.809% 8/13/18 (h) | 190,000 | 174,908 | ||
Series 2003-C3: | ||||
Class D, 4.131% 5/15/38 | 120,000 | 99,684 | ||
Class J, 4.231% 5/15/38 (h) | 300,000 | 196,542 | ||
Credit Suisse Mortgage Capital Certificates floater Series 2007-TFL1 Class L, 4.3669% 2/15/22 (h)(m) | 100,000 | 65,000 | ||
Crest Ltd. Series 2001-1A Class C, 9% 2/25/34 (h) | 500,657 | 471,861 | ||
Deutsche Mortgage & Asset Receiving Corp. Series 1998-C1 Class J, 6.22% 6/15/31 | 330,000 | 222,637 | ||
DLJ Commercial Mortgage Corp. Series 1998-CG1 Class B4, 7.2174% 6/10/31 (h)(m) | 365,000 | 389,036 | ||
First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 7.9571% 4/29/39 (h)(m) | 100,417 | 100,417 | ||
First Union National Bank-Bank of America Commercial Mortgage Trust Series 2001-C1 Class H, 7.039% 3/15/33 (h) | 50,000 | 46,519 | ||
GE Capital Commercial Mortgage Corp. Series 2002-1A Class H, 7.3918% 12/10/35 (h)(m) | 55,000 | 52,959 | ||
Ginnie Mae guaranteed REMIC pass-thru securities sequential payer Series 2003-47 Class C, 4.227% 10/16/27 | 3,851,221 | 3,848,756 | ||
Global Signal Trust II Series 2004-2A Class E, 5.587% 12/15/14 (h) | 85,000 | 82,386 | ||
Global Signal Trust III Series 2006-1: | ||||
Class D, 6.052% 2/15/36 (h) | 80,000 | 73,382 | ||
Class E, 6.495% 2/15/36 (h) | 40,000 | 36,260 | ||
Class F, 7.036% 2/15/36 | 200,000 | 179,708 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
Series 1997-C1 Class H, 6.6% 7/15/29 | 509,114 | 290,195 | ||
Series 1997-C2 Class G, 6.75% 4/15/29 (m) | 500,000 | 460,000 | ||
Series 1999-C1 Class F, 6.02% 5/15/33 (h) | 500,000 | 425,155 | ||
Series 1999-C2I Class K, 6.481% 9/15/33 (p) | 285,000 | 156,750 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
GMAC Commercial Mortgage Securities, Inc.: - continued | ||||
Series 1999-C3: | ||||
Class J, 6.974% 8/15/36 (h) | $ 226,000 | $ 214,003 | ||
Class K, 6.974% 8/15/36 (h) | 427,000 | 256,114 | ||
Series 2000-C1: | ||||
Class G, 7% 3/15/33 (h) | 120,000 | 117,843 | ||
Class H, 7% 3/15/33 (h) | 100,000 | 96,903 | ||
Class K, 7% 3/15/33 (h) | 90,000 | 81,325 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
Series 2002-C1 Class H, 5.903% 1/11/35 (h) | 86,000 | 74,412 | ||
Series 2003-C2 Class J, 5.234% 11/5/13 (h)(m) | 250,000 | 162,650 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A Class J, 4.2113% 6/6/20 (h)(m) | 250,000 | 157,500 | ||
Series 2007-EOP Class L, 3.7613% 3/1/20 (h)(m) | 400,000 | 387,252 | ||
Series 1998-GLII Class G, 7.751% 4/13/31 (h)(m) | 600,000 | 510,060 | ||
Series 2006-RR2: | ||||
Class M, 5.6903% 6/1/46 (h)(m) | 100,000 | 20,000 | ||
Class N, 5.6903% 6/1/46 (h)(m) | 100,000 | 18,000 | ||
GS Mortgage Securities Trust sequential payer Series 2007-GG10: | ||||
Class A2, 5.778% 8/10/45 | 12,655,000 | 12,284,910 | ||
Class A4, 5.7992% 8/10/45 (m) | 10,000,000 | 9,164,110 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
Series 2002-C1 Class E, 6.135% 7/12/37 (h) | 180,000 | 169,098 | ||
Series 2002-CIB4: | ||||
Class E, 6.7139% 5/12/34 (h)(m) | 190,000 | 185,870 | ||
Class F, 7.1059% 5/12/34 (h)(m) | 78,000 | 74,006 | ||
Series 2003-C1 Class CM1, 5.6896% 1/12/37 (h)(m) | 213,882 | 193,764 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2 Class A2, 2.5969% 11/15/18 (h)(m) | 10,000,000 | 8,600,000 | ||
Series 2004-CBX Class D, 5.097% 1/12/37 (m) | 65,000 | 51,441 | ||
Series 2004-LN2 Class D, 5.206% 7/15/41 (m) | 420,000 | 320,708 | ||
Series 2005-LDP3 Class A3, 4.959% 8/15/42 | 10,750,000 | 10,377,135 | ||
JPMorgan Commercial Mortgage Finance Corp. Series 1999-C7 Class F, 6% 10/15/35 (h) | 95,000 | 94,395 | ||
LB Commercial Conduit Mortgage Trust Series 1998-C4 Class G, 5.6% 10/15/35 (h) | 250,000 | 232,335 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-C6 Class A2, 5.262% 9/15/39 (m) | $ 8,375,000 | $ 8,178,077 | ||
Series 2006-C7 Class A1, 5.279% 11/15/38 | 895,540 | 887,632 | ||
Series 2007-C1 Class A3, 5.398% 2/15/40 | 10,000,000 | 9,265,471 | ||
Series 2007-C6 Class A2, 5.845% 7/15/40 | 10,000,000 | 9,727,937 | ||
Series 2002-C1 Class J, 6.95% 3/15/34 (h)(m) | 86,000 | 71,053 | ||
Series 2004-C2: | ||||
Class G, 4.595% 3/15/36 (h)(m) | 165,000 | 124,608 | ||
Class K, 5.0914% 3/15/36 (h)(m) | 500,000 | 262,420 | ||
LNR CFL Series 2004-1: | ||||
Class I10, 7.72% 2/26/28 (h) | 180,000 | 178,560 | ||
Class I11, 7.72% 2/26/28 (h) | 100,000 | 98,850 | ||
Class I12, 7.72% 2/26/28 (h) | 100,000 | 98,500 | ||
Class I9, 7.72% 2/26/28 (h) | 153,200 | 152,051 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 1997-C2 Class F, 6.25% 12/10/29 (m) | 620,000 | 615,977 | ||
Series 1998-C3 Class E, 6.8541% 12/15/30 (m) | 155,000 | 157,329 | ||
Merrill Lynch Mortgage Trust: | ||||
Series 2004-KEY2 Class K, 5.091% 8/12/39 (h)(m) | 100,000 | 36,355 | ||
Series 2006-KEY2 Class L, 5.091% 8/12/39 (h) | 300,000 | 104,836 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-4 Class A2, 5.112% 12/12/49 (m) | 1,075,000 | 1,039,173 | ||
Series 2007-5 Class A3, 5.364% 8/12/48 | 10,675,000 | 9,683,848 | ||
Series 2006-2 Class A4, 5.9094% 6/12/46 (m) | 15,250,000 | 14,513,646 | ||
Morgan Stanley Capital I Trust: | ||||
sequential payer: | ||||
Series 2004-RR2 Class A2, 5.45% 10/28/33 (h) | 333,394 | 311,971 | ||
Series 2007-IQ13 Class A4, 5.364% 3/15/44 | 10,000,000 | 8,866,256 | ||
Series 2007-T25 Class A2, 5.507% 11/12/49 | 1,555,000 | 1,462,024 | ||
Series 2004-IQ7 Class E, 5.4043% 6/15/38 (h)(m) | 120,000 | 83,328 | ||
Series 2005-HQ7: | ||||
Class E, 5.208% 11/14/42 (m) | 75,000 | 53,394 | ||
Class F, 5.208% 11/14/42 (m) | 150,000 | 103,952 | ||
Series 2007-HQ12 Class A2, 5.6325% 4/12/49 (m) | 12,880,000 | 12,467,535 | ||
Morgan Stanley Dean Witter Capital I Trust Series 2003-TOP9 Class E, 5.7122% 11/13/36 (h)(m) | 70,000 | 56,070 | ||
Mortgage Capital Funding, Inc. Series 1998-MC3 | 131,114 | 130,249 | ||
NationsLink Funding Corp. Series 1998-2 Class J, 5% 8/20/30 (h) | 160,000 | 105,475 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Providence Place Group Ltd. Partnership Series 2000-C1 Class A2, 7.75% 7/20/28 | $ 411,182 | $ 401,402 | ||
Real Estate Asset Liquidity Trust: | ||||
Series 2006-2: | ||||
Class F, 4.456% 9/12/38 (h) | CAD | 107,000 | 82,647 | |
Class G, 4.456% 9/12/38 (h) | CAD | 54,000 | 41,014 | |
Class H, 4.456% 9/12/38 (h) | CAD | 36,000 | 26,444 | |
Class J, 4.456% 9/12/38 (h) | CAD | 36,000 | 22,423 | |
Class K, 4.456% 9/12/38 (h) | CAD | 18,000 | 10,133 | |
Class L, 4.456% 9/12/38 (h) | CAD | 26,000 | 13,665 | |
Class M, 4.456% 9/12/38 (h) | CAD | 130,000 | 36,429 | |
Series 2007-1: | ||||
Class F, 4.57% 4/12/23 | CAD | 126,000 | 96,874 | |
Class G, 4.57% 4/12/23 | CAD | 42,000 | 31,130 | |
Class H, 4.57% 4/12/23 | CAD | 42,000 | 28,673 | |
Class J, 4.57% 4/12/23 | CAD | 42,000 | 25,623 | |
Class K, 4.57% 4/12/23 | CAD | 21,000 | 12,031 | |
Class L, 4.57% 4/12/23 | CAD | 63,000 | 33,927 | |
Class M, 4.57% 4/12/23 | CAD | 185,000 | 54,288 | |
Salomon Brothers Mortgage Securities VII, Inc.: | ||||
Series 2001-C1 Class E, 6.31% 12/18/35 | 135,000 | 129,679 | ||
Series 2001-MMA: | ||||
Class E6, 6.5% 2/18/34 (h)(m) | 165,000 | 155,284 | ||
Class F6, 6.5% 2/18/34 (h)(m) | 37,000 | 34,172 | ||
SBA CMBS Trust Series 2006-1A Class J, 7.825% 11/15/36 (h) | 90,000 | 81,874 | ||
Structured Asset Securities Corp. Series 1997-LLI | 170,000 | 167,928 | ||
UBS Commercial Mortgage Trust Series 2007-FL1: | ||||
Class F, 3.0419% 9/15/09 (h)(m) | 110,000 | 94,600 | ||
Class G, 3.0419% 9/15/09 (h)(m) | 200,000 | 170,000 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2007-C30 Class A4, 5.305% 12/15/43 | 8,045,000 | 7,380,171 | ||
Series 2007-C32 Class A2, 5.7357% 6/15/49 (m) | 13,285,000 | 12,881,485 | ||
Series 2006-C23 Class A5, 5.416% 1/15/45 (m) | 7,870,000 | 7,230,913 | ||
Series 2007-C30 Class B, 5.463% 12/15/43 (m) | 10,505,000 | 6,711,899 | ||
Wachovia Ltd./Wachovia LLC Series 2006-1 Class 1ML, 10.7025% 9/25/26 (h)(m) | 400,000 | 140,000 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $243,154,443) | 233,240,371 | |||
Municipal Securities - 0.3% | ||||
| Principal | Value | ||
Connecticut Gen. Oblig. Series 2007 B, 5% 5/1/15 | $ 10,000,000 | $ 11,039,800 | ||
Montgomery County Gen. Oblig.: | ||||
(Consolidated Pub. Impt. Proj.) Series A, 5% 5/1/13 | 3,300,000 | 3,604,326 | ||
Series A, 5% 1/1/12 | 11,025,000 | 11,895,093 | ||
Ohio Gen. Oblig. (Common Schools Proj.) Series 2006 D, 5% 9/15/12 | 10,195,000 | 11,068,508 | ||
TOTAL MUNICIPAL SECURITIES (Cost $37,434,862) | 37,607,727 | |||
Foreign Government and Government Agency Obligations - 1.2% | ||||
| ||||
Argentine Republic: | ||||
discount (with partial capitalization through 12/31/13) 8.28% 12/31/33 | 2,764,725 | 2,059,720 | ||
par 1.33% 12/31/38 (f) | 3,405,000 | 1,089,600 | ||
7% 3/28/11 | 17,450,000 | 14,648,790 | ||
7% 9/12/13 | 17,420,000 | 12,559,336 | ||
Brazilian Federative Republic: | ||||
6% 1/17/17 | 505,000 | 517,625 | ||
7.125% 1/20/37 | 140,000 | 156,100 | ||
8.25% 1/20/34 | 410,000 | 510,450 | ||
8.75% 2/4/25 | 280,000 | 351,400 | ||
12.25% 3/6/30 | 895,000 | 1,519,263 | ||
12.75% 1/15/20 | 490,000 | 764,400 | ||
Central Bank of Nigeria promissory note 5.092% 1/5/10 | 412,312 | 395,591 | ||
Colombian Republic 7.375% 9/18/37 | 1,830,000 | 2,008,425 | ||
Democratic Socialist Republic of Sri Lanka 8.25% 10/24/12 (h) | 1,385,000 | 1,260,350 | ||
Dominican Republic: | ||||
3.6713% 8/30/24 (m) | 1,100,000 | 1,057,375 | ||
9.04% 1/23/18 (h) | 3,120,449 | 3,190,659 | ||
9.5% 9/27/11 (Reg. S) | 1,606,150 | 1,638,273 | ||
Ecuador Republic: | ||||
5% 2/28/25 | 218,000 | 146,878 | ||
10% 8/15/30 (Reg. S) | 4,550,000 | 4,026,750 | ||
12% 11/15/12 (Reg. S) | 626,280 | 629,411 | ||
Gabonese Republic 8.2% 12/12/17 (h) | 2,580,000 | 2,657,400 | ||
Georgia Republic 7.5% 4/15/13 | 460,000 | 414,000 | ||
Ghana Republic 8.5% 10/4/17 (h) | 2,130,000 | 2,114,025 | ||
Indonesian Republic: | ||||
6.625% 2/17/37 (h) | 1,475,000 | 1,290,625 | ||
6.75% 3/10/14 (h) | 510,000 | 515,100 | ||
Foreign Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
Indonesian Republic: - continued | ||||
6.75% 3/10/14 (Reg. S) | $ 315,000 | $ 318,150 | ||
7.5% 1/15/16 (h) | 485,000 | 505,031 | ||
7.75% 1/17/38 (h) | 1,245,000 | 1,232,550 | ||
8.5% 10/12/35 (h) | 650,000 | 696,345 | ||
8.5% 10/12/35 (Reg. S) | 735,000 | 787,406 | ||
Islamic Republic of Pakistan: | ||||
6.75% 2/19/09 | 3,520,000 | 3,344,000 | ||
7.125% 3/31/16 (h) | 1,450,000 | 942,500 | ||
Lebanese Republic: | ||||
6.1088% 11/30/09 (Reg. S) (m) | 1,645,000 | 1,620,325 | ||
7.125% 3/5/10 | 250,000 | 249,688 | ||
7.5% 8/2/11 | 1,325,000 | 1,301,813 | ||
7.75% 9/7/12 | 400,000 | 396,000 | ||
7.875% 5/20/11 (Reg. S) | 1,080,000 | 1,073,250 | ||
8.625% 6/20/13 (Reg. S) | 3,495,000 | 3,521,213 | ||
9% 5/2/14 | 360,000 | 367,650 | ||
Philippine Republic: | ||||
9.5% 2/2/30 | 1,375,000 | 1,763,438 | ||
10.625% 3/16/25 | 1,365,000 | 1,861,587 | ||
Republic of Fiji 6.875% 9/13/11 | 890,000 | 801,000 | ||
Republic of Serbia 3.75% 11/1/24 (f)(h) | 2,935,000 | 2,744,225 | ||
Russian Federation: | ||||
7.5% 3/31/30 (Reg. S) | 8,990,095 | 10,013,168 | ||
12.75% 6/24/28 (Reg. S) | 1,490,000 | 2,615,397 | ||
Turkish Republic: | ||||
6.75% 4/3/18 | 1,965,000 | 1,964,607 | ||
6.875% 3/17/36 | 3,285,000 | 3,070,161 | ||
7% 9/26/16 | 1,390,000 | 1,422,943 | ||
7.25% 3/15/15 | 765,000 | 800,190 | ||
7.25% 3/5/38 | 1,350,000 | 1,300,725 | ||
7.375% 2/5/25 | 2,200,000 | 2,233,440 | ||
11.875% 1/15/30 | 1,085,000 | 1,636,940 | ||
Ukraine Government: | ||||
6.385% 6/26/12 (h) | 2,240,000 | 2,080,512 | ||
6.75% 11/14/17 (h) | 4,290,000 | 3,635,775 | ||
United Mexican States: | ||||
7.5% 4/8/33 | 700,000 | 816,200 | ||
8.3% 8/15/31 | 420,000 | 528,150 | ||
Uruguay Republic 8% 11/18/22 | 2,431,902 | 2,583,896 | ||
Venezuelan Republic: | ||||
3.7906% 4/20/11 (Reg. S) (m) | 3,130,000 | 2,809,175 | ||
Foreign Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
Venezuelan Republic: - continued | ||||
5.375% 8/7/10 (Reg. S) | $ 1,145,000 | $ 1,090,613 | ||
7% 3/31/38 | 720,000 | 500,400 | ||
8.5% 10/8/14 | 1,690,000 | 1,580,150 | ||
9% 5/7/23 (Reg. S) | 1,160,000 | 1,005,140 | ||
9.25% 9/15/27 | 4,050,000 | 3,766,500 | ||
9.375% 1/13/34 | 1,160,000 | 1,020,800 | ||
10.75% 9/19/13 | 5,460,000 | 5,637,450 | ||
13.625% 8/15/18 | 2,343,000 | 2,764,740 | ||
Vietnamese Socialist Republic: | ||||
4% 3/12/28 (f) | 90,000 | 74,925 | ||
6.875% 1/15/16 (h) | 1,740,000 | 1,687,800 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $142,861,644) | 135,687,514 |
Preferred Stocks - 0.1% | |||
Shares |
| ||
Convertible Preferred Stocks - 0.1% | |||
ENERGY - 0.1% | |||
Oil, Gas & Consumable Fuels - 0.1% | |||
El Paso Corp. 4.99% | 1,927 | 2,629,905 | |
UTILITIES - 0.0% | |||
Electric Utilities - 0.0% | |||
AES Trust III 6.75% | 28,100 | 1,278,550 | |
TOTAL CONVERTIBLE PREFERRED STOCKS | 3,908,455 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
TELECOMMUNICATION SERVICES - 0.0% | |||
Wireless Telecommunication Services - 0.0% | |||
Rural Cellular Corp. 12.25% pay-in-kind (a) | 520 | 715,000 | |
TOTAL PREFERRED STOCKS (Cost $4,527,961) | 4,623,455 |
Floating Rate Loans - 0.3% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 0.1% | ||||
Auto Components - 0.0% | ||||
Federal-Mogul Corp.: | ||||
Tranche B, term loan 4.4075% 12/27/14 (m) | $ 1,551,735 | $ 1,194,836 | ||
Tranche C, term loan 4.4075% 12/27/15 (m) | 1,201,347 | 925,037 | ||
| 2,119,873 | |||
Hotels, Restaurants & Leisure - 0.0% | ||||
OSI Restaurant Partners, Inc.: | ||||
Credit-Linked Deposit 5.0263% 6/14/13 (m) | 80,120 | 61,893 | ||
term loan 5.125% 6/14/14 (m) | 1,004,266 | 775,795 | ||
| 837,688 | |||
Media - 0.1% | ||||
CSC Holdings, Inc. Tranche B, term loan 4.2138% 3/31/13 (m) | 1,516,709 | 1,440,874 | ||
Education Media and Publishing Group Ltd. Tranche 2LN, term loan 11.9638% 12/12/14 (m) | 2,477,791 | 1,982,233 | ||
Univision Communications, Inc. Tranche 1LN, term loan 5.0288% 9/29/14 (m) | 1,795,000 | 1,442,731 | ||
Zuffa LLC term loan 4.5625% 6/19/15 (m) | 3,621,002 | 3,041,642 | ||
| 7,907,480 | |||
Specialty Retail - 0.0% | ||||
Toys 'R' US, Inc. term loan 5.4638% 12/9/08 (m) | 160,000 | 148,800 | ||
Textiles, Apparel & Luxury Goods - 0.0% | ||||
Hanesbrands, Inc.: | ||||
term loan 6.545% 3/5/14 (m) | 165,000 | 161,081 | ||
Tranche B 1LN, term loan 4.546% 9/5/13 (m) | 610,000 | 593,225 | ||
Levi Strauss & Co. term loan 4.7131% 4/4/14 (m) | 790,000 | 639,900 | ||
| 1,394,206 | |||
TOTAL CONSUMER DISCRETIONARY | 12,408,047 | |||
FINANCIALS - 0.0% | ||||
Diversified Financial Services - 0.0% | ||||
LandSource Holding Co. LLC term loan 8.25% 5/31/09 (m) | 59,525 | 38,394 | ||
Real Estate Investment Trusts - 0.0% | ||||
General Growth Properties, Inc. Tranche A1, term loan 3.62% 2/24/10 (m) | 209,211 | 183,582 | ||
Floating Rate Loans - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - 0.0% | ||||
Tishman Speyer Properties term loan 4.22% 12/27/12 (m) | $ 143,000 | $ 117,260 | ||
TOTAL FINANCIALS | 339,236 | |||
HEALTH CARE - 0.1% | ||||
Health Care Providers & Services - 0.0% | ||||
Community Health Systems, Inc.: | ||||
term loan 4.9776% 7/25/14 (m) | 2,065,032 | 1,948,874 | ||
Tranche DD, term loan 7/25/14 (m)(q) | 105,648 | 99,705 | ||
HCA, Inc. Tranche B, term loan 5.0506% 11/17/13 (m) | 2,198,839 | 2,061,411 | ||
| 4,109,990 | |||
Pharmaceuticals - 0.1% | ||||
PTS Acquisition Corp. term loan 5.0506% 4/10/14 (m) | 4,717,196 | 4,115,753 | ||
TOTAL HEALTH CARE | 8,225,743 | |||
INDUSTRIALS - 0.1% | ||||
Airlines - 0.1% | ||||
United Air Lines, Inc. Tranche B, term loan 4.5733% 2/1/14 (m) | 2,775,378 | 2,026,026 | ||
Commercial Services & Supplies - 0.0% | ||||
ARAMARK Corp.: | ||||
Credit-Linked Deposit 4.6756% 1/26/14 (m) | 120,664 | 114,028 | ||
term loan 4.6756% 1/26/14 (m) | 1,899,336 | 1,794,872 | ||
| 1,908,900 | |||
Machinery - 0.0% | ||||
Dresser, Inc. Tranche 2LN, term loan 8.5569% 5/4/15 pay-in-kind (m) | 1,255,000 | 1,207,938 | ||
TOTAL INDUSTRIALS | 5,142,864 | |||
INFORMATION TECHNOLOGY - 0.0% | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Flextronics International Ltd.: | ||||
Tranche B-A, term loan 5.041% 10/1/14 (m) | 640,670 | 576,603 | ||
Tranche B-A1, term loan 5.0406% 10/1/14 (m) | 99,330 | 89,397 | ||
Texas Competitive Electric Holdings Co. LLC Tranche B3, term loan 6.269% 10/10/14 (m) | 1,532,281 | 1,426,936 | ||
| 2,092,936 | |||
Floating Rate Loans - continued | ||||
| Principal | Value | ||
INFORMATION TECHNOLOGY - continued | ||||
Software - 0.0% | ||||
Kronos, Inc. Tranche 1LN, term loan 5.0506% 6/11/14 (m) | $ 1,800,441 | $ 1,638,401 | ||
SS&C Technologies, Inc. term loan 4.7808% 11/23/12 (m) | 1,064,386 | 995,201 | ||
| 2,633,602 | |||
TOTAL INFORMATION TECHNOLOGY | 4,726,538 | |||
MATERIALS - 0.0% | ||||
Containers & Packaging - 0.0% | ||||
Anchor Glass Container Corp. term loan 7.75% 6/20/14 (m) | 2,858,000 | 2,800,840 | ||
Paper & Forest Products - 0.0% | ||||
Georgia-Pacific Corp. Tranche B1, term loan 4.4395% 12/23/12 (m) | 1,172,053 | 1,109,055 | ||
TOTAL MATERIALS | 3,909,895 | |||
TELECOMMUNICATION SERVICES - 0.0% | ||||
Diversified Telecommunication Services - 0.0% | ||||
Insight Midwest Holdings LLC Tranche B, term loan 4.47% 4/6/14 (m) | 465,000 | 446,400 | ||
Intelsat Ltd. Tranche B, term loan 5.2875% 7/3/13 (m) | 980,025 | 943,274 | ||
| 1,389,674 | |||
Wireless Telecommunication Services - 0.0% | ||||
Crown Castle International Corp. Tranche B, term loan 4.3006% 3/6/14 (m) | 9,875 | 9,233 | ||
TOTAL TELECOMMUNICATION SERVICES | 1,398,907 | |||
UTILITIES - 0.0% | ||||
Multi-Utilities - 0.0% | ||||
Ashmore Energy International: | ||||
Revolving Credit-Linked Deposit 5.8006% 3/30/12 (m) | 355,590 | 323,548 | ||
term loan 5.8006% 3/30/14 (m) | 845,023 | 768,971 | ||
| 1,092,519 | |||
TOTAL FLOATING RATE LOANS (Cost $37,602,554) | 37,243,749 |
Fixed-Income Funds - 53.3% | |||
Shares | Value | ||
Fidelity 1-3 Year Duration Securitized Bond Central Fund (n) | 3,366,821 | $ 283,991,380 | |
Fidelity Commercial Mortgage-Backed Securities Central Fund (n) | 7,414,807 | 658,434,817 | |
Fidelity Corporate Bond 1-10 Year Central Fund (n) | 18,851,759 | 1,816,743,999 | |
Fidelity Floating Rate Central Fund (n) | 4,475,644 | 408,626,297 | |
Fidelity Mortgage Backed Securities Central Fund (n) | 21,787,296 | 2,138,641,000 | |
Fidelity Ultra-Short Central Fund (n) | 7,340,076 | 599,904,422 | |
TOTAL FIXED-INCOME FUNDS (Cost $6,228,917,563) | 5,906,341,915 | ||
Preferred Securities - 0.1% | |||
Principal |
| ||
CONSUMER DISCRETIONARY - 0.0% | |||
Media - 0.0% | |||
Globo Comunicacoes e Participacoes SA 9.375% | $ 3,765,000 | 3,880,584 | |
Net Servicos de Comunicacao SA 9.25% (h) | 1,623,000 | 1,681,437 | |
| 5,562,021 | ||
ENERGY - 0.1% | |||
Oil, Gas & Consumable Fuels - 0.1% | |||
Pemex Project Funding Master Trust 7.75% | 6,834,000 | 6,994,450 | |
TOTAL PREFERRED SECURITIES (Cost $12,428,953) | 12,556,471 | ||
Cash Equivalents - 7.2% | |||
Maturity Amount |
| ||
Investments in repurchase agreements in a joint trading account at: | |||
2.01%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Treasury Obligations) # | $ 2,755,616 | 2,755,000 | |
Cash Equivalents - continued | |||
Maturity Amount | Value | ||
Investments in repurchase agreements in a joint trading account at: - continued | |||
2.12%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Government Obligations) # | $ 436,212,763 | $ 436,110,000 | |
2.14%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Government Obligations) # (b) | 353,592,056 | 353,508,000 | |
TOTAL CASH EQUIVALENTS (Cost $792,373,000) | 792,373,000 | ||
TOTAL INVESTMENT PORTFOLIO - 108.3% (Cost $12,390,318,621) | 11,996,564,286 | ||
NET OTHER ASSETS - (8.3)% | (914,582,124) | ||
NET ASSETS - 100% | $ 11,081,982,162 |
Swap Agreements | |||||
| Expiration Date | Notional Amount |
| ||
Credit Default Swaps | |||||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34 | Oct. 2034 | $ 43,728 | (35,417) | ||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 6.3950% 8/25/34 | Sept. 2034 | 39,167 | (36,249) | ||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7 Class B3, 7.6913% 7/25/34 | August 2034 | 57,619 | (52,395) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive from Citibank upon credit event of Bristol-Myers Squibb Co., par value of the notional amount of Bristol-Myers Squibb Co. 5.25% 8/15/13, and pay quarterly notional amount multiplied by .32% | Sept. 2017 | $ 1,500,000 | $ 9,615 | ||
Receive from Citibank upon credit event of Merrill Lynch & Co., Inc., par value of the notional amount of Merrill Lynch & Co., Inc. 5% 1/15/15, and pay quarterly notional amount multiplied by .90% | Dec. 2012 | 4,000,000 | 323,342 | ||
Receive from Deutsche Bank upon credit event of Household Finance Corp., par value of the notional amount of Household Finance Corp. 7% 5/15/12, and pay quarterly notional amount multiplied by .73% | Sept. 2012 | 5,900,000 | 478,878 | ||
Receive from Deutsche Bank upon credit event of Southwest Airlines Co., par value of the notional amount of Southwest Airlines Co. 5.25% 10/1/14, and pay quarterly notional amount multiplied by 1.4% | June 2013 | 14,400,000 | 135,376 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.18% | March 2013 | 2,429,000 | 21,381 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.18% | March 2013 | 2,429,000 | 21,381 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.19% | March 2018 | 2,143,000 | 66,824 | ||
Receive from Goldman Sachs upon credit event of Lowe's Companies, Inc., par value of the notional amount of Lowe's Companies, Inc. 8.25% 6/1/10, and pay quarterly notional amount multiplied by 1.07% | March 2013 | 3,800,000 | (57,737) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive from Lehman Brothers, Inc. upon credit event of Lowe's Companies, Inc., par value of the notional amount of Lowe's Companies, Inc. 8.25% 6/1/10, and pay quarterly notional amount multiplied by 1.03% | March 2013 | $ 3,800,000 | $ (51,175) | ||
Receive from Morgan Stanley, Inc. upon credit event of H.J. Heinz Co., par value of the notional amount of H.J. Heinz Co. 6% 3/15/08, and pay quarterly notional amount multiplied by .65% | March 2013 | 5,000,000 | (34,679) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Credit Suisse First Boston upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 4,000,000 | (3,640,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Credit Suisse First Boston upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 4,600,000 | (4,186,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to JPMorgan Chase, Inc. upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 2,800,000 | (2,548,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Lehman Brothers, Inc. upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 6,000,000 | (5,460,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to UBS upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | August 2037 | 7,200,000 | (6,552,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to UBS upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | August 2037 | 2,600,000 | (2,366,000) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive monthly notional amount multiplied by .82% and pay UBS upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34 | August 2034 | $ 34,860 | $ (16,996) | ||
Receive monthly notional amount multiplied by .85% and pay UBS upon credit event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34 | Nov. 2034 | 134,000 | (62,264) | ||
Receive monthly notional amount multiplied by .85% and pay UBS upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34 | Oct. 2034 | 120,859 | (25,494) | ||
Receive monthly notional amount multiplied by 1.6% and pay Morgan Stanley, Inc. upon credit event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M7, 5.4413% 5/25/35 | June 2035 | 100,000 | (94,250) | ||
Receive monthly notional amount multiplied by 2.22% and pay JPMorgan Chase, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2005-HE3 Class B2, 6.87% 7/25/35 | August 2035 | 5,325,000 | (4,737,537) | ||
Receive monthly notional amount multiplied by 2.39% and pay UBS upon credit event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.73% 2/25/34 | March 2034 | 57,176 | (43,756) | ||
Receive monthly notional amount multiplied by 2.4% and pay Deutsche Bank upon credit event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.2288% 1/25/34 | Feb. 2034 | 787 | (693) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon credit event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32 | April 2032 | $ 11,800 | $ (10,517) | ||
Receive monthly notional amount multiplied by 3% and pay UBS upon credit event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2005-R4 Class M9, 7.07% 7/25/35 | August 2035 | 1,200,000 | (1,061,024) | ||
Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon credit event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33 | May 2033 | 134,000 | (100,184) | ||
Receive monthly notional amount multiplied by 5.55% and pay Deutsche Bank upon credit event of Carrington Mortgage Loan Trust, par value of the notional amount of Carrington Mortgage Loan Trust Series 2006-FRE1 Class M10, 7.74% 7/25/36 | August 2036 | 1,200,000 | (1,102,156) | ||
Receive monthly notional amount multiplied by 6.25% and pay Deutsche Bank upon credit event of Residential Asset Mortgage Products, Inc., par value of the notional amount of Residential Asset Mortgage Products, Inc. Series 2006-RS5, 7.17% 9/25/36 | Oct. 2036 | 1,200,000 | (1,084,294) | ||
Receive quarterly notional amount multiplied by .72% and pay Bank of America upon credit event of Allegheny Energy Supply Co. LLC, par value of the notional amount of Allegheny Energy Supply Co. LLC 8.25% 4/15/12 | June 2012 | 4,000,000 | (80,377) | ||
Receive quarterly notional amount multiplied by .78% and pay Deutsche Bank upon credit event of Allegheny Energy Supply Co. LLC, par value of the notional amount of Allegheny Energy Supply Co. LLC 8.25% 4/15/12 | June 2012 | 3,955,000 | (70,727) | ||
TOTAL CREDIT DEFAULT SWAPS | 90,214,996 | (32,453,124) | |||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Interest Rate Swaps | |||||
Receive quarterly a fixed rate equal to 4.3875% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | March 2010 | $ 1,250,000 | $ 27,972 | ||
Receive quarterly a fixed rate equal to 4.774% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | March 2015 | 1,250,000 | 60,703 | ||
Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | July 2014 | 1,135,000 | 46,173 | ||
Receive semi-annually a fixed rate equal to 3.567% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2011 | 293,294,000 | 2,517,342 | ||
Receive semi-annually a fixed rate equal to 4.449% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2018 | 102,760,000 | 878,228 | ||
Receive semi-annually a fixed rate equal to 4.87% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | Oct. 2012 | 100,000,000 | 5,181,070 | ||
Receive semi-annually a fixed rate equal to 5.015% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2012 | 50,000,000 | 2,819,225 | ||
Receive semi-annually a fixed rate equal to 5.062% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2012 | 75,000,000 | 4,223,055 | ||
Receive semi-annually a fixed rate equal to 5.09% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | Jan. 2012 | 75,000,000 | 3,376,635 | ||
Receive semi-annually a fixed rate equal to 5.144% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2012 | 100,000,000 | 6,074,970 | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Interest Rate Swaps - continued | |||||
Receive semi-annually a fixed rate equal to 5.263% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | Feb. 2012 | $ 50,000,000 | $ 2,482,665 | ||
Receive semi-annually a fixed rate equal to 5.276% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | April 2011 | 20,000,000 | 1,195,664 | ||
Receive semi-annually a fixed rate equal to 5.375% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | April 2009 | 30,000,000 | 941,400 | ||
Receive semi-annually a fixed rate equal to 5.44% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | July 2012 | 50,000,000 | 2,985,640 | ||
Receive semi-annually a fixed rate equal to 5.556% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | June 2012 | 25,000,000 | 1,661,915 | ||
Receive semi-annually a fixed rate equal to 5.636% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | July 2009 | 100,000,000 | 2,614,710 | ||
Receive semi-annually a fixed rate equal to 5.6485% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | July 2010 | 100,000,000 | 4,609,320 | ||
TOTAL INTEREST RATE SWAPS | 1,174,689,000 | 41,696,687 | |||
| $ 1,264,903,996 | $ 9,243,563 |
Currency Abbreviation | ||
CAD | - | Canadian dollar |
Legend |
(a) Non-income producing |
(b) Includes investment made with cash collateral received from securities on loan. |
(c) Non-income producing - Issuer is in default. |
(d) Principal amount is stated in United States dollars unless otherwise noted. |
(e) Security 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. |
(f) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(g) Security or a portion of the security is on loan at period end. |
(h) 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 end of the period, the value of these securities amounted to $411,251,869 or 3.7% of net assets. |
(i) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(j) A portion of the security is subject to a forward commitment to sell. |
(k) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $16,020,498. |
(l) Represents a tradable index of credit default swaps on home equity asset-backed debt securities. |
(m) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(n) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's web site at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's web site or upon request. |
(o) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool held as of the end of the period. |
(p) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $156,750 or 0.0% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
GMAC Commercial Mortgage Securities, Inc. Series 1999-C2I Class K, 6.481% 9/15/33 | 3/23/07 | $ 163,875 |
(q) Position or a portion of the position represents an unfunded loan commitment. At period end, the total principal amount and market value of unfunded commitments totaled $105,648 and $99,705, respectively. The coupon rate will be determined at time of settlement. |
# Additional Information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$2,755,000 due 9/02/08 at 2.01% | |
BNP Paribas Securities Corp. | $ 1,012,105 |
Banc of America Securities LLC | 546,770 |
Barclays Capital, Inc. | 766,747 |
Deutsche Bank Securities, Inc. | 429,378 |
| $ 2,755,000 |
$436,110,000 due 9/02/08 at 2.12% | |
ABN AMRO Bank N.V., New York Branch | $ 12,638,373 |
Banc of America Securities LLC | 34,165,795 |
Bank of America, NA | 126,383,734 |
Barclays Capital, Inc. | 227,490,039 |
Greenwich Capital Markets, Inc. | 12,638,373 |
ING Financial Markets LLC | 16,474,499 |
RBC Capital Markets Corp. | 6,319,187 |
| $ 436,110,000 |
$353,508,000 due 9/02/08 at 2.14% | |
Banc of America Securities LLC | $ 112,434,096 |
Bank of America, NA | 241,073,904 |
| $ 353,508,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | $ 14,792,274 |
Fidelity Commercial Mortgage-Backed Securities Central Fund | 29,162,743 |
Fidelity Corporate Bond 1-10 Year Central Fund | 81,406,674 |
Fidelity Floating Rate Central Fund | 24,729,364 |
Fidelity Mortgage Backed Securities Central Fund | 96,892,856 |
Fidelity Ultra-Short Central Fund | 33,658,178 |
Total | $ 280,642,089 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, end of |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | $ 310,910,980 | $ 62,786,499 | $ 48,982,775 | $ 283,991,380 | 18.9% |
Fidelity Commercial Mortgage-Backed Securities Central Fund | 402,255,147 | 308,170,881 | - | 658,434,817 | 19.0% |
Fidelity Corporate Bond 1-10 Year Central Fund | 763,168,246 | 1,105,094,191 | - | 1,816,743,999 | 23.0% |
Fidelity Floating Rate Central Fund | 228,686,671 | 223,302,409 | 23,315,935 | 408,626,297 | 15.3% |
Fidelity Mortgage Backed Securities Central Fund | 964,085,734 | 1,235,465,746 | 49,866,701 | 2,138,641,000 | 23.8% |
Fidelity Ultra-Short Central Fund | 875,572,723 | 377,273,786 | 529,852,254 | 599,904,422 | 16.9% |
Total | $ 3,544,679,501 | $ 3,312,093,512 | $ 652,017,665 | $ 5,906,341,915 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
| August 31, 2008 | |
|
|
|
Assets | ||
Investment in securities, at value (including securities loaned of $345,134,698 and repurchase agreements of $792,373,000) - See accompanying schedule: Unaffiliated issuers (cost $6,161,401,058) | $ 6,090,222,371 |
|
Fidelity Central Funds (cost $6,228,917,563) | 5,906,341,915 |
|
Total Investments (cost $12,390,318,621) |
| $ 11,996,564,286 |
Commitment to sell securities on a delayed delivery basis | (24,201,442) | |
Receivable for securities sold on a delayed delivery basis | 24,142,500 | (58,942) |
Receivable for investments sold, regular delivery | 26,097,269 | |
Cash | 391,339 | |
Receivable for swap agreements | 30,562 | |
Receivable for fund shares sold | 6,324,418 | |
Interest receivable | 56,922,769 | |
Distributions receivable from Fidelity Central Funds | 25,743,229 | |
Unrealized appreciation on swap agreements | 42,753,484 | |
Other receivables | 36,971 | |
Total assets | 12,154,805,385 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 66,643,753 | |
Delayed delivery | 608,653,056 | |
Payable for fund shares redeemed | 4,295,845 | |
Distributions payable | 1,067,348 | |
Unrealized depreciation on swap agreements | 33,509,921 | |
Accrued management fee | 2,918,053 | |
Distribution fees payable | 55,295 | |
Other affiliated payables | 1,315,009 | |
Other payables and accrued expenses | 856,943 | |
Collateral on securities loaned, at value | 353,508,000 | |
Total liabilities | 1,072,823,223 | |
|
|
|
Net Assets | $ 11,081,982,162 | |
Net Assets consist of: |
| |
Paid in capital | $ 11,370,457,234 | |
Undistributed net investment income | 8,813,868 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 83,267,778 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (380,556,718) | |
Net Assets | $ 11,081,982,162 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Assets and Liabilities - continued
| August 31, 2008 | |
|
|
|
Calculation of Maximum Offering Price | $ 10.07 | |
|
|
|
Maximum offering price per share (100/96.00 of $10.07) | $ 10.49 | |
Class T: | $ 10.06 | |
|
|
|
Maximum offering price per share (100/96.00 of $10.06) | $ 10.48 | |
Class B: | $ 10.07 | |
|
|
|
Class C: | $ 10.07 | |
|
|
|
Total Bond: | $ 10.07 | |
|
|
|
Institutional Class: | $ 10.06 |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
| Year ended August 31, 2008 | |
|
|
|
Investment Income |
|
|
Dividends |
| $ 1,204,234 |
Interest |
| 283,244,652 |
Income from Fidelity Central Funds |
| 280,642,089 |
Total income |
| 565,090,975 |
|
|
|
Expenses | ||
Management fee | $ 31,993,893 | |
Transfer agent fees | 10,846,695 | |
Distribution fees | 633,899 | |
Fund wide operations fee | 3,495,827 | |
Independent trustees' compensation | 40,783 | |
Miscellaneous | 17,948 | |
Total expenses before reductions | 47,029,045 | |
Expense reductions | (352,777) | 46,676,268 |
Net investment income | 518,414,707 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 143,164,408 | |
Fidelity Central Funds | (55,342,894) |
|
Foreign currency transactions | (891) | |
Swap agreements | 7,472,837 |
|
Total net realized gain (loss) |
| 95,293,460 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (338,543,318) | |
Assets and liabilities in foreign currencies | (131) | |
Swap agreements | 6,488,170 | |
Delayed delivery commitments | (58,942) |
|
Total change in net unrealized appreciation (depreciation) |
| (332,114,221) |
Net gain (loss) | (236,820,761) | |
Net increase (decrease) in net assets resulting from operations | $ 281,593,946 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
| Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income | $ 518,414,707 | $ 212,551,890 |
Net realized gain (loss) | 95,293,460 | (6,020,604) |
Change in net unrealized appreciation (depreciation) | (332,114,221) | (85,266,164) |
Net increase (decrease) in net assets resulting | 281,593,946 | 121,265,122 |
Distributions to shareholders from net investment income | (501,867,517) | (198,338,706) |
Distributions to shareholders from net realized gain | (24,508,784) | (4,857,769) |
Total distributions | (526,376,301) | (203,196,475) |
Share transactions - net increase (decrease) | 4,412,741,476 | 4,556,920,613 |
Total increase (decrease) in net assets | 4,167,959,121 | 4,474,989,260 |
|
|
|
Net Assets | ||
Beginning of period | 6,914,023,041 | 2,439,033,781 |
End of period (including undistributed net investment income of $8,813,868 and undistributed net investment income of $4,530,397, respectively) | $ 11,081,982,162 | $ 6,914,023,041 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .488 | .508 | .043 | .476 | .387 | .046 |
Net realized and unrealized gain (loss) | (.189) | (.141) | .105 | (.294) H | .183 | .145 |
Total from investment operations | .299 | .367 | .148 | .182 | .570 | .191 |
Distributions from net investment income | (.474) | (.470) | (.038) | (.432) | (.370) | (.041) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.499) | (.487) | (.038) | (.472) | (.460) | (.041) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.93% | 3.57% | 1.44% | 1.78% | 5.52% | 1.85% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | .80% | .77% | .73% A | .79% | .96% | .87% A |
Expenses net of fee waivers, if any | .80% | .77% | .73% A | .79% | .80% | .80% A |
Expenses net of all reductions | .80% | .77% | .73% A | .79% | .80% | .80% A |
Net investment income | 4.77% | 4.93% | 4.98% A | 4.61% | 3.69% | 3.51% A |
Supplemental Data |
|
|
|
|
| |
Net assets, | $ 80,755 | $ 48,076 | $ 6,780 | $ 4,545 | $ 2,974 | $ 102 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.56 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .489 | .508 | .042 | .466 | .377 | .045 |
Net realized and unrealized gain (loss) | (.191) | (.143) | .105 | (.296) H | .173 | .144 |
Total from investment operations | .298 | .365 | .147 | .170 | .550 | .189 |
Distributions from net investment income | (.473) | (.468) | (.037) | (.420) | (.360) | (.039) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.498) | (.485) | (.037) | (.460) | (.450) | (.039) |
Net asset value, | $ 10.06 | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.56 | $ 10.46 |
Total Return B, C, D | 2.92% | 3.55% | 1.43% | 1.66% | 5.33% | 1.84% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | .81% | .78% | .87% A | .91% | 1.13% | .96% A |
Expenses net of fee waivers, if any | .81% | .78% | .87% A | .90% | .90% | .90% A |
Expenses net of all reductions | .80% | .78% | .87% A | .90% | .90% | .90% A |
Net investment income | 4.76% | 4.92% | 4.84% A | 4.50% | 3.59% | 3.41% A |
Supplemental Data |
|
|
|
|
| |
Net assets, | $ 38,574 | $ 42,191 | $ 6,293 | $ 4,583 | $ 5,739 | $ 102 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .413 | .432 | .037 | .399 | .309 | .036 |
Net realized and unrealized gain (loss) | (.190) | (.145) | .104 | (.296) H | .182 | .145 |
Total from investment operations | .223 | .287 | .141 | .103 | .491 | .181 |
Distributions from net investment income | (.398) | (.390) | (.031) | (.353) | (.291) | (.031) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.423) | (.407) | (.031) | (.393) | (.381) | (.031) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.17% | 2.77% | 1.38% | 1.01% | 4.74% | 1.76% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | 1.54% | 1.53% | 1.51% A | 1.59% | 1.75% | 1.62% A |
Expenses net of fee waivers, if any | 1.54% | 1.53% | 1.51% A | 1.55% | 1.55% | 1.55% A |
Expenses net of all reductions | 1.54% | 1.53% | 1.51% A | 1.55% | 1.55% | 1.55% A |
Net investment income | 4.03% | 4.17% | 4.22% A | 3.85% | 2.94% | 2.76% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 9,645 | $ 6,054 | $ 1,720 | $ 1,667 | $ 2,029 | $ 104 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .413 | .429 | .036 | .389 | .299 | .035 |
Net realized and unrealized gain (loss) | (.189) | (.145) | .105 | (.293) H | .181 | .145 |
Total from investment operations | .224 | .284 | .141 | .096 | .480 | .180 |
Distributions from net investment income | (.399) | (.387) | (.031) | (.346) | (.280) | (.030) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.424) | (.404) | (.031) | (.386) | (.370) | (.030) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.18% | 2.75% | 1.37% | .94% | 4.63% | 1.74% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | 1.53% | 1.55% | 1.60% A | 1.62% | 1.74% | 1.74% A |
Expenses net of fee waivers, if any | 1.53% | 1.55% | 1.60% A | 1.62% | 1.65% | 1.65% A |
Expenses net of all reductions | 1.53% | 1.55% | 1.60% A | 1.62% | 1.65% | 1.65% A |
Net investment income | 4.03% | 4.15% | 4.13% A | 3.78% | 2.84% | 2.66% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 28,786 | $ 18,890 | $ 2,106 | $ 1,770 | $ 677 | $ 142 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Total Bond
Years ended August 31, | 2008 | 2007 | 2006 K | 2006 I | 2005 I | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.28 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income D | .524 | .543 | .046 | .506 | .411 | .340 |
Net realized and unrealized gain (loss) | (.189) | (.143) | .105 | (.290) G | .182 | .237 |
Total from investment operations | .335 | .400 | .151 | .216 | .593 | .577 |
Distributions from net investment income | (.510) | (.503) | (.041) | (.466) | (.393) | (.337) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | (.060) |
Total distributions | (.535) | (.520) | (.041) | (.506) | (.483) | (.397) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C | 3.29% | 3.89% | 1.46% | 2.11% | 5.75% | 5.68% |
Ratios to Average Net Assets E, H |
|
|
|
|
| |
Expenses before reductions | .45% | .45% | .45% A | .45% | .64% | .75% |
Expenses net of fee waivers, if any | .45% | .45% | .45% A | .45% | .61% | .65% |
Expenses net of all reductions | .45% | .45% | .45% A | .45% | .61% | .65% |
Net investment income | 5.12% | 5.25% | 5.26% A | 4.95% | 3.87% | 3.25% |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 9,976,432 | $ 6,450,177 | $ 2,421,077 | $ 2,306,817 | $ 420,225 | $ 373,699 |
Portfolio turnover rate F | 122% | 116% J | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I For the period ended July 31.
J Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
K For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended August 31, | 2008 | 2007 | 2006 L | 2006 J | 2005 J | 2004 H |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income D | .516 | .527 | .045 | .493 | .410 | .048 |
Net realized and unrealized gain (loss) | (.186) | (.134) | .105 | (.294) G | .182 | .145 |
Total from investment operations | .330 | .393 | .150 | .199 | .592 | .193 |
Distributions from net investment income | (.505) | (.496) | (.040) | (.459) | (.392) | (.043) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.530) | (.513) | (.040) | (.499) | (.482) | (.043) |
Net asset value, end of period | $ 10.06 | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.57 | $ 10.46 |
Total Return B, C | 3.24% | 3.83% | 1.46% | 1.95% | 5.74% | 1.87% |
Ratios to Average Net Assets E, I |
|
|
|
|
| |
Expenses before reductions | .51% | .50% | .54% A | .56% | .62% | .71% A |
Expenses net of fee waivers, if any | .51% | .50% | .54% A | .56% | .62% | .65% A |
Expenses net of all reductions | .51% | .49% | .54% A | .56% | .61% | .65% A |
Net investment income | 5.06% | 5.21% | 5.16% A | 4.84% | 3.87% | 3.66% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 947,791 | $ 348,636 | $ 1,058 | $ 933 | $ 114 | $ 102 |
Portfolio turnover rate F | 122% | 116% K | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J For the period ended July 31.
K Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
L For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended August 31, 2008
1. Organization.
Fidelity Total Bond Fund (the Fund) is a fund of Fidelity Income Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund offers Class A, Class T, Class B, Class C, Total Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
2. Investments in Fidelity Central Funds.
The Fund may invest in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on their investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. The following summarizes the Fund's investment in each Fidelity Central Fund.
Annual Report
2. Investments in Fidelity Central Funds - continued
Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | Fidelity Investment Money Management, Inc. (FIMM) | Seeks a high level of income by normally investing in investment-grade securitized debt securities and repurchase agreements for those securities. | Futures Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Commercial Mortgage-Backed Securities Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade commercial mortgage-backed securities and repurchase agreements for those securities. | Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Corporate Bond 1-10 Year Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade corporate bonds and other corporate debt securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Floating Rate Central Fund | Fidelity Management & Research Company, Inc. (FMRC) | Seeks a high level of income by normally investing in floating rate loans and other floating rate securities. | Loans & Direct Debt Instruments Repurchase Agreements Restricted Securities
|
Fidelity Mortgage Backed Securities Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade mortgage-related securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Futures Mortgage Dollar Rolls Repurchase Agreements Swap Agreements |
Fidelity Ultra-Short Central Fund | FIMM | Seeks to obtain a high level of current income consistent with preservation of capital by investing in U.S. dollar denominated money market and investment-grade debt securities. | Futures Repurchase Agreements Restricted Securities Swap Agreements |
Annual Report
Notes to Financial Statements - continued
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com,as applicable. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the SEC's web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC's web site or upon request.
3. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Fund:
Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Debt securities, including restricted securities, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value. Actual prices received at disposition may differ.
When current market prices or quotations are not readily available or reliable, valuations may be determined in good faith in accordance with procedures adopted by the Board of Trustees. Factors used in determining value may include significant market or security specific events, changes in interest rates and credit quality, and developments in foreign markets which are monitored by evaluating the performance of ADRs, futures contracts
Annual Report
3. Significant Accounting Policies - continued
Security Valuation - continued
and exchange-traded funds. The frequency with which these procedures are used cannot be predicted and may be utilized to a significant extent. The value of securities used for net asset value (NAV) calculation under these procedures may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 pm Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which 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 and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing substantially all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code and filing its U.S. federal tax return. As a result, no provision for income taxes is required. The Fund is subject to the provisions of FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the Fund's federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service (IRS). Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swap agreements, foreign currency transactions, market discount, partnerships (including allocations from Fidelity Central Funds), deferred trustees compensation and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 79,456,091 |
|
Unrealized depreciation | (416,279,836) |
|
Net unrealized appreciation (depreciation) | $ (336,823,745) |
|
Undistributed ordinary income | 74,595,018 |
|
|
|
|
Cost for federal income tax purposes | $ 12,333,388,031 |
|
Annual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
| August 31, 2008 | August 31, 2007 |
Ordinary Income | $ 521,474,544 | $ 203,196,475 |
Long-term Capital Gains | 4,901,757 | - |
Total | $ 526,376,301 | $ 203,196,475 |
New Accounting Pronouncements. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and results in expanded disclosures about fair value measurements.
In addition, in March 2008, Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), was issued and is effective for reporting periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures to provide information about the reasons the Fund invests in derivative instruments, the accounting treatment and the effect derivatives have on financial performance.
4. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Annual Report
Notes to Financial Statements - continued
4. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities. The Fund may purchase or sell securities on a delayed delivery or when-issued 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. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued 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 or when-issued 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 value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Restricted Securities. The Fund may 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. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The Fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the Fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments.
Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.
Annual Report
4. Operating Policies - continued
Swap Agreements - continued
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The Fund may enter into credit default swaps in which either it or its counterparty act as guarantors. By acting as the guarantor of a swap, a fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value.
Periodic payments and premiums received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $5,714,855,579 and $1,275,500,461, respectively.
6. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and a group fee rate that averaged .12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.
Annual Report
Notes to Financial Statements - continued
6. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
| Distribution | Service | Paid to | Retained |
Class A | 0% | .25% | $ 182,737 | $ 37,558 |
Class T | 0% | .25% | 115,549 | 1,138 |
Class B | .65% | .25% | 83,546 | 60,524 |
Class C | .75% | .25% | 252,067 | 75,748 |
|
|
| $ 633,899 | $ 174,968 |
Sales Load. FDC receives a front-end sales charge of up to 4.00% for selling Class A shares and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, ..75% to .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 25,515 |
Class T | 5,823 |
Class B* | 11,561 |
Class C* | 3,836 |
| $ 46,735 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
6. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of each respective class of the Fund. FIIOC receives an asset-based fee of .10% of Total Bond's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. Prior to January 1, 2008, Fidelity Service Company, Inc. (FSC), also an affiliate of FMR, was the sub-transfer agent for Total Bond shares. For the period, each class paid the following transfer agent fees:
| Amount | % of |
Class A | $ 143,015 | .20 |
Class T | 94,941 | .21 |
Class B | 26,504 | .29 |
Class C | 46,393 | .18 |
Total Bond | 9,096,927 | .10 |
Institutional Class | 1,438,915 | .16 |
| $ 10,846,695 |
|
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.
7. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounted to $17,948 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, 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, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities during the period amounted to $5,167,155.
9. Expense Reductions.
Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's management fee by $79,612. During the period, credits reduced each class' transfer agent expense as noted in the table below.
| Transfer Agent |
|
Total Bond | $ 249,985 |
|
Institutional Class | 23,180 |
|
| $ 273,165 |
|
10. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
10. Other - continued
At the end of the period, the Fidelity Advisor Freedom Funds and Fidelity Freedom Funds were owners of record, in the aggregate, of approximately 34% of the total outstanding shares of the Fund.
11. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended August 31, | 2008 | 2007 |
From net investment income |
|
|
Class A | $ 3,361,032 | $ 1,100,606 |
Class T | 2,139,983 | 1,373,421 |
Class B | 357,685 | 136,878 |
Class C | 975,717 | 457,270 |
Total Bond | 451,129,055 | 191,143,423 |
Institutional Class | 43,904,045 | 4,127,108 |
Total | $ 501,867,517 | $ 198,338,706 |
From net realized gain |
|
|
Class A | $ 158,977 | $ 27,576 |
Class T | 118,778 | 34,295 |
Class B | 17,979 | 5,072 |
Class C | 58,576 | 16,001 |
Total Bond | 22,110,637 | 4,768,190 |
Institutional Class | 2,043,837 | 6,635 |
Total | $ 24,508,784 | $ 4,857,769 |
12. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Years ended | Years ended | Years ended | Years ended |
Class A |
|
|
|
|
Shares sold | 5,588,201 | 5,058,526 | $ 57,565,572 | $ 52,475,077 |
Reinvestment of distributions | 305,321 | 89,369 | 3,130,894 | 927,501 |
Shares redeemed | (2,555,919) | (1,118,505) | (26,109,819) | (11,603,024) |
Net increase (decrease) | 3,337,603 | 4,029,390 | $ 34,586,647 | $ 41,799,554 |
Annual Report
Notes to Financial Statements - continued
12. Share Transactions - continued
| Shares | Dollars | ||
| Years ended | Years ended | Years ended | Years ended |
Class T |
|
|
|
|
Shares sold | 2,804,342 | 4,727,867 | $ 28,824,011 | $ 49,238,640 |
Reinvestment of distributions | 209,490 | 129,776 | 2,149,894 | 1,346,799 |
Shares redeemed | (3,292,088) | (1,351,158) | (33,740,425) | (13,923,481) |
Net increase (decrease) | (278,256) | 3,506,485 | $ (2,766,520) | $ 36,661,958 |
Class B |
|
|
|
|
Shares sold | 792,814 | 539,386 | $ 8,188,014 | $ 5,591,610 |
Reinvestment of distributions | 25,155 | 9,450 | 258,101 | 98,229 |
Shares redeemed | (449,829) | (124,884) | (4,577,167) | (1,299,404) |
Net increase (decrease) | 368,140 | 423,952 | $ 3,868,948 | $ 4,390,435 |
Class C |
|
|
|
|
Shares sold | 1,925,088 | 1,926,281 | $ 19,771,131 | $ 20,051,168 |
Reinvestment of distributions | 87,624 | 38,210 | 898,560 | 397,140 |
Shares redeemed | (993,539) | (327,493) | (10,165,574) | (3,406,204) |
Net increase (decrease) | 1,019,173 | 1,636,998 | $ 10,504,117 | $ 17,042,104 |
Total Bond |
|
|
|
|
Shares sold | 547,722,071 | 449,525,248 | $ 5,645,252,478 | $ 4,670,295,711 |
Reinvestment of distributions | 45,012,353 | 18,043,057 | 461,616,494 | 187,426,399 |
Shares redeemed | (230,103,358) | (72,384,207) | (2,368,082,060) | (750,709,047) |
Net increase (decrease) | 362,631,066 | 395,184,098 | $ 3,738,786,912 | $ 4,107,013,063 |
Institutional Class |
|
|
|
|
Shares sold | 78,780,201 | 34,101,050 | $ 814,530,864 | $ 352,256,185 |
Reinvestment of distributions | 4,451,142 | 377,910 | 45,563,586 | 3,888,447 |
Shares redeemed | (22,980,579) | (594,798) | (232,333,078) | (6,131,133) |
Net increase (decrease) | 60,250,764 | 33,884,162 | $ 627,761,372 | $ 350,013,499 |
Annual Report
13. Credit Risk.
The Fund invests a portion of its assets, directly or indirectly, in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults. Continuing shifts in the market's perception of credit quality on structured securities have resulted in increased volatility of market price and periods of decreased market activity that have adversely impacted the valuation of certain issuers of the Fund.
Subsequent to period end, Lehman Brothers Holdings, Inc. (LBHI) and certain of its affiliates sought protection under the insolvency laws of their jurisdictions of organization, including the United States, the United Kingdom and Japan. During this period, the Fund had outstanding securities trades and other transactions with counterparties affiliated with LBHI, which may include interest rate and credit default swap agreements, and commitments to purchase securities on a delayed delivery or when-issued basis. As a result of these events, LBHI's affiliates are unable to fulfill their commitments and, in certain cases, the Fund may have terminated its trades and related agreements with the relevant entities and, where appropriate, is in the process of initiating claims for damages. FMR believes that the financial impact to the Fund relating to these events is immaterial.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Total Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Total Bond Fund (a fund of Fidelity Income Fund) at August 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Total Bond Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2008 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 23, 2008
Annual Report
Trustees and Officers
The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for Edward C. Johnson 3d and James C. Curvey, each of the Trustees oversees 158 funds advised by FMR or an affiliate. Messrs. Johnson and Curvey oversee 376 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (78) | |
| Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR LLC; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of FIL Limited. Previously, Mr. Johnson served as President of FMR LLC (2006-2007). Mr. Edward C. Johnson 3d and Mr. Arthur E. Johnson are not related. |
James C. Curvey (73) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2006- present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR. FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (66) | |
| Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities), a member of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. Previously, Mr. Gamper served as Chairman of the Board of Governors, Rutgers University (2004-2007). |
George H. Heilmeier (72) | |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology), Compaq, Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing), INET Technologies Inc. (telecommunications network surveillance, 2001- 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. |
Arthur E. Johnson (61) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor). In addition, Mr. Johnson serves as a member of the Board of Directors of AGL Resources, Inc. (holding company), and IKON Office Solutions, Inc. (document management systems and services). Mr. Arthur E. Johnson and Mr. Edward C. Johnson 3d are not related. |
James H. Keyes (67) | |
| Year of Election or Appointment: 2007 Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines) and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). Previously, Mr. Keyes served as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (61) | |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of McKesson Corporation (healthcare service). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007). |
Kenneth L. Wolfe (69) | |
| Year of Election or Appointment: 2005 Mr. Wolfe is Chairman and a Director of Hershey Foods Corporation (2007-present), where prior to his retirement in 2001, he was Chairman and Chief Executive Officer. Mr. Wolfe currently serves as a member of the board of Revlon Inc. (2004-present). Previously, Mr. Wolfe served as a member of the boards of Adelphia Communications Corporation (2003-2006) and Bausch & Lomb, Inc. (1993-2007). |
Advisory Board Member and Executive Officers**:
Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Peter S. Lynch (64) | |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. |
John R. Hebble (50) | |
| Year of Election or Appointment: 2008 President and Treasurer of the fund. Mr. Hebble also serves as President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2003-present). Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds. |
Boyce I. Greer (52) | |
| Year of Election or Appointment: 2006 Vice President of the fund. Mr. Greer also serves as Vice President of Asset Allocation Funds (2005-present), Fixed-Income Funds (2006- present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). Mr. Greer is President and a Director of Fidelity Investments Money Management, Inc. (2007-present), and an Executive Vice President of FMR and FMR Co., Inc. (2005-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005). |
Dwight D. Churchill (54) | |
| Year of Election or Appointment: 2008 Vice President of the fund. Mr. Churchill also serves as Vice President of Fidelity's Bond Funds (2008-present). Mr. Churchill is Executive Vice President of FMR (2005-present), FMR Co., Inc. (2005-present) and Fidelity Investments Money Management, Inc. (2008-present). Previously, Mr. Churchill served as Senior Vice President of FMR (1997-2005) and Senior Vice President of Fidelity Investments Money Management, Inc. (2000-2006). |
Scott C. Goebel (40) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of the fund. Mr. Goebel also serves as Secretary and CLO of other Fidelity funds (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008- present); and Deputy General Counsel of FMR LLC. Previously, Mr. Goebel served as Assistant Secretary of the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Nancy D. Prior (41) | |
| Year of Election or Appointment: 2008 Assistant Secretary of the fund. Ms. Prior also serves as Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds (2008- present) and is an employee of FMR (2002-present). |
Holly C. Laurent (54) | |
| Year of Election or Appointment: 2008 Anti-Money Laundering (AML) Officer of the fund. Ms. Laurent also serves as AML Officer of other Fidelity funds (2008-present) and is an employee of FMR LLC. Previously, Ms. Laurent was Senior Vice President and Head of Legal for Fidelity Business Services India Pvt. Ltd. (2006- 2008), Senior Vice President, Deputy General Counsel and Group Head for FMR LLC (2005-2006). |
Christine Reynolds (49) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of the fund. Ms. Reynolds also serves as Chief Financial Officer of other Fidelity funds (2008-present). Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. She served as Chief Operating Officer of FPCMS from 2007 through July 2008. Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980- 2002), where she was an audit partner with PwC's investment management practice. |
Michael H. Whitaker (41) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of the fund. Mr. Whitaker also serves as Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Bryan A. Mehrmann (47) | |
| Year of Election or Appointment: 2005 Deputy Treasurer of the fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). |
Robert G. Byrnes (41) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). |
Peter L. Lydecker (54) | |
| Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004-present) and is an employee of FMR. |
Paul M. Murphy (61) | |
| Year of Election or Appointment: 2007 Assistant Treasurer of the fund. Mr. Murphy also serves as Assistant Treasurer of other Fidelity funds (2007-present) and is an employee of FMR (2007-present). Previously, Mr. Murphy served as Chief Financial Officer of the Fidelity Funds (2005-2006), Vice President and Associate General Counsel of FMR (2007), and Senior Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (1994-2007). |
Gary W. Ryan (50) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
** FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.
Annual Report
Distributions
The Board of Trustees of Fidelity Total Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:
| Pay Date | Record Date | Capital Gains |
Class A | 10/13/08 | 10/10/08 | $.065 |
Class T | 10/13/08 | 10/10/08 | $.065 |
Class B | 10/13/08 | 10/10/08 | $.065 |
Class C | 10/13/08 | 10/10/08 | $.065 |
The fund hereby designates as a capital gain dividend with respect to the taxable year ended August 31, 2008 $3,879,500, or, if subsequently determined to be different, the net capital gain of such year.
A total of 6.69% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $426,216,385 of distributions paid during the period January 1, 2008 to August 31, 2008 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2009 of amounts for use in preparing 2008 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Total Bond Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly and, acting directly and through its separate committees, requests and receives information concerning, and considers at each of its meetings factors that are relevant to, its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has a written charter outlining the structure and purposes of the committee. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts.
At its June 2008 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expenses; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders. The Board also approved agreements with foreign sub-advisers Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Japan) Inc., and Fidelity Management & Research (Hong Kong) Limited.
In considering whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. The Board's decision to renew the Advisory Contracts was not based on any single factor noted above, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that Fidelity has taken a number of actions over the previous year that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) contractually agreeing to reduce the management fees on Fidelity's Institutional Money Market Funds and launching Class IV and Institutional Class of certain of these funds; (iii) reducing the transfer agent fees for the Fidelity Select Portfolios and Investor Class of the VIP funds; and (iv) launching Class K of 29 equity funds as a lower-fee class available to certain employer-sponsored retirement plans.
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2007, as available, the cumulative total returns of Fidelity Total Bond (retail class) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Fidelity Total Bond (retail class) and Class C show the performance of the highest and lowest performing classes, respectively (based on three-year performance). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Fidelity Total Bond Fund
The Board reviewed the fund's relative investment performance against its peer group and stated that the performance of Fidelity Total Bond (retail class) of the fund was in the fourth quartile for the one-year period, the second quartile for the three-year period, and the first quartile for the five-year period. The Board also stated that the investment performance of the fund was lower than its benchmark for all periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board discussed with FMR actions that may be taken by FMR to improve the fund's below-benchmark performance and how investment personnel evaluate potential for incremental return against the risks involved in obtaining that incremental return. The Board considered the steps that FMR has taken to strengthen and refine its risk management processes in light of recent credit events that have affected various sectors of the fixed-income markets.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Total Bond Fund
Annual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2007.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that the current contractual arrangements for the fund (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Total Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Total Bond (retail class) to 45 basis points. These contractual arrangements may not be increased without the approval of the Board and the shareholders of the applicable class. The fund's Advisor classes are subject to different class-level expenses (transfer agent fees and 12b-1 fees).
The Board noted that each class's total expenses ranked below its competitive median for 2007.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR determines the group fee rates based on a tiered asset "breakpoint" schedule. The Board noted, however, that because the current contractual arrangements set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including (i) fund performance trends and actions to be taken by FMR to improve certain funds' overall performance; (ii) portfolio manager changes that have occurred during the past year; (iii) Fidelity's fund profitability methodology, the profitability of certain fund service providers, and profitability trends for certain funds; (iv) Fidelity's compensation structure for portfolio managers and key personnel, including its effects on fund profitability and the extent to which portfolio manager compensation is linked to fund performance; (v) Fidelity's fee structures; (vi) the funds' sub-advisory arrangements; and (vii) accounts managed by Fidelity other than the Fidelity funds.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co. Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Hong Kong) Limited
Fidelity Management & Research
(Japan) Inc.
Fidelity Research & Analysis Company
Fidelity Investments
Money Management, Inc.
Fidelity Investments Japan Limited
FIL Investment Advisors
FIL Investment Advisors
(U.K.) Ltd.
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
ATB-UANN-1008 1.804574.104
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor
Total Bond
Fund - Institutional Class
Annual Report
August 31, 2008
(2_fidelity_logos) (Registered_Trademark)
Institutional Class is a class of Fidelity Total Bond Fund
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm |
| |
Trustees and Officers |
| |
Distributions |
| |
Board Approval of Investment Advisory Contracts and Management Fees |
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To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com (search for "proxy voting guidelines") or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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 LLC or an affiliated company.
Annual Report
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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com or http://www.advisor.fidelity.com, as applicable.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Most domestic and international equity indexes continued to dwell in negative territory, pressured by unfavorable
credit-market conditions, particularly in the United States. On the upside,
investment-grade bonds and money markets generally have served investors well so far this year. Financial markets are always unpredictable, but there are a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best-performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended August 31, 2008 | Past 1 | Past 5 | Life of |
Institutional Class B | 3.24% | 4.20% | 4.57% |
A From October 15, 2002.
B The initial offering of Institutional Class shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Total Bond, the original retail class of the fund.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Total Bond Fund - Institutional Class on October 15, 2002, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® U.S. Aggregate Index performed over the same period. The initial offering of Institutional Class took place on June 16, 2004. See above for additional information regarding the performance of Institutional Class.
Annual Report
Management's Discussion of Fund Performance
Comments from Ford O'Neil, Lead Portfolio Manager of Fidelity Advisor Total Bond Fund
Several years of healthy economic growth and a hearty appetite for risk abruptly reversed during the 12-month period ending August 31, 2008, as a meltdown in the subprime mortgage market led to an unnerving credit crisis. Bond investors fled from lower-quality debt instruments and flocked to those with an explicit or implicit guarantee from the U.S. government. The investment-grade bond market as a whole, as measured by the Lehman Brothers® U.S. Aggregate Index, rose 5.86%. Treasuries did the best, benefiting from their reputation as one of the world's safest investments. The Lehman Brothers U.S. Treasury Index gained 8.65% during the period - one of the highest returns of any domestic or international asset class over the past 12 months. At the opposite end of the spectrum, the asset-backed sector - home to weak-performing subprime debt - fell 3.48% according to the Lehman Brothers U.S. Fixed-Rate Asset-Backed Securities Index.
The fund's Institutional Class shares gained 3.24%, trailing the Lehman Brothers U.S. Universal Index, which returned 5.21%, and the Lehman Brothers U.S. Aggregate Index. In this review, I'll address the aggregate of my direct investments and those I made in Fidelity fixed-income central funds. Underweighting index-topping U.S. Treasuries and government agency securities and overweighting weak securitized bonds accounted for the bulk of the fund's shortfall versus the Aggregate index. Specifically, holdings in asset-backed securities backed by subprime mortgages and commercial mortgage-backed securities - with sizable exposure coming from our stake in Fidelity® Ultra-Short Central Fund, one of the central funds discussed above - caused most of the damage. I significantly reduced the fund's exposure to Ultra-Short Central and cut direct investments in securitized bonds by period end. The market's growing aversion to riskier assets meant our out-of-index stake in emerging-markets debt and overexposure to corporate bonds worked against us, because both segments struggled. Similar factors hurt our high-yield bond positions, which significantly lagged the index. Conversely, out-of-index exposure to Treasury Inflation-Protected Securities (TIPS) helped. Another plus was yield-curve positioning, with my decisions to overweight better-performing intermediate bonds and underweight lagging long-term bonds benefiting performance. To manage the fund's yield-curve positioning, I used interest rate swaps - contracts that usually involve the exchange of fixed-rate interest payments for floating-rate payments.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2008 to August 31, 2008).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
| Beginning | Ending | Expenses Paid |
Class A |
|
|
|
Actual | $ 1,000.00 | $ 992.50 | $ 3.96 |
Hypothetical A | $ 1,000.00 | $ 1,021.17 | $ 4.01 |
Class T |
|
|
|
Actual | $ 1,000.00 | $ 992.30 | $ 4.11 |
Hypothetical A | $ 1,000.00 | $ 1,021.01 | $ 4.17 |
Class B |
|
|
|
Actual | $ 1,000.00 | $ 987.80 | $ 7.64 |
Hypothetical A | $ 1,000.00 | $ 1,017.44 | $ 7.76 |
Class C |
|
|
|
Actual | $ 1,000.00 | $ 988.80 | $ 7.65 |
Hypothetical A | $ 1,000.00 | $ 1,017.44 | $ 7.76 |
Total Bond |
|
|
|
Actual | $ 1,000.00 | $ 994.20 | $ 2.26 |
Hypothetical A | $ 1,000.00 | $ 1,022.87 | $ 2.29 |
Institutional Class |
|
|
|
Actual | $ 1,000.00 | $ 993.90 | $ 2.56 |
Hypothetical A | $ 1,000.00 | $ 1,022.57 | $ 2.59 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). The fees and expenses of the underlying Fidelity Central Funds in which the Fund invests are not included in the Fund's annualized expense ratio.
| Annualized |
Class A | .79% |
Class T | .82% |
Class B | 1.53% |
Class C | 1.53% |
Total Bond | .45% |
Institutional Class | .51% |
Annual Report
Investment Changes (Unaudited)
The information in the following tables is based on the combined investments of the Fund and its pro-rata share of its investments in each non-money market Fidelity Central Fund.
Quality Diversification (% of fund's net assets) | |||||||
As of August 31, 2008 | As of February 29, 2008 | ||||||
![]() | U.S. Government and |
| ![]() | U.S. Government and |
| ||
![]() | AAA 11.0% |
| ![]() | AAA 10.8% |
| ||
![]() | AA 5.9% |
| ![]() | AA 4.2% |
| ||
![]() | A 8.8% |
| ![]() | A 7.0% |
| ||
![]() | BBB 15.1% |
| ![]() | BBB 12.8% |
| ||
![]() | BB and Below 10.2% |
| ![]() | BB and Below 9.6% |
| ||
![]() | Not Rated 0.9% |
| ![]() | Not Rated 0.6% |
| ||
![]() | Equities 0.1% |
| ![]() | Equities 0.0% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. All ratings are as of the report date and do not reflect subsequent downgrades. |
Weighted Average Maturity as of August 31, 2008 | ||
|
| 6 months ago |
Years | 6.2 | 5.7 |
The weighted average maturity is based on the dollar-weighted average length of time until principal payments are expected or until securities reach maturity, taking into account any maturity shortening feature such as a call, refunding or redemption provision. |
Duration as of August 31, 2008 | ||
|
| 6 months ago |
Years | 4.6 | 4.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of August 31, 2008* | As of February 29, 2008** | ||||||
![]() | Corporate Bonds 31.9% |
| ![]() | Corporate Bonds 25.7% |
| ||
![]() | U.S. Government and |
| ![]() | U.S. Government and |
| ||
![]() | Asset-Backed |
| ![]() | Asset-Backed |
| ||
![]() | CMOs and Other Mortgage Related Securities 10.4% |
| ![]() | CMOs and Other Mortgage Related Securities 9.8% |
| ||
![]() | Municipal Bonds 0.3% |
| ![]() | Municipal Bonds 0.0% |
| ||
![]() | Stocks 0.1% |
| ![]() | Stocks 0.0% |
| ||
![]() | Other Investments 5.2% |
| ![]() | Other Investments 4.8% |
| ||
![]() | Short-Term |
| ![]() | Short-Term |
|
* Foreign investments | 9.8% |
| ** Foreign investments | 9.5% |
| ||
* Futures and Swaps | 12.6% |
| ** Futures and Swaps | 12.1% |
|
† Short-term Investments and Net Other Assets are not included in the pie chart.
A holdings listing for the Fund, which presents direct holdings as well as the pro rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable.
Annual Report
Investments August 31, 2008
Showing Percentage of Net Assets
Corporate Bonds - 16.5% | ||||
| Principal | Value | ||
Convertible Bonds - 0.1% | ||||
ENERGY - 0.0% | ||||
Oil, Gas & Consumable Fuels - 0.0% | ||||
Chesapeake Energy Corp. 2.5% 5/15/37 | $ 1,300,000 | $ 1,750,710 | ||
INFORMATION TECHNOLOGY - 0.1% | ||||
Communications Equipment - 0.1% | ||||
Lucent Technologies, Inc. 2.875% 6/15/25 | 3,838,000 | 2,943,516 | ||
Nortel Networks Corp.: | ||||
1.75% 4/15/12 (h) | 6,339,000 | 4,468,995 | ||
1.75% 4/15/12 | 870,000 | 613,350 | ||
| 8,025,861 | |||
Semiconductors & Semiconductor Equipment - 0.0% | ||||
Advanced Micro Devices, Inc. 6% 5/1/15 | 3,200,000 | 1,815,040 | ||
TOTAL INFORMATION TECHNOLOGY | 9,840,901 | |||
TOTAL CONVERTIBLE BONDS | 11,591,611 | |||
Nonconvertible Bonds - 16.4% | ||||
CONSUMER DISCRETIONARY - 2.4% | ||||
Auto Components - 0.0% | ||||
Tenneco, Inc. 8.125% 11/15/15 | 855,000 | 767,363 | ||
Automobiles - 0.0% | ||||
Ford Motor Co.: | ||||
6.5% 8/1/18 | 750,000 | 397,500 | ||
7.45% 7/16/31 | 1,450,000 | 746,750 | ||
| 1,144,250 | |||
Diversified Consumer Services - 0.0% | ||||
Service Corp. International: | ||||
6.75% 4/1/15 | 650,000 | 611,000 | ||
7.5% 4/1/27 | 1,935,000 | 1,548,000 | ||
| 2,159,000 | |||
Hotels, Restaurants & Leisure - 0.8% | ||||
Boyd Gaming Corp. 7.75% 12/15/12 | 650,000 | 581,750 | ||
Cap Cana SA 9.625% 11/3/13 (h) | 600,000 | 528,000 | ||
Carrols Corp. 9% 1/15/13 | 85,000 | 71,188 | ||
Chukchansi Economic Development Authority 8% 11/15/13 (h) | 565,000 | 457,650 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Fontainebleau Las Vegas Holdings LLC/Fontainebleau Las Vegas Capital Corp. 10.25% 6/15/15 (h) | $ 1,270,000 | $ 571,500 | ||
Galaxy Entertainment Finance Co. Ltd. | 1,440,000 | 1,384,200 | ||
Harrah's Operating Co., Inc.: | ||||
5.375% 12/15/13 | 1,795,000 | 816,725 | ||
5.5% 7/1/10 | 420,000 | 352,800 | ||
Host Marriott LP: | ||||
6.375% 3/15/15 | 250,000 | 215,300 | ||
7.125% 11/1/13 | 4,590,000 | 4,280,175 | ||
ITT Corp. 7.375% 11/15/15 | 250,000 | 237,500 | ||
Landry's Restaurants, Inc. 9.5% 12/15/14 | 2,385,000 | 2,361,150 | ||
Mandalay Resort Group 9.375% 2/15/10 | 700,000 | 686,000 | ||
Mashantucket Western Pequot Tribe 8.5% 11/15/15 (h) | 5,740,000 | 4,218,900 | ||
McDonald's Corp. 6.3% 3/1/38 | 7,590,000 | 7,519,656 | ||
MGM Mirage, Inc.: | ||||
5.875% 2/27/14 | 3,295,000 | 2,644,238 | ||
6.625% 7/15/15 | 4,055,000 | 3,244,000 | ||
6.75% 9/1/12 | 5,985,000 | 5,191,988 | ||
6.75% 4/1/13 | 3,650,000 | 3,102,500 | ||
6.875% 4/1/16 | 1,710,000 | 1,368,000 | ||
7.625% 1/15/17 | 4,555,000 | 3,661,081 | ||
8.375% 2/1/11 | 1,585,000 | 1,428,481 | ||
Mohegan Tribal Gaming Authority: | ||||
6.125% 2/15/13 | 1,825,000 | 1,533,000 | ||
7.125% 8/15/14 | 3,515,000 | 2,565,950 | ||
Park Place Entertainment Corp.: | ||||
7.875% 3/15/10 | 700,000 | 598,500 | ||
8.125% 5/15/11 | 3,780,000 | 2,646,000 | ||
Royal Caribbean Cruises Ltd.: | ||||
7.25% 3/15/18 | 790,000 | 667,550 | ||
yankee: | ||||
7% 6/15/13 | 3,350,000 | 2,998,250 | ||
7.25% 6/15/16 | 4,190,000 | 3,561,500 | ||
7.5% 10/15/27 | 2,125,000 | 1,615,000 | ||
Scientific Games Corp.: | ||||
6.25% 12/15/12 | 875,000 | 824,688 | ||
7.875% 6/15/16 (h) | 1,950,000 | 1,911,000 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Seminole Hard Rock Entertainment, Inc. 5.2763% 3/15/14 (h)(m) | $ 3,010,000 | $ 2,377,900 | ||
Seneca Gaming Corp.: | ||||
Series B, 7.25% 5/1/12 | 1,215,000 | 1,087,425 | ||
7.25% 5/1/12 | 3,395,000 | 3,038,525 | ||
Snoqualmie Entertainment Authority: | ||||
6.875% 2/1/14 (h)(m) | 140,000 | 102,550 | ||
9.125% 2/1/15 (h) | 1,805,000 | 1,322,163 | ||
Station Casinos, Inc.: | ||||
6% 4/1/12 | 940,000 | 648,600 | ||
7.75% 8/15/16 | 710,000 | 479,250 | ||
Times Square Hotel Trust 8.528% 8/1/26 (h) | 111,072 | 111,072 | ||
Town Sports International Holdings, Inc. 0% 2/1/14 (e) | 2,270,000 | 2,020,300 | ||
Universal City Florida Holding Co. I/II 8.375% 5/1/10 | 3,025,000 | 2,926,688 | ||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.: | ||||
6.625% 12/1/14 | 1,590,000 | 1,442,925 | ||
6.625% 12/1/14 | 6,460,000 | 5,878,600 | ||
| 85,280,218 | |||
Household Durables - 0.2% | ||||
D.R. Horton, Inc. 6.5% 4/15/16 | 1,170,000 | 936,000 | ||
Fortune Brands, Inc. 5.875% 1/15/36 | 13,274,000 | 10,754,077 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.375% 12/15/14 | 710,000 | 426,000 | ||
8.875% 4/1/12 | 425,000 | 284,750 | ||
11.5% 5/1/13 (h) | 120,000 | 122,556 | ||
KB Home: | ||||
6.25% 6/15/15 | 535,000 | 446,725 | ||
6.375% 8/15/11 | 650,000 | 598,000 | ||
Newell Rubbermaid, Inc. 6.25% 4/15/18 | 3,105,000 | 2,809,522 | ||
Pulte Homes, Inc. 5.25% 1/15/14 | 645,000 | 548,250 | ||
Urbi, Desarrollos Urbanos, SA de CV 8.5% 4/19/16 (h) | 505,000 | 513,206 | ||
| 17,439,086 | |||
Media - 1.3% | ||||
AOL Time Warner, Inc. 7.625% 4/15/31 | 500,000 | 500,312 | ||
Cablemas SA de CV 9.375% 11/15/15 (Reg. S) | 2,015,000 | 2,178,618 | ||
Cablevision Systems Corp.: | ||||
7.1325% 4/1/09 (m) | 340,000 | 342,975 | ||
8% 4/15/12 | 3,070,000 | 3,046,975 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Charter Communications Holdings I LLC: | ||||
9.92% 4/1/14 | $ 1,495,000 | $ 717,600 | ||
11.125% 1/15/14 | 505,000 | 252,500 | ||
Charter Communications Holdings I LLC/Charter Communications Holdings I Capital Corp. 11% 10/1/15 | 5,490,000 | 4,090,050 | ||
Charter Communications Holdings II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 | 3,865,000 | 3,671,750 | ||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp.: | ||||
8.375% 4/30/14 (h) | 2,220,000 | 2,120,100 | ||
10.875% 9/15/14 (h) | 890,000 | 934,500 | ||
Clear Channel Communications, Inc.: | ||||
5% 3/15/12 | 885,000 | 550,913 | ||
6.25% 3/15/11 | 705,000 | 558,713 | ||
7.65% 9/15/10 | 700,000 | 670,250 | ||
Comcast Corp.: | ||||
5.7% 5/15/18 | 9,000,000 | 8,552,781 | ||
6.45% 3/15/37 | 8,838,000 | 8,151,243 | ||
COX Communications, Inc. 6.45% 12/1/36 (h) | 1,365,000 | 1,277,684 | ||
CSC Holdings, Inc.: | ||||
6.75% 4/15/12 | 2,735,000 | 2,680,300 | ||
7.625% 4/1/11 | 1,235,000 | 1,241,175 | ||
8.5% 6/15/15 (h) | 2,340,000 | 2,351,700 | ||
EchoStar Communications Corp.: | ||||
6.375% 10/1/11 | 2,810,000 | 2,743,263 | ||
7% 10/1/13 | 5,770,000 | 5,495,925 | ||
Kabel Deutschland GmbH 10.625% 7/1/14 | 3,690,000 | 3,800,700 | ||
Lamar Media Corp.: | ||||
Series B, 6.625% 8/15/15 | 535,000 | 474,813 | ||
6.625% 8/15/15 | 1,030,000 | 914,125 | ||
News America Holdings, Inc. 7.75% 12/1/45 | 170,000 | 174,986 | ||
News America, Inc.: | ||||
6.15% 3/1/37 | 2,970,000 | 2,687,069 | ||
6.2% 12/15/34 | 5,330,000 | 4,843,691 | ||
6.65% 11/15/37 | 15,817,000 | 15,248,157 | ||
Nexstar Broadcasting, Inc. 7% 1/15/14 | 1,120,000 | 907,200 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Nexstar Finance Holdings LLC/Nexstar Finance Holdings, Inc. 11.375% 4/1/13 | $ 639,181 | $ 575,263 | ||
Nielsen Finance LLC/Nielsen Finance Co.: | ||||
0% 8/1/16 (e) | 1,505,000 | 1,030,925 | ||
10% 8/1/14 | 2,975,000 | 3,004,750 | ||
Quebecor Media, Inc.: | ||||
7.75% 3/15/16 | 3,590,000 | 3,392,550 | ||
7.75% 3/15/16 | 1,790,000 | 1,691,550 | ||
The Reader's Digest Association, Inc. 9% 2/15/17 | 2,805,000 | 1,654,950 | ||
Time Warner Cable, Inc.: | ||||
5.85% 5/1/17 | 2,607,000 | 2,488,574 | ||
6.75% 7/1/18 | 12,300,000 | 12,417,932 | ||
7.3% 7/1/38 | 9,000,000 | 9,043,443 | ||
Time Warner, Inc.: | ||||
6.5% 11/15/36 | 7,565,000 | 6,683,352 | ||
6.625% 5/15/29 | 4,415,000 | 4,038,228 | ||
TL Acquisitions, Inc.: | ||||
0% 7/15/15 (e)(h) | 1,305,000 | 947,756 | ||
10.5% 1/15/15 (h) | 4,155,000 | 3,562,913 | ||
Umbrella Acquisition, Inc. 9.75% 3/15/15 pay-in-kind (h)(m) | 720,000 | 513,000 | ||
Viacom, Inc.: | ||||
6.125% 10/5/17 | 4,235,000 | 3,984,826 | ||
6.75% 10/5/37 | 1,460,000 | 1,312,422 | ||
Videotron Ltd. 9.125% 4/15/18 (h) | 1,150,000 | 1,207,500 | ||
Visant Holding Corp. 8.75% 12/1/13 | 450,000 | 428,625 | ||
| 139,158,627 | |||
Multiline Retail - 0.0% | ||||
Matahari Finance BV 9.5% 10/6/09 | 995,000 | 996,269 | ||
Specialty Retail - 0.1% | ||||
AutoNation, Inc. 7% 4/15/14 | 1,290,000 | 1,119,075 | ||
Michaels Stores, Inc. 10% 11/1/14 | 1,405,000 | 1,046,725 | ||
Nebraska Book Co., Inc. 8.625% 3/15/12 | 1,000,000 | 807,500 | ||
Sally Holdings LLC: | ||||
9.25% 11/15/14 | 1,410,000 | 1,417,050 | ||
10.5% 11/15/16 | 700,000 | 707,000 | ||
Sonic Automotive, Inc. 8.625% 8/15/13 | 700,000 | 532,000 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER DISCRETIONARY - continued | ||||
Specialty Retail - continued | ||||
Toys 'R' US, Inc.: | ||||
7.375% 10/15/18 | $ 445,000 | $ 311,500 | ||
7.625% 8/1/11 | 4,470,000 | 3,922,425 | ||
| 9,863,275 | |||
Textiles, Apparel & Luxury Goods - 0.0% | ||||
Hanesbrands, Inc. 6.5081% 12/15/14 (h)(m) | 2,345,000 | 2,034,288 | ||
Levi Strauss & Co.: | ||||
8.875% 4/1/16 | 1,780,000 | 1,535,250 | ||
9.75% 1/15/15 | 2,180,000 | 1,978,350 | ||
| 5,547,888 | |||
TOTAL CONSUMER DISCRETIONARY | 262,355,976 | |||
CONSUMER STAPLES - 1.3% | ||||
Beverages - 0.1% | ||||
Constellation Brands, Inc.: | ||||
7.25% 9/1/16 | 2,050,000 | 2,009,000 | ||
7.25% 5/15/17 | 775,000 | 757,563 | ||
8.375% 12/15/14 | 2,395,000 | 2,466,850 | ||
Diageo Capital PLC 5.75% 10/23/17 | 8,133,000 | 8,060,673 | ||
| 13,294,086 | |||
Food & Staples Retailing - 0.3% | ||||
Albertsons, Inc.: | ||||
7.45% 8/1/29 | 250,000 | 238,110 | ||
7.75% 6/15/26 | 210,000 | 195,300 | ||
CVS Caremark Corp.: | ||||
6.036% 12/10/28 (h) | 12,277,725 | 11,334,304 | ||
6.302% 6/1/37 (m) | 8,615,000 | 7,311,981 | ||
Rite Aid Corp.: | ||||
6.875% 8/15/13 | 735,000 | 444,675 | ||
7.5% 3/1/17 | 3,030,000 | 2,522,475 | ||
9.375% 12/15/15 | 735,000 | 474,075 | ||
10.375% 7/15/16 | 1,425,000 | 1,362,656 | ||
SUPERVALU, Inc. 7.5% 11/15/14 | 1,150,000 | 1,138,500 | ||
Wal-Mart Stores, Inc. 6.2% 4/15/38 | 10,570,000 | 10,456,034 | ||
| 35,478,110 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
CONSUMER STAPLES - continued | ||||
Food Products - 0.6% | ||||
Bertin Ltda. 10.25% 10/5/16 (h) | $ 505,000 | $ 517,625 | ||
Cargill, Inc.: | ||||
6% 11/27/17 (h) | 8,750,000 | 8,651,554 | ||
6.625% 9/15/37 (h) | 8,334,000 | 8,027,751 | ||
Dean Foods Co.: | ||||
6.9% 10/15/17 | 4,170,000 | 3,753,000 | ||
7% 6/1/16 | 3,235,000 | 2,992,375 | ||
General Mills, Inc. 5.2% 3/17/15 | 7,738,000 | 7,600,798 | ||
Gruma SA de CV 7.75% | 1,685,000 | 1,672,363 | ||
Kraft Foods, Inc.: | ||||
6.125% 2/1/18 | 5,261,000 | 5,166,807 | ||
6.875% 2/1/38 | 11,635,000 | 11,382,800 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | 1,595,000 | 1,595,000 | ||
Pierre Foods, Inc. 9.875% 7/15/12 (c) | 540,000 | 43,200 | ||
Pilgrims Pride Corp.: | ||||
7.625% 5/1/15 | 1,725,000 | 1,509,375 | ||
8.375% 5/1/17 | 1,425,000 | 1,129,313 | ||
Smithfield Foods, Inc. 7.75% 7/1/17 | 5,140,000 | 4,548,900 | ||
| 58,590,861 | |||
Personal Products - 0.0% | ||||
Revlon Consumer Products Corp. 9.5% 4/1/11 | 1,205,000 | 1,156,800 | ||
Tobacco - 0.3% | ||||
Philip Morris International, Inc.: | ||||
4.875% 5/16/13 | 7,558,000 | 7,487,166 | ||
5.65% 5/16/18 | 7,161,000 | 7,045,035 | ||
6.375% 5/16/38 | 12,110,000 | 11,910,476 | ||
Reynolds American, Inc. 7.25% 6/15/37 | 4,865,000 | 4,794,866 | ||
| 31,237,543 | |||
TOTAL CONSUMER STAPLES | 139,757,400 | |||
ENERGY - 2.4% | ||||
Energy Equipment & Services - 0.1% | ||||
Compagnie Generale de Geophysique SA: | ||||
7.5% 5/15/15 | 1,640,000 | 1,627,700 | ||
7.75% 5/15/17 | 2,970,000 | 2,947,725 | ||
Complete Production Services, Inc. 8% 12/15/16 | 740,000 | 727,050 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Energy Equipment & Services - continued | ||||
Helix Energy Solutions Group, Inc. 9.5% 1/15/16 (h) | $ 1,295,000 | $ 1,290,144 | ||
Seitel, Inc. 9.75% 2/15/14 | 2,545,000 | 2,245,963 | ||
Weatherford International Ltd. 7% 3/15/38 | 5,880,000 | 5,857,991 | ||
| 14,696,573 | |||
Oil, Gas & Consumable Fuels - 2.3% | ||||
Anadarko Petroleum Corp.: | ||||
5.95% 9/15/16 | 8,600,000 | 8,380,691 | ||
6.45% 9/15/36 | 2,115,000 | 1,943,911 | ||
Arch Western Finance LLC 6.75% 7/1/13 | 1,600,000 | 1,588,000 | ||
Atlas Pipeline Partners LP 8.125% 12/15/15 | 2,145,000 | 2,037,750 | ||
Canadian Natural Resources Ltd.: | ||||
5.7% 5/15/17 | 14,850,000 | 14,331,869 | ||
6.25% 3/15/38 | 3,050,000 | 2,809,227 | ||
6.75% 2/1/39 | 2,980,000 | 2,931,381 | ||
Chaparral Energy, Inc.: | ||||
8.5% 12/1/15 | 1,530,000 | 1,327,275 | ||
8.875% 2/1/17 | 1,140,000 | 986,100 | ||
Chesapeake Energy Corp.: | ||||
6.5% 8/15/17 | 1,925,000 | 1,780,625 | ||
6.875% 1/15/16 | 740,000 | 706,700 | ||
7.5% 9/15/13 | 1,300,000 | 1,322,750 | ||
7.5% 6/15/14 | 1,790,000 | 1,798,950 | ||
7.625% 7/15/13 | 600,000 | 606,000 | ||
Connacher Oil and Gas Ltd. 10.25% 12/15/15 (h) | 1,145,000 | 1,182,213 | ||
Drummond Co., Inc. 7.375% 2/15/16 (h) | 4,035,000 | 3,500,363 | ||
Duke Capital LLC 6.75% 2/15/32 | 10,542,000 | 9,867,460 | ||
Duke Energy Field Services 6.45% 11/3/36 (h) | 2,400,000 | 2,178,998 | ||
El Paso Performance-Linked Trust 7.75% 7/15/11 (h) | 1,165,000 | 1,173,738 | ||
Energy Partners Ltd. 9.75% 4/15/14 | 3,070,000 | 2,724,625 | ||
Forest Oil Corp.: | ||||
7.25% 6/15/19 | 1,080,000 | 990,900 | ||
7.75% 5/1/14 | 675,000 | 671,625 | ||
KazMunaiGaz Finance Sub BV 9.125% 7/2/18 (h) | 510,000 | 521,475 | ||
Massey Energy Co. 6.875% 12/15/13 | 4,565,000 | 4,450,875 | ||
Nakilat, Inc. 6.067% 12/31/33 (h) | 2,885,000 | 2,519,095 | ||
National Gas Co. of Trinidad & Tobago Ltd. 6.05% 1/15/36 (h) | 240,000 | 223,704 | ||
Newfield Exploration Co. 7.125% 5/15/18 | 1,285,000 | 1,207,900 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
Nexen, Inc.: | ||||
5.875% 3/10/35 | $ 240,000 | $ 203,393 | ||
6.4% 5/15/37 | 3,645,000 | 3,269,306 | ||
NGPL PipeCo LLC 6.514% 12/15/12 (h) | 4,600,000 | 4,666,452 | ||
OPTI Canada, Inc.: | ||||
7.875% 12/15/14 | 2,280,000 | 2,254,464 | ||
8.25% 12/15/14 | 3,965,000 | 3,945,175 | ||
Pan American Energy LLC 7.75% 2/9/12 (h) | 3,120,000 | 3,042,000 | ||
Pemex Project Funding Master Trust: | ||||
5.75% 3/1/18 (h) | 860,000 | 844,950 | ||
6.625% 6/15/35 | 625,000 | 620,313 | ||
6.625% 6/15/35 (h) | 260,000 | 258,050 | ||
Petro-Canada: | ||||
6.05% 5/15/18 | 3,850,000 | 3,727,967 | ||
6.8% 5/15/38 | 18,950,000 | 18,027,779 | ||
Petrohawk Energy Corp.: | ||||
7.875% 6/1/15 (h) | 1,725,000 | 1,604,250 | ||
9.125% 7/15/13 | 4,270,000 | 4,227,300 | ||
Petroleos de Venezuela SA: | ||||
5.25% 4/12/17 | 9,205,000 | 6,282,413 | ||
5.375% 4/12/27 | 3,045,000 | 1,728,038 | ||
Petroleum Development Corp. 12% 2/15/18 | 1,605,000 | 1,685,250 | ||
Petrozuata Finance, Inc.: | ||||
7.63% 4/1/09 (h) | 1,258,137 | 1,258,137 | ||
8.22% 4/1/17 (h) | 2,178,398 | 2,254,642 | ||
Pioneer Natural Resources Co. 6.65% 3/15/17 | 2,935,000 | 2,678,188 | ||
Plains All American Pipeline LP: | ||||
6.125% 1/15/17 | 6,185,000 | 6,032,670 | ||
6.65% 1/15/37 | 4,430,000 | 4,003,918 | ||
Plains Exploration & Production Co.: | ||||
7% 3/15/17 | 4,040,000 | 3,625,900 | ||
7.75% 6/15/15 | 485,000 | 461,963 | ||
Range Resources Corp.: | ||||
6.375% 3/15/15 (Reg. S) | 1,085,000 | 1,022,613 | ||
7.375% 7/15/13 | 2,060,000 | 2,060,000 | ||
7.5% 5/15/16 | 2,615,000 | 2,595,388 | ||
Ras Laffan Liquid Natural Gas Co. Ltd. III 6.332% 9/30/27 (h) | 1,840,000 | 1,669,726 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
ENERGY - continued | ||||
Oil, Gas & Consumable Fuels - continued | ||||
SandRidge Energy, Inc.: | ||||
6.4163% 4/1/14 (h)(m) | $ 2,720,000 | $ 2,529,600 | ||
8.625% 4/1/15 pay-in-kind (h) | 6,045,000 | 5,863,650 | ||
Ship Finance International Ltd. 8.5% 12/15/13 | 330,000 | 326,700 | ||
Southwestern Energy Co. 7.5% 2/1/18 (h) | 965,000 | 977,063 | ||
Spectra Energy Capital, LLC 6.2% 4/15/18 | 14,500,000 | 14,153,305 | ||
Suncor Energy, Inc.: | ||||
6.1% 6/1/18 | 9,625,000 | 9,558,443 | ||
6.85% 6/1/39 | 10,460,000 | 10,474,529 | ||
Teekay Corp. 8.875% 7/15/11 | 2,115,000 | 2,231,325 | ||
TEPPCO Partners LP: | ||||
6.65% 4/15/18 | 4,741,000 | 4,770,508 | ||
7.55% 4/15/38 | 9,095,000 | 9,136,582 | ||
Tesoro Corp. 6.5% 6/1/17 | 365,000 | 305,688 | ||
Texas Eastern Transmission LP 6% 9/15/17 (h) | 4,381,000 | 4,273,666 | ||
TNK-BP Finance SA: | ||||
6.875% 7/18/11 (h) | 1,200,000 | 1,146,000 | ||
7.5% 3/13/13 (Reg. S) | 1,145,000 | 1,079,163 | ||
Valero Energy Corp. 6.625% 6/15/37 | 2,785,000 | 2,457,339 | ||
XTO Energy, Inc.: | ||||
6.375% 6/15/38 | 13,285,000 | 11,975,949 | ||
6.75% 8/1/37 | 10,380,000 | 9,790,323 | ||
YPF SA 10% 11/2/28 | 1,475,000 | 1,430,750 | ||
| 250,295,028 | |||
TOTAL ENERGY | 264,991,601 | |||
FINANCIALS - 4.0% | ||||
Capital Markets - 0.9% | ||||
Bear Stearns Companies, Inc. 6.95% 8/10/12 | 9,630,000 | 10,002,498 | ||
BlackRock, Inc. 6.25% 9/15/17 | 6,750,000 | 6,629,729 | ||
Goldman Sachs Group, Inc.: | ||||
5.625% 1/15/17 | 3,200,000 | 2,897,322 | ||
6.75% 10/1/37 | 28,895,000 | 25,423,352 | ||
JPMorgan Chase Capital XX 6.55% 9/29/36 | 10,020,000 | 8,244,616 | ||
JPMorgan Chase Capital XXV 6.8% 10/1/37 | 7,405,000 | 6,321,019 | ||
Lehman Brothers Holdings, Inc.: | ||||
6.75% 12/28/17 | 4,235,000 | 3,798,185 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Lehman Brothers Holdings, Inc.: - continued | ||||
6.875% 5/2/18 | $ 6,600,000 | $ 6,144,765 | ||
7% 9/27/27 | 5,000,000 | 4,458,450 | ||
Merrill Lynch & Co., Inc.: | ||||
6.15% 4/25/13 | 3,165,000 | 2,999,265 | ||
6.875% 4/25/18 | 557,000 | 513,002 | ||
Morgan Stanley 4.75% 4/1/14 | 1,635,000 | 1,435,569 | ||
Northern Trust Corp. 5.5% 8/15/13 | 2,275,000 | 2,314,533 | ||
UBS AG Stamford Branch: | ||||
5.75% 4/25/18 | 12,400,000 | 11,871,128 | ||
5.875% 12/20/17 | 12,585,000 | 12,268,663 | ||
| 105,322,096 | |||
Commercial Banks - 0.7% | ||||
American Express Bank FSB 6% 9/13/17 | 10,000,000 | 9,186,950 | ||
Bank of America NA: | ||||
5.3% 3/15/17 | 1,515,000 | 1,374,775 | ||
6% 10/15/36 | 690,000 | 595,837 | ||
BB&T Capital Trust IV 6.82% 6/12/77 (m) | 2,314,000 | 1,803,738 | ||
Credit Suisse First Boston 6% 2/15/18 | 13,365,000 | 12,823,089 | ||
Development Bank of Philippines 8.375% (m) | 1,355,000 | 1,365,163 | ||
Ex-Im Ukraine 7.65% 9/7/11 (Issued by Credit Suisse London Branch for Ex-Im Ukraine) | 3,665,000 | 3,426,775 | ||
EXIM of Ukraine 7.75% 9/23/09 (Issued by Dresdner Bank AG for EXIM Ukraine) | 445,000 | 440,550 | ||
HBOS PLC 6.75% 5/21/18 (h) | 10,175,000 | 9,189,500 | ||
HSBC Holdings PLC 6.5% 9/15/37 | 8,400,000 | 7,659,481 | ||
HSBK (Europe) B.V. 9.25% 10/16/13 (h) | 1,085,000 | 1,047,025 | ||
KeyCorp Capital Trust VII 5.7% 6/15/35 | 2,600,000 | 1,660,451 | ||
Standard Chartered Bank 6.4% 9/26/17 (h) | 11,244,000 | 10,642,131 | ||
UBS Luxembourg SA (Reg. S) 8.375% 10/22/11 | 1,545,000 | 1,552,725 | ||
Vimpel Communications 8% 2/11/10 (Issued by UBS Luxembourg SA for Vimpel Communications) | 195,000 | 196,950 | ||
Wachovia Bank NA 6.6% 1/15/38 | 9,000,000 | 7,051,041 | ||
Wells Fargo & Co. 5.625% 12/11/17 | 10,423,000 | 10,018,379 | ||
| 80,034,560 | |||
Consumer Finance - 0.7% | ||||
American Express Co. 8.15% 3/19/38 | 9,010,000 | 9,196,264 | ||
American General Finance Corp. 6.9% 12/15/17 | 5,510,000 | 4,413,857 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Ford Motor Credit Co. LLC: | ||||
5.7% 1/15/10 | $ 1,415,000 | $ 1,234,623 | ||
7% 10/1/13 | 280,000 | 203,000 | ||
7.25% 10/25/11 | 840,000 | 643,474 | ||
7.375% 10/28/09 | 1,420,000 | 1,319,782 | ||
7.875% 6/15/10 | 710,000 | 612,041 | ||
9.875% 8/10/11 | 1,410,000 | 1,157,470 | ||
General Electric Capital Corp.: | ||||
5.625% 9/15/17 | 4,445,000 | 4,344,530 | ||
5.625% 5/1/18 | 25,000,000 | 24,305,525 | ||
5.875% 1/14/38 | 14,000,000 | 12,606,090 | ||
6.375% 11/15/67 (m) | 9,000,000 | 8,242,956 | ||
SLM Corp.: | ||||
2.94% 7/27/09 (m) | 1,827,000 | 1,731,463 | ||
2.96% 7/26/10 (m) | 6,515,000 | 5,872,543 | ||
4% 1/15/09 | 1,885,000 | 1,870,806 | ||
4.5% 7/26/10 | 4,120,000 | 3,748,162 | ||
| 81,502,586 | |||
Diversified Financial Services - 0.5% | ||||
Bank of America Corp. 5.75% 12/1/17 | 4,590,000 | 4,281,837 | ||
GlaxoSmithKline Capital, Inc.: | ||||
5.65% 5/15/18 | 5,941,000 | 5,958,015 | ||
6.375% 5/15/38 | 7,549,000 | 7,553,069 | ||
Hilcorp Energy I LP/Hilcorp Finance Co.: | ||||
7.75% 11/1/15 (h) | 5,185,000 | 4,692,425 | ||
9% 6/1/16 (h) | 1,000,000 | 970,000 | ||
International Lease Finance Corp. 5.65% 6/1/14 | 1,600,000 | 1,340,848 | ||
Leucadia National Corp.: | ||||
7% 8/15/13 | 6,420,000 | 6,259,500 | ||
7.125% 3/15/17 | 880,000 | 836,000 | ||
NSG Holdings II, LLC 7.75% 12/15/25 (h) | 5,470,000 | 5,251,200 | ||
OAO TMK 8.5% 9/29/09 (Issued by TMK Capital SA for OAO TMK) | 4,200,000 | 4,200,000 | ||
Pakistan International Sukuk Co. Ltd. 5.3569% 1/27/10 (m) | 500,000 | 450,000 | ||
Sunwest Management, Inc. 8.385% 6/9/10 (m) | 325,000 | 298,415 | ||
ZFS Finance USA Trust V 6.5% 5/9/67 (h)(m) | 12,400,000 | 10,682,265 | ||
| 52,773,574 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Insurance - 0.3% | ||||
American International Group, Inc.: | ||||
5.85% 1/16/18 | $ 8,920,000 | $ 7,510,631 | ||
8.175% 5/15/58 (h)(m) | 7,875,000 | 6,082,508 | ||
Pacific Life Global Funding 5.15% 4/15/13 (h) | 7,895,000 | 7,899,713 | ||
The Chubb Corp.: | ||||
5.75% 5/15/18 | 4,035,000 | 3,871,506 | ||
6.5% 5/15/38 | 3,390,000 | 3,211,011 | ||
USI Holdings Corp. 6.6794% 11/15/14 (h)(m) | 150,000 | 117,000 | ||
| 28,692,369 | |||
Real Estate Investment Trusts - 0.4% | ||||
Duke Realty LP: | ||||
5.4% 8/15/14 | 4,695,000 | 4,301,578 | ||
5.875% 8/15/12 | 895,000 | 880,649 | ||
5.95% 2/15/17 | 490,000 | 451,404 | ||
6.25% 5/15/13 | 14,190,000 | 13,993,199 | ||
6.5% 1/15/18 | 3,795,000 | 3,540,226 | ||
Highwoods/Forsyth LP 5.85% 3/15/17 | 80,000 | 68,000 | ||
HMB Capital Trust V 6.37% 12/15/36 (c)(h)(m) | 270,000 | 2,700 | ||
Hospitality Properties Trust 6.7% 1/15/18 | 5,000,000 | 4,144,435 | ||
Host Hotels & Resorts LP 6.875% 11/1/14 | 835,000 | 749,413 | ||
iStar Financial, Inc. 5.95% 10/15/13 | 300,000 | 211,500 | ||
Liberty Property LP 6.625% 10/1/17 | 3,785,000 | 3,532,892 | ||
Omega Healthcare Investors, Inc.: | ||||
7% 4/1/14 | 4,880,000 | 4,672,600 | ||
7% 1/15/16 | 400,000 | 373,000 | ||
Reckson Operating Partnership LP 6% 3/31/16 | 4,021,000 | 3,430,653 | ||
Rouse Co. 5.375% 11/26/13 | 100,000 | 76,171 | ||
Rouse Co. LP/TRC, Inc. 6.75% 5/1/13 (h) | 100,000 | 82,000 | ||
Senior Housing Properties Trust 8.625% 1/15/12 | 250,000 | 255,000 | ||
UDR, Inc. 5.5% 4/1/14 | 2,755,000 | 2,597,320 | ||
Ventas Realty LP: | ||||
6.5% 6/1/16 | 105,000 | 98,700 | ||
6.625% 10/15/14 | 1,350,000 | 1,292,625 | ||
6.75% 4/1/17 | 1,285,000 | 1,220,750 | ||
| 45,974,815 | |||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
FINANCIALS - continued | ||||
Real Estate Management & Development - 0.2% | ||||
American Real Estate Partners/American Real Estate Finance Corp.: | ||||
7.125% 2/15/13 | $ 7,880,000 | $ 6,885,150 | ||
8.125% 6/1/12 | 2,465,000 | 2,295,531 | ||
ERP Operating LP: | ||||
5.375% 8/1/16 | 2,170,000 | 1,932,695 | ||
5.5% 10/1/12 | 3,140,000 | 3,012,924 | ||
5.75% 6/15/17 | 6,260,000 | 5,642,514 | ||
Forest City Enterprises, Inc. 7.625% 6/1/15 | 100,000 | 90,000 | ||
Inversiones y Representaciones SA 8.5% 2/2/17 (h) | 910,000 | 618,800 | ||
| 20,477,614 | |||
Thrifts & Mortgage Finance - 0.3% | ||||
Bank of America Corp.: | ||||
4.9% 5/1/13 | 13,200,000 | 12,775,224 | ||
5.65% 5/1/18 | 13,300,000 | 12,269,396 | ||
Credit Suisse First Boston (New York Branch) 5% 5/15/13 | 6,309,000 | 6,145,124 | ||
Wrightwood Capital LLC 10.5% 6/1/14 (h) | 100,000 | 87,000 | ||
| 31,276,744 | |||
TOTAL FINANCIALS | 446,054,358 | |||
HEALTH CARE - 0.5% | ||||
Health Care Equipment & Supplies - 0.1% | ||||
Bausch & Lomb, Inc. 9.875% 11/1/15 (h) | 3,055,000 | 3,139,013 | ||
Biomet, Inc.: | ||||
10% 10/15/17 | 4,825,000 | 5,198,938 | ||
10.375% 10/15/17 pay-in-kind | 3,155,000 | 3,300,919 | ||
11.625% 10/15/17 | 2,045,000 | 2,152,363 | ||
FMC Finance III SA 6.875% 7/15/17 | 1,030,000 | 988,800 | ||
| 14,780,033 | |||
Health Care Providers & Services - 0.2% | ||||
Community Health Systems, Inc. 8.875% 7/15/15 | 4,865,000 | 4,859,162 | ||
DASA Finance Corp. 8.75% 5/29/18 (h) | 590,000 | 595,900 | ||
HCA, Inc.: | ||||
6.5% 2/15/16 | 1,420,000 | 1,166,175 | ||
9.125% 11/15/14 | 1,665,000 | 1,712,869 | ||
9.25% 11/15/16 | 3,450,000 | 3,557,813 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
HEALTH CARE - continued | ||||
Health Care Providers & Services - continued | ||||
HCA, Inc.: - continued | ||||
9.625% 11/15/16 pay-in-kind | $ 9,515,000 | $ 9,693,406 | ||
HealthSouth Corp. 10.75% 6/15/16 | 1,280,000 | 1,382,400 | ||
IASIS Healthcare LLC/IASIS Capital Corp. 8.75% 6/15/14 | 1,350,000 | 1,356,750 | ||
Skilled Healthcare Group, Inc. 11% 1/15/14 | 64,000 | 67,520 | ||
Sun Healthcare Group, Inc. 9.125% 4/15/15 | 10,000 | 10,000 | ||
Tenet Healthcare Corp.: | ||||
6.5% 6/1/12 | 285,000 | 272,175 | ||
7.375% 2/1/13 | 1,975,000 | 1,871,313 | ||
Viant Holdings, Inc. 10.125% 7/15/17 (h) | 71,000 | 59,995 | ||
| 26,605,478 | |||
Health Care Technology - 0.1% | ||||
DJO Finance LLC / DJO Finance Corp. 10.875% 11/15/14 | 6,520,000 | 6,568,900 | ||
Pharmaceuticals - 0.1% | ||||
AstraZeneca PLC: | ||||
5.9% 9/15/17 | 3,520,000 | 3,656,129 | ||
6.45% 9/15/37 | 2,600,000 | 2,666,362 | ||
| 6,322,491 | |||
TOTAL HEALTH CARE | 54,276,902 | |||
INDUSTRIALS - 0.9% | ||||
Aerospace & Defense - 0.1% | ||||
Alliant Techsystems, Inc. 6.75% 4/1/16 | 2,045,000 | 1,978,538 | ||
BE Aerospace, Inc. 8.5% 7/1/18 | 520,000 | 542,100 | ||
Bombardier, Inc.: | ||||
6.3% 5/1/14 (h) | 1,575,000 | 1,512,000 | ||
7.45% 5/1/34 (h) | 425,000 | 405,875 | ||
8% 11/15/14 (h) | 1,915,000 | 1,972,450 | ||
| 6,410,963 | |||
Airlines - 0.2% | ||||
American Airlines, Inc. pass-thru trust certificates: | ||||
6.817% 5/23/11 | 3,390,000 | 2,627,250 | ||
6.977% 11/23/22 | 1,212,061 | 787,840 | ||
8.608% 10/1/12 | 960,000 | 806,400 | ||
AMR Corp. 9% 8/1/12 | 485,000 | 276,450 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Airlines - continued | ||||
Continental Airlines, Inc. pass-thru trust certificates: | ||||
7.566% 9/15/21 | $ 396,970 | $ 345,364 | ||
7.73% 9/15/12 | 19,588 | 17,090 | ||
7.875% 7/2/18 | 1,555,470 | 1,042,165 | ||
9.558% 9/1/19 | 251,878 | 181,352 | ||
9.798% 4/1/21 | 798,009 | 670,327 | ||
Delta Air Lines, Inc. pass-thru trust certificates: | ||||
7.57% 11/18/10 | 7,640,000 | 7,200,700 | ||
8.021% 8/10/22 | 1,002,104 | 751,578 | ||
8.954% 8/10/14 | 1,573,111 | 1,179,833 | ||
Northwest Airlines, Inc. pass-thru trust certificates 8.028% 11/1/17 | 1,165,000 | 932,000 | ||
United Air Lines, Inc. pass-thru trust certificates: | ||||
Class B, 7.336% 7/2/19 | 904,705 | 624,246 | ||
7.032% 4/1/12 | 750,105 | 738,853 | ||
7.186% 10/1/12 | 1,862,895 | 1,837,280 | ||
| 20,018,728 | |||
Building Products - 0.0% | ||||
Nortek, Inc. 10% 12/1/13 (h) | 3,025,000 | 2,767,875 | ||
Ply Gem Industries, Inc. 11.75% 6/15/13 (h) | 1,415,000 | 1,266,425 | ||
| 4,034,300 | |||
Commercial Services & Supplies - 0.2% | ||||
Allied Waste North America, Inc.: | ||||
6.875% 6/1/17 | 1,025,000 | 1,008,344 | ||
7.125% 5/15/16 | 395,000 | 398,950 | ||
7.25% 3/15/15 | 800,000 | 810,000 | ||
7.875% 4/15/13 | 120,000 | 122,850 | ||
ARAMARK Corp.: | ||||
6.3006% 2/1/15 (m) | 3,270,000 | 3,041,100 | ||
8.5% 2/1/15 | 3,130,000 | 3,153,475 | ||
FTI Consulting, Inc.: | ||||
7.625% 6/15/13 | 2,105,000 | 2,178,675 | ||
7.75% 10/1/16 | 915,000 | 947,025 | ||
Iron Mountain, Inc.: | ||||
6.625% 1/1/16 | 2,670,000 | 2,516,475 | ||
7.75% 1/15/15 | 2,545,000 | 2,545,000 | ||
8.625% 4/1/13 | 210,000 | 211,050 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Commercial Services & Supplies - continued | ||||
JohnsonDiversey, Inc. 9.625% 5/15/12 | $ 210,000 | $ 212,100 | ||
Rental Service Corp. 9.5% 12/1/14 | 1,405,000 | 1,124,000 | ||
US Investigations Services, Inc.: | ||||
10.5% 11/1/15 (h) | 1,250,000 | 1,118,750 | ||
11.75% 5/1/16 (h) | 950,000 | 779,000 | ||
| 20,166,794 | |||
Electrical Equipment - 0.0% | ||||
General Cable Corp. 7.125% 4/1/17 | 700,000 | 665,000 | ||
Sensus Metering Systems, Inc. 8.625% 12/15/13 | 4,885,000 | 4,787,300 | ||
| 5,452,300 | |||
Industrial Conglomerates - 0.2% | ||||
Covidien International Finance SA 6.55% 10/15/37 | 3,620,000 | 3,682,289 | ||
General Electric Co. 5.25% 12/6/17 | 15,620,000 | 15,095,730 | ||
Nell AF Sarl 8.375% 8/15/15 (h) | 500,000 | 292,500 | ||
Sequa Corp.: | ||||
11.75% 12/1/15 (h) | 1,415,000 | 1,195,675 | ||
13.5% 12/1/15 pay-in-kind (h) | 705,000 | 572,460 | ||
| 20,838,654 | |||
Machinery - 0.1% | ||||
Case Corp. 7.25% 1/15/16 | 1,040,000 | 1,007,500 | ||
Terex Corp. 8% 11/15/17 | 5,965,000 | 5,913,105 | ||
| 6,920,605 | |||
Marine - 0.0% | ||||
Navios Maritime Holdings, Inc. 9.5% 12/15/14 | 490,000 | 467,950 | ||
Road & Rail - 0.1% | ||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.: | ||||
7.625% 5/15/14 | 1,895,000 | 1,383,350 | ||
7.75% 5/15/16 | 2,145,000 | 1,490,775 | ||
CSX Corp. 6.25% 4/1/15 | 2,470,000 | 2,420,175 | ||
Hertz Corp.: | ||||
8.875% 1/1/14 | 3,020,000 | 2,808,600 | ||
10.5% 1/1/16 | 1,920,000 | 1,680,000 | ||
Kansas City Southern Railway Co. 8% 6/1/15 | 2,415,000 | 2,463,300 | ||
| 12,246,200 | |||
Trading Companies & Distributors - 0.0% | ||||
Ashtead Capital, Inc. 9% 8/15/16 (h) | 300,000 | 272,250 | ||
Ashtead Holdings PLC 8.625% 8/1/15 (h) | 275,000 | 248,188 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INDUSTRIALS - continued | ||||
Trading Companies & Distributors - continued | ||||
Penhall International Corp. 12% 8/1/14 (h) | $ 60,000 | $ 42,000 | ||
VWR Funding, Inc. 10.25% 7/15/15 | 1,155,000 | 1,051,050 | ||
| 1,613,488 | |||
TOTAL INDUSTRIALS | 98,169,982 | |||
INFORMATION TECHNOLOGY - 0.5% | ||||
Communications Equipment - 0.1% | ||||
Lucent Technologies, Inc.: | ||||
6.45% 3/15/29 | 2,700,000 | 1,863,000 | ||
6.5% 1/15/28 | 1,940,000 | 1,338,600 | ||
Nortel Networks Corp.: | ||||
7.0406% 7/15/11 (m) | 485,000 | 449,838 | ||
10.125% 7/15/13 | 1,005,000 | 934,650 | ||
| 4,586,088 | |||
Computers & Peripherals - 0.0% | ||||
Seagate Technology HDD Holdings 6.8% 10/1/16 | 2,650,000 | 2,385,000 | ||
Electronic Equipment & Instruments - 0.2% | ||||
Celestica, Inc. 7.875% 7/1/11 | 1,450,000 | 1,460,875 | ||
Flextronics International Ltd.: | ||||
6.25% 11/15/14 | 420,000 | 386,400 | ||
6.5% 5/15/13 | 2,510,000 | 2,371,950 | ||
Jabil Circuit, Inc. 8.25% 3/15/18 | 5,260,000 | 5,285,143 | ||
NXP BV: | ||||
5.5406% 10/15/13 (m) | 435,000 | 341,475 | ||
9.5% 10/15/15 | 1,125,000 | 765,000 | ||
Texas Competitive Electric Holdings Co. LLC: | ||||
Series A, 10.25% 11/1/15 (h) | 4,110,000 | 4,099,725 | ||
Series B, 10.25% 11/1/15 (h) | 3,900,000 | 3,890,250 | ||
10.5% 11/1/16 pay-in-kind (h)(m) | 3,965,000 | 3,806,400 | ||
Tyco Electronics Group SA 7.125% 10/1/37 | 1,895,000 | 1,908,104 | ||
| 24,315,322 | |||
IT Services - 0.0% | ||||
First Data Corp. 9.875% 9/24/15 (h) | 2,050,000 | 1,773,250 | ||
Iron Mountain, Inc. 8% 6/15/20 | 705,000 | 683,850 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
INFORMATION TECHNOLOGY - continued | ||||
IT Services - continued | ||||
SunGard Data Systems, Inc.: | ||||
9.125% 8/15/13 | $ 995,000 | $ 1,004,950 | ||
10.25% 8/15/15 | 990,000 | 996,188 | ||
| 4,458,238 | |||
Office Electronics - 0.1% | ||||
Xerox Capital Trust I 8% 2/1/27 | 4,835,000 | 4,641,600 | ||
Semiconductors & Semiconductor Equipment - 0.1% | ||||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 | 2,280,000 | 2,126,100 | ||
9.25% 6/1/16 | 710,000 | 690,475 | ||
Avago Technologies Finance Ltd.: | ||||
10.125% 12/1/13 | 2,130,000 | 2,300,400 | ||
11.875% 12/1/15 | 710,000 | 781,000 | ||
Freescale Semiconductor, Inc.: | ||||
6.6513% 12/15/14 (m) | 1,045,000 | 768,075 | ||
8.875% 12/15/14 | 1,140,000 | 924,882 | ||
9.125% 12/15/14 pay-in-kind | 1,110,000 | 861,693 | ||
10.125% 12/15/16 | 1,150,000 | 879,750 | ||
Spansion LLC 11.25% 1/15/16 (h) | 700,000 | 437,500 | ||
| 9,769,875 | |||
Software - 0.0% | ||||
SS&C Technologies, Inc. 11.75% 12/1/13 | 95,000 | 100,225 | ||
TOTAL INFORMATION TECHNOLOGY | 50,256,348 | |||
MATERIALS - 0.8% | ||||
Chemicals - 0.1% | ||||
Berry Plastics Corp. 7.5406% 2/15/15 (m) | 1,350,000 | 1,275,750 | ||
Chemtura Corp. 6.875% 6/1/16 | 735,000 | 620,193 | ||
Equistar Chemicals LP 7.55% 2/15/26 | 350,000 | 227,500 | ||
JohnsonDiversey Holdings, Inc. 10.67% 5/15/13 | 480,000 | 470,400 | ||
Momentive Performance Materials, Inc. 9.75% 12/1/14 | 4,500,000 | 4,005,000 | ||
Nalco Co. 7.75% 11/15/11 | 1,400,000 | 1,424,500 | ||
NOVA Chemicals Corp.: | ||||
5.9525% 11/15/13 (m) | 1,560,000 | 1,343,550 | ||
6.5% 1/15/12 | 5,650,000 | 5,141,500 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
MATERIALS - continued | ||||
Chemicals - continued | ||||
Pliant Corp. 11.35% 6/15/09 (f) | $ 60,253 | $ 48,805 | ||
PolyOne Corp. 8.875% 5/1/12 | 1,410,000 | 1,420,575 | ||
| 15,977,773 | |||
Construction Materials - 0.0% | ||||
Texas Industries, Inc. 7.25% 7/15/13 (h) | 940,000 | 878,900 | ||
Containers & Packaging - 0.1% | ||||
BWAY Corp. 10% 10/15/10 | 940,000 | 935,300 | ||
Crown Americas LLC/Crown Americas Capital Corp. 7.75% 11/15/15 | 700,000 | 722,750 | ||
Crown Cork & Seal, Inc.: | ||||
7.375% 12/15/26 | 280,000 | 238,000 | ||
8% 4/15/23 | 335,000 | 298,150 | ||
Graphic Packaging International, Inc. 8.5% 8/15/11 | 1,005,000 | 969,825 | ||
Greif, Inc. 6.75% 2/1/17 | 3,195,000 | 3,099,150 | ||
Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 | 170,000 | 140,250 | ||
Vitro SAB de CV 8.625% 2/1/12 | 2,415,000 | 2,113,125 | ||
| 8,516,550 | |||
Metals & Mining - 0.5% | ||||
Evraz Group SA: | ||||
8.875% 4/24/13 (h) | 4,505,000 | 4,414,900 | ||
9.5% 4/24/18 (h) | 715,000 | 691,763 | ||
FMG Finance Property Ltd.: | ||||
6.6819% 9/1/11 (h)(m) | 1,490,000 | 1,467,650 | ||
10% 9/1/13 (h) | 6,810,000 | 7,150,500 | ||
10.625% 9/1/16 (h) | 884,000 | 990,080 | ||
Freeport-McMoRan Copper & Gold, Inc.: | ||||
8.25% 4/1/15 | 4,030,000 | 4,221,425 | ||
8.375% 4/1/17 | 1,480,000 | 1,568,800 | ||
Noranda Aluminium Acquisition Corp. 6.8275% 5/15/15 pay-in-kind (m) | 500,000 | 426,250 | ||
OAO Severstal 9.75% 7/29/13 (Issued by Steel Capital SA for OAO Severstal) (h) | 750,000 | 748,125 | ||
RathGibson, Inc. 11.25% 2/15/14 | 350,000 | 336,875 | ||
Rio Tinto Finance Ltd.: | ||||
6.5% 7/15/18 | 7,128,000 | 7,171,581 | ||
7.125% 7/15/28 | 8,900,000 | 9,019,242 | ||
Steel Dynamics, Inc.: | ||||
6.75% 4/1/15 | 3,860,000 | 3,599,450 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Steel Dynamics, Inc.: - continued | ||||
7.375% 11/1/12 | $ 1,235,000 | $ 1,210,300 | ||
7.75% 4/15/16 (h) | 1,285,000 | 1,249,663 | ||
United States Steel Corp. 6.65% 6/1/37 | 3,395,000 | 2,881,652 | ||
Vale Overseas Ltd. 6.25% 1/23/17 | 2,685,000 | 2,685,814 | ||
Vedanta Resources PLC 6.625% 2/22/10 (h) | 2,000,000 | 2,002,600 | ||
| 51,836,670 | |||
Paper & Forest Products - 0.1% | ||||
Catalyst Paper Corp. 8.625% 6/15/11 | 845,000 | 686,563 | ||
Domtar Corp.: | ||||
5.375% 12/1/13 | 705,000 | 613,350 | ||
7.125% 8/15/15 | 975,000 | 928,688 | ||
Georgia-Pacific Corp.: | ||||
7% 1/15/15 (h) | 6,505,000 | 6,098,438 | ||
8.125% 5/15/11 | 3,130,000 | 3,145,650 | ||
8.875% 5/15/31 | 1,510,000 | 1,404,300 | ||
Stone Container Corp. 8.375% 7/1/12 | 2,545,000 | 2,239,600 | ||
Stone Container Finance Co. 7.375% 7/15/14 | 300,000 | 241,500 | ||
| 15,358,089 | |||
TOTAL MATERIALS | 92,567,982 | |||
TELECOMMUNICATION SERVICES - 1.7% | ||||
Diversified Telecommunication Services - 1.2% | ||||
AT&T, Inc.: | ||||
6.3% 1/15/38 | 40,171,000 | 37,879,807 | ||
6.8% 5/15/36 | 11,484,000 | 11,414,407 | ||
BellSouth Capital Funding Corp. 7.875% 2/15/30 | 1,060,000 | 1,141,395 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 | 3,465,000 | 3,274,425 | ||
Citizens Communications Co.: | ||||
6.25% 1/15/13 | 1,300,000 | 1,238,250 | ||
9% 8/15/31 | 650,000 | 565,500 | ||
Indosat Finance Co. BV 7.75% 11/5/10 | 1,085,000 | 1,095,850 | ||
Intelsat Ltd.: | ||||
6.5% 11/1/13 | 3,700,000 | 2,830,500 | ||
7.625% 4/15/12 | 5,385,000 | 4,563,788 | ||
11.25% 6/15/16 | 975,000 | 1,023,750 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
Level 3 Financing, Inc.: | ||||
6.845% 2/15/15 (m) | $ 350,000 | $ 280,875 | ||
8.75% 2/15/17 | 1,465,000 | 1,274,550 | ||
9.25% 11/1/14 | 185,000 | 169,738 | ||
Qwest Corp.: | ||||
6.0263% 6/15/13 (m) | 70,000 | 64,750 | ||
7.5% 10/1/14 | 2,440,000 | 2,250,900 | ||
7.625% 6/15/15 | 1,850,000 | 1,711,250 | ||
SBC Communications, Inc.: | ||||
6.15% 9/15/34 | 350,000 | 325,697 | ||
6.45% 6/15/34 | 370,000 | 353,526 | ||
Sistema Capital SA 8.875% 1/28/11 (Reg. S) | 1,280,000 | 1,288,000 | ||
Sprint Capital Corp.: | ||||
6.875% 11/15/28 | 15,675,000 | 13,323,750 | ||
7.625% 1/30/11 | 1,010,000 | 1,010,000 | ||
8.375% 3/15/12 | 1,295,000 | 1,304,713 | ||
8.75% 3/15/32 | 815,000 | 792,588 | ||
Telecom Italia Capital SA 7.2% 7/18/36 | 9,915,000 | 9,117,834 | ||
Telefonica Emisiones SAU 7.045% 6/20/36 | 4,999,000 | 5,076,190 | ||
Time Warner Telecom Holdings, Inc. 9.25% 2/15/14 | 3,795,000 | 3,813,975 | ||
U.S. West Communications: | ||||
6.875% 9/15/33 | 890,000 | 658,600 | ||
7.5% 6/15/23 | 920,000 | 745,200 | ||
Verizon Communications, Inc.: | ||||
6.1% 4/15/18 | 6,000,000 | 5,984,862 | ||
6.25% 4/1/37 | 2,348,000 | 2,156,309 | ||
6.4% 2/15/38 | 7,621,000 | 7,090,990 | ||
6.9% 4/15/38 | 6,295,000 | 6,233,208 | ||
Verizon Global Funding Corp. 7.75% 12/1/30 | 5,296,000 | 5,635,315 | ||
| 135,690,492 | |||
Wireless Telecommunication Services - 0.5% | ||||
Cricket Communications, Inc. 10% 7/15/15 (h) | 1,755,000 | 1,772,550 | ||
Digicel Group Ltd.: | ||||
8.875% 1/15/15 (h) | 7,220,000 | 6,732,650 | ||
9.125% 1/15/15 pay-in-kind (h)(m) | 2,575,000 | 2,401,188 | ||
9.25% 9/1/12 (h) | 820,000 | 840,500 | ||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: | ||||
6.375% 6/15/15 | 1,525,000 | 1,441,125 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
DIRECTV Holdings LLC/DIRECTV Financing, Inc.: - continued | ||||
7.625% 5/15/16 (h) | $ 1,485,000 | $ 1,481,288 | ||
8.375% 3/15/13 | 3,395,000 | 3,509,581 | ||
Intelsat Jackson Holdings Ltd.: | ||||
9.5% 6/15/16 (h) | 4,755,000 | 4,766,888 | ||
11.5% 6/15/16 (h) | 765,000 | 799,425 | ||
Intelsat Subsidiary Holding Co. Ltd. 8.875% 1/15/15 (h) | 5,155,000 | 5,097,264 | ||
Millicom International Cellular SA 10% 12/1/13 | 3,110,000 | 3,281,050 | ||
Mobile Telesystems Finance SA 8% 1/28/12 (h) | 2,695,000 | 2,688,263 | ||
Nextel Communications, Inc.: | ||||
5.95% 3/15/14 | 650,000 | 520,000 | ||
6.875% 10/31/13 | 5,490,000 | 4,515,525 | ||
7.375% 8/1/15 | 970,000 | 788,125 | ||
Orascom Telecom Finance SCA 7.875% 2/8/14 (h) | 3,800,000 | 3,477,000 | ||
Pakistan Mobile Communications Ltd. 8.625% 11/13/13 (h) | 1,870,000 | 1,421,200 | ||
Rural Cellular Corp. 8.25% 3/15/12 | 360,000 | 372,600 | ||
Sprint Nextel Corp. 6% 12/1/16 | 3,260,000 | 2,974,750 | ||
Telecom Personal SA 9.25% 12/22/10 (h) | 4,220,000 | 4,177,800 | ||
Vimpel Communications: | ||||
8.375% 4/30/13 (Issued by VIP Finance Ireland Ltd. for Vimpel Communications) (h) | 3,055,000 | 2,963,350 | ||
9.125% 4/30/18 (Issued by VIP Finance Ireland Ltd. for Vimpel Communications) (h) | 1,150,000 | 1,098,250 | ||
| 57,120,372 | |||
TOTAL TELECOMMUNICATION SERVICES | 192,810,864 | |||
UTILITIES - 1.9% | ||||
Electric Utilities - 0.9% | ||||
Commonwealth Edison Co.: | ||||
5.4% 12/15/11 | 1,923,000 | 1,943,997 | ||
5.8% 3/15/18 | 10,485,000 | 10,212,726 | ||
6.15% 9/15/17 | 5,140,000 | 5,152,557 | ||
Duke Energy Carolinas LLC: | ||||
5.25% 1/15/18 | 4,710,000 | 4,670,554 | ||
6.05% 4/15/38 | 4,552,000 | 4,436,689 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
Edison Mission Energy: | ||||
7% 5/15/17 | $ 2,095,000 | $ 2,005,963 | ||
7.2% 5/15/19 | 3,810,000 | 3,667,125 | ||
7.625% 5/15/27 | 1,650,000 | 1,493,250 | ||
EDP Finance BV 6% 2/2/18 (h) | 5,953,000 | 5,904,584 | ||
Enel Finance International SA: | ||||
6.25% 9/15/17 (h) | 2,667,000 | 2,704,735 | ||
6.8% 9/15/37 (h) | 16,141,000 | 16,412,411 | ||
Energy Future Holdings: | ||||
10.875% 11/1/17 (h) | 4,420,000 | 4,519,450 | ||
11.25% 11/1/17 pay-in-kind (h)(m) | 4,680,000 | 4,586,400 | ||
Illinois Power Co. 6.125% 11/15/17 | 2,700,000 | 2,579,391 | ||
Intergen NV 9% 6/30/17 (h) | 4,595,000 | 4,686,900 | ||
IPALCO Enterprises, Inc. 7.25% 4/1/16 (h) | 4,440,000 | 4,395,600 | ||
Majapahit Holding BV 7.75% 10/17/16 | 840,000 | 802,200 | ||
Mirant Americas Generation LLC: | ||||
8.3% 5/1/11 | 1,060,000 | 1,078,550 | ||
8.5% 10/1/21 | 2,575,000 | 2,201,625 | ||
9.125% 5/1/31 | 340,000 | 292,400 | ||
National Power Corp. 6.875% 11/2/16 (h) | 2,005,000 | 1,949,863 | ||
Nevada Power Co. 6.5% 5/15/18 | 790,000 | 790,000 | ||
PPL Capital Funding, Inc. 6.7% 3/30/67 (m) | 2,290,000 | 1,929,641 | ||
Southern California Edison Co. 5.95% 2/1/38 | 3,750,000 | 3,719,903 | ||
Virginia Electric & Power Co. 5.4% 4/30/18 | 12,750,000 | 12,408,938 | ||
| 104,545,452 | |||
Gas Utilities - 0.1% | ||||
Dynegy Holdings, Inc.: | ||||
8.375% 5/1/16 | 3,070,000 | 3,000,925 | ||
8.75% 2/15/12 | 1,325,000 | 1,338,250 | ||
Intergas Finance BV: | ||||
6.375% 5/14/17 (Reg. S) | 1,250,000 | 1,093,750 | ||
6.875% 11/4/11 (Reg. S) | 2,170,000 | 2,094,050 | ||
Transportadora de Gas del Sur SA 7.875% 5/14/17 (h) | 2,580,000 | 2,031,750 | ||
| 9,558,725 | |||
Independent Power Producers & Energy Traders - 0.5% | ||||
AES Corp.: | ||||
7.75% 3/1/14 | 5,400,000 | 5,319,000 | ||
7.75% 10/15/15 | 3,805,000 | 3,757,438 | ||
Corporate Bonds - continued | ||||
| Principal | Value | ||
Nonconvertible Bonds - continued | ||||
UTILITIES - continued | ||||
Independent Power Producers & Energy Traders - continued | ||||
AES Corp.: - continued | ||||
8% 10/15/17 | $ 1,090,000 | $ 1,070,925 | ||
Allegheny Energy Supply Co. LLC 7.8% 3/15/11 | 9,060,000 | 9,331,800 | ||
Mirant North America LLC 7.375% 12/31/13 | 2,000,000 | 1,987,500 | ||
NRG Energy, Inc.: | ||||
7.25% 2/1/14 | 3,290,000 | 3,240,650 | ||
7.375% 2/1/16 | 3,750,000 | 3,684,375 | ||
7.375% 1/15/17 | 4,070,000 | 3,947,900 | ||
PPL Energy Supply LLC 6.5% 5/1/18 | 6,895,000 | 6,719,074 | ||
Reliant Energy, Inc.: | ||||
7.625% 6/15/14 | 5,230,000 | 5,073,100 | ||
7.875% 6/15/17 | 2,895,000 | 2,793,675 | ||
Tenaska Alabama Partners LP 7% 6/30/21 (h) | 453,070 | 423,621 | ||
TXU Corp. 5.55% 11/15/14 | 3,140,000 | 2,449,200 | ||
| 49,798,258 | |||
Multi-Utilities - 0.4% | ||||
Aquila, Inc. 11.875% 7/1/12 (m) | 155,000 | 179,025 | ||
CMS Energy Corp. 6.55% 7/17/17 | 5,620,000 | 5,342,749 | ||
Dominion Resources, Inc. 7.5% 6/30/66 (m) | 9,800,000 | 8,825,841 | ||
MidAmerican Energy Holdings, Co.: | ||||
5.75% 4/1/18 | 5,000,000 | 4,958,420 | ||
6.5% 9/15/37 | 17,430,000 | 17,388,813 | ||
NiSource Finance Corp.: | ||||
5.45% 9/15/20 | 1,650,000 | 1,408,923 | ||
6.8% 1/15/19 | 10,000,000 | 9,725,880 | ||
| 47,829,651 | |||
TOTAL UTILITIES | 211,732,086 | |||
TOTAL NONCONVERTIBLE BONDS | 1,812,973,499 | |||
TOTAL CORPORATE BONDS (Cost $1,904,437,007) | 1,824,565,110 | |||
U.S. Government and Government Agency Obligations - 12.0% | ||||
| Principal | Value | ||
U.S. Government Agency Obligations - 2.9% | ||||
Fannie Mae: | ||||
3.625% 2/12/13 (g) | $ 43,445,000 | $ 42,949,032 | ||
4.375% 7/17/13 (k) | 8,745,000 | 8,854,750 | ||
4.75% 11/19/12 | 24,650,000 | 25,491,748 | ||
5% 2/16/12 | 8,000,000 | 8,319,624 | ||
Freddie Mac: | ||||
3.5% 5/29/13 (g) | 73,300,000 | 71,484,506 | ||
4.125% 12/21/12 | 55,225,000 | 55,486,049 | ||
5.25% 7/18/11 (g) | 100,000,000 | 104,675,900 | ||
Tennessee Valley Authority 5.375% 4/1/56 | 385,000 | 394,932 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 317,656,541 | |||
U.S. Treasury Inflation Protected Obligations - 6.5% | ||||
U.S. Treasury Inflation-Indexed Notes: | ||||
1.625% 1/15/18 | 78,310,500 | 78,028,088 | ||
2% 1/15/14 (k) | 334,070,632 | 346,244,167 | ||
2% 7/15/14 | 75,430,550 | 78,314,711 | ||
2.375% 4/15/11 | 57,042,626 | 59,068,005 | ||
2.625% 7/15/17 | 124,540,740 | 134,954,818 | ||
3.5% 1/15/11 (k) | 25,136,600 | 26,733,544 | ||
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | 723,343,333 | |||
U.S. Treasury Obligations - 2.6% | ||||
U.S. Treasury Bonds 6.25% 5/15/30 | 22,776,000 | 28,409,507 | ||
U.S. Treasury Notes: | ||||
3.375% 6/30/13 (g) | 126,233,000 | 128,008,088 | ||
4.125% 8/31/12 | 35,285,000 | 36,925,188 | ||
4.5% 9/30/11 (k) | 91,855,000 | 96,885,531 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 290,228,314 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $1,293,596,571) | 1,331,228,188 | |||
U.S. Government Agency - Mortgage Securities - 13.8% | ||||
| ||||
Fannie Mae - 12.3% | ||||
3.736% 10/1/33 (m) | 1,656,106 | 1,653,023 | ||
4.36% 5/1/35 (m) | 2,457,990 | 2,469,144 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
| Principal | Value | ||
Fannie Mae - continued | ||||
4.378% 5/1/35 (m) | $ 2,547,427 | $ 2,561,002 | ||
4.5% 4/1/20 | 2,293,272 | 2,263,814 | ||
5% 8/1/18 to 3/1/23 | 22,398,232 | 22,321,970 | ||
5% 9/1/38 (i) | 100,000,000 | 96,052,390 | ||
5% 9/1/38 (i) | 138,000,000 | 132,552,298 | ||
5.29% 2/1/36 (m) | 2,085,980 | 2,115,611 | ||
5.303% 12/1/35 (m) | 1,189,471 | 1,205,710 | ||
5.5% 10/1/17 to 11/1/37 | 458,233,709 | 457,705,328 | ||
5.5% 9/1/23 (i)(j) | 24,000,000 | 24,201,442 | ||
5.5% 9/1/38 (i) | 100,000,000 | 98,701,220 | ||
5.5% 9/1/38 (i) | 100,000,000 | 98,701,220 | ||
5.616% 7/1/37 (m) | 1,335,609 | 1,359,396 | ||
6% 6/1/22 to 3/1/38 | 256,492,937 | 260,644,009 | ||
6% 9/1/38 (i) | 50,000,000 | 50,473,480 | ||
6.028% 4/1/36 (m) | 1,048,137 | 1,072,406 | ||
6.252% 6/1/36 (m) | 406,689 | 413,927 | ||
6.309% 4/1/36 (m) | 1,017,138 | 1,043,936 | ||
6.5% 12/1/34 to 8/1/37 | 30,501,592 | 31,546,999 | ||
6.5% 9/1/38 (i) | 50,000,000 | 51,402,855 | ||
6.5% 9/1/38 (i) | 18,000,000 | 18,505,028 | ||
TOTAL FANNIE MAE | 1,358,966,208 | |||
Freddie Mac - 1.5% | ||||
4.392% 1/1/35 (m) | 4,843,444 | 4,857,635 | ||
4.617% 2/1/35 (m) | 4,994,663 | 5,020,296 | ||
4.737% 10/1/35 (m) | 10,754,965 | 10,770,076 | ||
5.5% 11/1/17 | 3,873,871 | 3,942,672 | ||
5.735% 10/1/35 (m) | 735,744 | 747,066 | ||
5.853% 6/1/36 (m) | 1,233,777 | 1,256,531 | ||
5.984% 7/1/37 (m) | 6,129,619 | 6,253,762 | ||
6% 10/1/35 to 3/1/38 | 86,575,645 | 87,373,379 | ||
6% 9/1/38 (i) | 47,000,000 | 47,367,963 | ||
6.045% 6/1/36 (m) | 1,160,487 | 1,184,320 | ||
6.063% 4/1/36 (m) | 1,909,574 | 1,948,759 | ||
6.11% 6/1/36 (m) | 1,161,978 | 1,187,224 | ||
TOTAL FREDDIE MAC | 171,909,683 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,525,546,529) | 1,530,875,891 | |||
Asset-Backed Securities - 0.6% | ||||
| Principal | Value | ||
ACE Securities Corp. Home Equity Loan Trust Series 2005-SD1 Class A1, 2.8719% 11/25/50 (m) | $ 14,187 | $ 11,462 | ||
Advanta Business Card Master Trust Series 2007-D1 | 2,590,000 | 1,459,740 | ||
Airspeed Ltd. Series 2007-1A Class C1, 4.9669% 6/15/32 (h)(m) | 4,731,465 | 2,223,788 | ||
AmeriCredit Prime Automobile Receivables Trust Series 2007-1 Class E, 6.96% 3/31/16 (h) | 2,215,000 | 1,674,511 | ||
Ameriquest Mortgage Securities, Inc. Series 2004-R8 Class M9, 5.2219% 9/25/34 (m) | 177,014 | 16,622 | ||
Anthracite CDO II Ltd. Series 2002-2A: | ||||
Class F, 7.6% 12/24/37 (h) | 160,000 | 139,200 | ||
Class G, 9.75% 12/24/37 (h) | 210,000 | 180,600 | ||
Anthracite CDO III Ltd./Anthracite CDO III Corp. Series 2004-1A Class A, 2.8319% 3/23/19 (h)(m) | 295,980 | 232,821 | ||
Capital Auto Receivables Asset Trust Series 2006-1: | ||||
Class C, 5.55% 1/18/11 | 1,500,000 | 1,497,792 | ||
Class D, 7.16% 1/15/13 (h) | 160,000 | 149,384 | ||
Capital Trust RE CDO Ltd./Capital Trust RE CDO Corp. Series 2005-3A Class A2, 5.16% 6/25/35 (h) | 460,000 | 386,400 | ||
CapitalSource Real Estate Loan Trust Series 2006-1A Class A2A, 3.0675% 1/20/37 (h)(m) | 250,000 | 165,000 | ||
Capmark VII Ltd. Series 2006-7A Class H, 4.0169% 8/20/36 (h)(m) | 500,000 | 150,000 | ||
Carrington Mortgage Loan Trust Series 2006-NC3 Class M10, 4.4719% 8/25/36 (h)(m) | 290,000 | 13,862 | ||
Concord Real Estate CDO Ltd./LLC Series 2006-1A | 250,000 | 65,000 | ||
Countrywide Home Loan Trust Series 2006-13N Class N, 7% 8/25/37 (h) | 480,708 | 22,883 | ||
Crest Clarendon Street Ltd./Crest Clarendon Corp. Series 2002-1A: | ||||
Class B1, 6.065% 12/28/35 (h) | 500,000 | 425,000 | ||
Class B2, 4.0213% 12/28/35 (h)(m) | 500,000 | 420,000 | ||
Crest Dartmouth Street Ltd./Crest Dartmouth Street Corp. Series 2003-1A Class D, 9% 6/28/38 (h) | 100,000 | 85,000 | ||
DB Master Finance LLC Series 2006-1 Class M1, 8.285% 6/20/31 (h) | 235,000 | 176,250 | ||
Ford Credit Auto Owner Trust: | ||||
Series 2006-B Class D, 7.26% 2/15/13 (h) | 1,175,000 | 1,087,713 | ||
Series 2006-C Class D, 6.89% 5/15/13 (h) | 915,000 | 828,746 | ||
Series 2007-A Class D, 7.05% 12/15/13 (h) | 970,000 | 846,502 | ||
GS Auto Loan Trust Series 2006-1 Class D, 6.25% 1/15/14 (h) | 830,696 | 785,692 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
GSAMP Trust Series 2004-AR1 Class B4, 5% 6/25/34 (h)(m) | $ 421,734 | $ 37,165 | ||
Guggenheim Structured Real Estate Funding Ltd. Series 2006-3 Class E, 4.1219% 9/25/46 (h)(m) | 250,000 | 92,500 | ||
Home Equity Asset Trust Series 2006-3N Class B, 6.5% 8/27/36 (h) | 250,000 | 25 | ||
Kent Funding III Ltd. Series 2006-3A Class D, 5.8988% 10/29/47 (m) | 267,490 | 2,675 | ||
Leafs CMBS I Ltd. Series 2002-1A Class D, 4.13% 11/20/37 (h) | 155,000 | 114,169 | ||
Marathon Real Estate CDO Ltd. Series 2006-1A Class B, 2.9019% 5/25/46 (h)(m) | 250,000 | 134,727 | ||
Merna Reinsurance Ltd. Series 2007-1 Class B, 4.5506% 6/30/12 (h)(m) | 5,400,000 | 5,187,240 | ||
N-Star Real Estate CDO Ltd. Series 1A: | ||||
Class B1, 4.4844% 8/28/38 (h)(m) | 195,000 | 163,800 | ||
Class C1B, 7.696% 8/28/38 (h) | 63,000 | 44,781 | ||
Newcastle CDO VIII Series 2006-8A Class 10, 4.7219% 11/1/52 (h)(m) | 250,000 | 17,500 | ||
Park Place Securities, Inc. Series 2005-WHQ2 Class M7, 3.7219% 5/25/35 (m) | 134,000 | 7,705 | ||
Prima Capital CDO Ltd./Prima Capital CDO Corp. Series 2005-1A Class A2, 4.646% 7/24/39 (h) | 353,271 | 323,905 | ||
Residential Asset Securities Corp. Series 2007-KS2 Class AI1, 2.5419% 2/25/37 (m) | 2,445,212 | 2,384,081 | ||
Resource Real Estate Funding CDO Series 2007-1A | 250,000 | 92,500 | ||
ROCK 1 CRE CDO LLC Series 2006-1A Class H, 4.0763% 12/15/26 (h)(m) | 185,000 | 64,750 | ||
SIRENS B.V. Series 2007-2 Class A1, 4.5881% 4/13/10 (h)(m) | 10,000,000 | 8,512,000 | ||
Structured Asset Securities Corp.: | ||||
Series 2006-BC1 Class B1, 4.9719% 3/25/36 (h)(m) | 80,986 | 1,013 | ||
Series 2007-BC4 Class A3, 2.7219% 11/25/37 (m) | 15,977,484 | 14,159,822 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 2.9169% 3/15/11 (h)(m) | 14,070,000 | 14,045,814 | ||
Swift Master Auto Receivables Trust Series 2007-1 Class B, 2.6869% 6/15/12 (m) | 3,285,000 | 2,728,156 | ||
TIAA Real Estate CDO Ltd./TIAA Real Estate CDO Corp.: | ||||
Series 2002-1A: | ||||
Class IIFX, 6.77% 5/22/37 (h) | 225,000 | 202,500 | ||
Class IV, 6.84% 5/22/37 (h) | 235,000 | 195,293 | ||
Series 2003-1A Class B2, 5.4802% 12/28/38 (h) | 100,000 | 80,000 | ||
Asset-Backed Securities - continued | ||||
| Principal | Value | ||
Wachovia Auto Loan Owner Trust Series 2006-2A | $ 1,390,000 | $ 735,551 | ||
Wachovia Ltd./Wachovia LLC Series 2006-1A: | ||||
Class F, 3.9544% 9/25/26 (h)(m) | 250,000 | 76,275 | ||
Class G, 4.1544% 9/25/26 (h)(m) | 250,000 | 60,725 | ||
WaMu Asset-Backed Certificates Series 2006-HE5 Class B1, 4.9719% 10/25/36 (h)(m) | 1,330,000 | 211,503 | ||
Wrightwood Capital Real Estate CDO Ltd. Series 2005-1A Class D, 3.6613% 11/21/40 (h)(m) | 305,000 | 146,400 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $74,672,777) | 62,866,543 | |||
Collateralized Mortgage Obligations - 0.8% | ||||
| ||||
Private Sponsor - 0.2% | ||||
ABN AMRO Mortgage Corp.: | ||||
Series 2003-2 Class B4, 5.3302% 3/25/18 (m) | 178,866 | 98,376 | ||
Series 2003-9 Class B5, 4.5164% 8/25/18 (h) | 301,381 | 75,345 | ||
Banc of America Mortgage Securities, Inc. Series 2004-7 Class 15B4, 5.3052% 8/25/19 (h)(m) | 75,938 | 11,391 | ||
Bayview Commercial Asset Trust Series 2006-3A Class IO, 1.1688% 10/25/36 (m)(o) | 14,682,247 | 1,262,673 | ||
Chase Mortgage Finance Trust Series 2007-A1 Class 1A5, 4.3742% 2/25/37 (m) | 1,825,663 | 1,725,252 | ||
Countrywide Alternative Loan Trust Series 2006-OC5N Class N, 7.25% 7/25/37 (h) | 78,237 | 1,234 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2003-28 Class B3, 5.5% 8/25/33 | 91,974 | 36,790 | ||
Series 2003-35 Class B, 4.639% 9/25/18 (m) | 163,761 | 81,881 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
floater Series 2007-AR7 Class 2A1, 4.5993% 11/25/34 (m) | 1,895,865 | 1,763,186 | ||
Series 2003-17 Class B4, 5.389% 6/25/33 (h)(m) | 382,239 | 152,896 | ||
Series 2004-3 Class DB4, 5.842% 4/25/34 (m) | 116,739 | 2,918 | ||
Diversified REIT Trust Series 1999-1A: | ||||
Class F, 6.78% 3/18/11 (h)(m) | 250,000 | 249,541 | ||
Class G, 6.78% 3/18/11 (h)(m) | 250,000 | 248,894 | ||
GMAC Commercial Mortgage Securities, Inc. Series 1993-C3 Class L, 6.974% 8/15/36 (h) | 282,731 | 105,003 | ||
GMAC Mortgage Loan Trust Series 2003-J10 Class B2, 4.75% 1/25/19 (h) | 154,881 | 46,464 | ||
JPMorgan Mortgage Trust Series 2006-A2 Class 5A1, 3.7741% 11/25/33 (m) | 4,120,699 | 3,884,418 | ||
Collateralized Mortgage Obligations - continued | ||||
| Principal | Value | ||
Private Sponsor - continued | ||||
LB Commercial Conduit Mortgage Trust Series 1998-C4 Class F, 6% 10/15/35 (h) | $ 125,000 | $ 122,954 | ||
Merrill Lynch Floating Trust floater Series 2006-1 Class TM, 2.9669% 6/15/22 (h)(m) | 8,861,703 | 7,886,916 | ||
Merrill Lynch Mortgage Trust Series 2002-MW1 Class E, 6.219% 7/12/34 (h) | 90,000 | 79,738 | ||
Nomura Home Equity Loan Trust floater Series 2006-FM2 Class B1, 4.7719% 7/25/36 (h)(m) | 3,946,782 | 48,940 | ||
Provident Funding Mortgage Loan Trust Series 2005-2 Class 3A, 4.7027% 10/25/35 (m) | 3,236,118 | 2,982,908 | ||
RESI Finance LP/RESI Finance DE Corp. floater Series 2003-CB1: | ||||
Class B4, 4.1131% 6/10/35 (h)(m) | 27,450 | 20,662 | ||
Class B5, 4.7131% 6/10/35 (h)(m) | 20,588 | 16,361 | ||
Class B6, 5.2131% 6/10/35 (h)(m) | 10,294 | 7,417 | ||
RESIX Finance Ltd. floater Series 2007-A Class BB, 5.8169% 2/15/39 (h)(m) | 495,088 | 71,459 | ||
Structured Asset Securities Corp. floater: | ||||
Series 2005-AR1 Class B1, 4.4719% 9/25/35 (h)(m) | 530,000 | 5,300 | ||
Series 2006-BC5 Class B, 4.9719% 12/25/36 (h)(m) | 1,050,000 | 49,035 | ||
Wells Fargo Mortgage Backed Securities Trust: | ||||
Series 2003-12 Class B6, 4.75% 11/25/18 (h) | 295,440 | 59,088 | ||
Series 2005-AR12 Class 2A6, 4.3173% 7/25/35 (m) | 555,987 | 507,294 | ||
Series 2005-AR3 Class 2A1, 4.2121% 3/25/35 (m) | 1,017,735 | 930,120 | ||
TOTAL PRIVATE SPONSOR | 22,534,454 | |||
U.S. Government Agency - 0.6% | ||||
Fannie Mae subordinate REMIC pass-thru certificates: | ||||
planned amortization class: | ||||
Series 2001-68 Class QZ, 5.5% 12/25/16 | 4,460,815 | 4,554,042 | ||
Series 2002-9 Class PC, 6% 3/25/17 | 669,747 | 690,279 | ||
sequential payer Series 2002-77 Class CB, 5% 12/25/17 | 48,250,000 | 48,374,871 | ||
Freddie Mac Multi-class participation certificates guaranteed sequential payer: | ||||
Series 2467 Class NB, 5% 7/15/17 | 5,495,000 | 5,591,020 | ||
Series 2528 Class HN, 5% 11/15/17 | 5,515,000 | 5,609,686 | ||
TOTAL U.S. GOVERNMENT AGENCY | 64,819,898 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $92,764,757) | 87,354,352 | |||
Commercial Mortgage Securities - 2.1% | ||||
| Principal | Value | ||
Asset Securitization Corp.: | ||||
Series 1996-D2 Class B1A, 8.7715% 2/14/29 (h)(m) | $ 750,000 | $ 708,978 | ||
Series 1997-D4: | ||||
Class B2, 7.525% 4/14/29 | 1,494,104 | 1,544,643 | ||
Class B5, 7.525% 4/14/29 | 129,000 | 106,161 | ||
Banc of America Commercial Mortgage Trust Series 2008-1 Class D, 6.2005% 2/10/18 (h)(m) | 125,000 | 86,677 | ||
Banc of America Commercial Mortgage, Inc.: | ||||
sequential payer Series 2007-1 Class A2, 5.381% 1/15/49 | 4,040,000 | 3,890,705 | ||
Series 2003-2 Class BWF, 7.55% 10/11/37 (h) | 95,407 | 106,345 | ||
Series 2004-1 Class F, 5.279% 11/10/39 (h) | 185,000 | 147,979 | ||
Series 2004-5 Class G, 5.3905% 11/10/41 (h)(m) | 135,000 | 77,759 | ||
Bear Stearns Commercial Mortgage Securities Trust: | ||||
Series 1999-C1: | ||||
Class G, 5.64% 2/14/31 (h) | 60,000 | 51,779 | ||
Class I, 5.64% 2/14/31 (h) | 170,000 | 42,500 | ||
Series 2007-BBA8: | ||||
Class K, 3.6669% 3/15/22 (h)(m) | 105,000 | 78,750 | ||
Class L, 4.3669% 3/15/22 (h)(m) | 214,000 | 139,100 | ||
Chase Commercial Mortgage Securities Corp. Series 1998-2 Class J, 6.39% 11/18/30 (h) | 490,787 | 171,776 | ||
Citigroup Commercial Mortgage Trust: | ||||
sequential payer Series 2006-C5 Class A4, 5.431% 10/15/49 | 9,955,000 | 9,095,320 | ||
Series 2006-FL2 Class CNP3, 3.6669% 8/16/21 (h)(m) | 5,182,308 | 4,605,776 | ||
Series 2007-C6 Class A1, 5.622% 12/10/49 (m) | 9,554,003 | 9,383,581 | ||
Series 2007-FL3A Class A2, 2.6069% 4/15/22 (h)(m) | 6,878,000 | 6,190,200 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust sequential payer: | ||||
Series 2006-CD2 Class A4, 5.3623% 1/15/46 (m) | 10,435,000 | 9,600,063 | ||
Series 2007-CD4 Class A2A, 5.237% 12/11/49 | 10,000,000 | 9,645,299 | ||
Claregold Trust Series 2007-2A: | ||||
Class F, 5.01% 5/15/44 (m) | CAD | 138,000 | 70,594 | |
Class G, 5.01% 5/15/44 (m) | CAD | 30,000 | 13,544 | |
Class H, 5.01% 5/15/44 (m) | CAD | 20,000 | 8,377 | |
Class J, 5.01% 5/15/44 (m) | CAD | 20,000 | 7,484 | |
Class K, 5.01% 5/15/44 (m) | CAD | 10,000 | 3,360 | |
Class L, 5.01% 5/15/44 (m) | CAD | 36,000 | 10,911 | |
Class M, 5.01% 5/15/44 (m) | CAD | 165,000 | 36,961 | |
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
COMM pass-thru certificates Series 2001-J2A Class F, 7.0311% 7/16/34 (h)(m) | $ 190,000 | $ 152,210 | ||
Commercial Mortgage Acceptance Corp. Series 1998-C1 Class G, 6.21% 7/15/31 (h) | 500,000 | 364,649 | ||
Commercial Mortgage Asset Trust Series 1999-C1 Class F, 6.25% 1/17/32 (h) | 550,000 | 428,166 | ||
Credit Suisse Commercial Mortgage Trust sequential payer Series 2007-C2 Class A2, 5.448% 1/15/49 (m) | 10,150,000 | 9,806,041 | ||
Credit Suisse First Boston Mortgage Securities Corp.: | ||||
Series 1997-C2 Class F, 7.46% 1/17/35 (m) | 500,000 | 491,409 | ||
Series 1998-C1 Class H, 6% 5/17/40 (h) | 130,000 | 26,000 | ||
Series 2001-SPGA Class C, 6.809% 8/13/18 (h) | 190,000 | 174,908 | ||
Series 2003-C3: | ||||
Class D, 4.131% 5/15/38 | 120,000 | 99,684 | ||
Class J, 4.231% 5/15/38 (h) | 300,000 | 196,542 | ||
Credit Suisse Mortgage Capital Certificates floater Series 2007-TFL1 Class L, 4.3669% 2/15/22 (h)(m) | 100,000 | 65,000 | ||
Crest Ltd. Series 2001-1A Class C, 9% 2/25/34 (h) | 500,657 | 471,861 | ||
Deutsche Mortgage & Asset Receiving Corp. Series 1998-C1 Class J, 6.22% 6/15/31 | 330,000 | 222,637 | ||
DLJ Commercial Mortgage Corp. Series 1998-CG1 Class B4, 7.2174% 6/10/31 (h)(m) | 365,000 | 389,036 | ||
First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 7.9571% 4/29/39 (h)(m) | 100,417 | 100,417 | ||
First Union National Bank-Bank of America Commercial Mortgage Trust Series 2001-C1 Class H, 7.039% 3/15/33 (h) | 50,000 | 46,519 | ||
GE Capital Commercial Mortgage Corp. Series 2002-1A Class H, 7.3918% 12/10/35 (h)(m) | 55,000 | 52,959 | ||
Ginnie Mae guaranteed REMIC pass-thru securities sequential payer Series 2003-47 Class C, 4.227% 10/16/27 | 3,851,221 | 3,848,756 | ||
Global Signal Trust II Series 2004-2A Class E, 5.587% 12/15/14 (h) | 85,000 | 82,386 | ||
Global Signal Trust III Series 2006-1: | ||||
Class D, 6.052% 2/15/36 (h) | 80,000 | 73,382 | ||
Class E, 6.495% 2/15/36 (h) | 40,000 | 36,260 | ||
Class F, 7.036% 2/15/36 | 200,000 | 179,708 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
Series 1997-C1 Class H, 6.6% 7/15/29 | 509,114 | 290,195 | ||
Series 1997-C2 Class G, 6.75% 4/15/29 (m) | 500,000 | 460,000 | ||
Series 1999-C1 Class F, 6.02% 5/15/33 (h) | 500,000 | 425,155 | ||
Series 1999-C2I Class K, 6.481% 9/15/33 (p) | 285,000 | 156,750 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
GMAC Commercial Mortgage Securities, Inc.: - continued | ||||
Series 1999-C3: | ||||
Class J, 6.974% 8/15/36 (h) | $ 226,000 | $ 214,003 | ||
Class K, 6.974% 8/15/36 (h) | 427,000 | 256,114 | ||
Series 2000-C1: | ||||
Class G, 7% 3/15/33 (h) | 120,000 | 117,843 | ||
Class H, 7% 3/15/33 (h) | 100,000 | 96,903 | ||
Class K, 7% 3/15/33 (h) | 90,000 | 81,325 | ||
Greenwich Capital Commercial Funding Corp.: | ||||
Series 2002-C1 Class H, 5.903% 1/11/35 (h) | 86,000 | 74,412 | ||
Series 2003-C2 Class J, 5.234% 11/5/13 (h)(m) | 250,000 | 162,650 | ||
GS Mortgage Securities Corp. II: | ||||
floater: | ||||
Series 2006-FL8A Class J, 4.2113% 6/6/20 (h)(m) | 250,000 | 157,500 | ||
Series 2007-EOP Class L, 3.7613% 3/1/20 (h)(m) | 400,000 | 387,252 | ||
Series 1998-GLII Class G, 7.751% 4/13/31 (h)(m) | 600,000 | 510,060 | ||
Series 2006-RR2: | ||||
Class M, 5.6903% 6/1/46 (h)(m) | 100,000 | 20,000 | ||
Class N, 5.6903% 6/1/46 (h)(m) | 100,000 | 18,000 | ||
GS Mortgage Securities Trust sequential payer Series 2007-GG10: | ||||
Class A2, 5.778% 8/10/45 | 12,655,000 | 12,284,910 | ||
Class A4, 5.7992% 8/10/45 (m) | 10,000,000 | 9,164,110 | ||
JPMorgan Chase Commercial Mortgage Securities Corp.: | ||||
Series 2002-C1 Class E, 6.135% 7/12/37 (h) | 180,000 | 169,098 | ||
Series 2002-CIB4: | ||||
Class E, 6.7139% 5/12/34 (h)(m) | 190,000 | 185,870 | ||
Class F, 7.1059% 5/12/34 (h)(m) | 78,000 | 74,006 | ||
Series 2003-C1 Class CM1, 5.6896% 1/12/37 (h)(m) | 213,882 | 193,764 | ||
JPMorgan Chase Commercial Mortgage Securities Trust: | ||||
floater Series 2006-FLA2 Class A2, 2.5969% 11/15/18 (h)(m) | 10,000,000 | 8,600,000 | ||
Series 2004-CBX Class D, 5.097% 1/12/37 (m) | 65,000 | 51,441 | ||
Series 2004-LN2 Class D, 5.206% 7/15/41 (m) | 420,000 | 320,708 | ||
Series 2005-LDP3 Class A3, 4.959% 8/15/42 | 10,750,000 | 10,377,135 | ||
JPMorgan Commercial Mortgage Finance Corp. Series 1999-C7 Class F, 6% 10/15/35 (h) | 95,000 | 94,395 | ||
LB Commercial Conduit Mortgage Trust Series 1998-C4 Class G, 5.6% 10/15/35 (h) | 250,000 | 232,335 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-C6 Class A2, 5.262% 9/15/39 (m) | $ 8,375,000 | $ 8,178,077 | ||
Series 2006-C7 Class A1, 5.279% 11/15/38 | 895,540 | 887,632 | ||
Series 2007-C1 Class A3, 5.398% 2/15/40 | 10,000,000 | 9,265,471 | ||
Series 2007-C6 Class A2, 5.845% 7/15/40 | 10,000,000 | 9,727,937 | ||
Series 2002-C1 Class J, 6.95% 3/15/34 (h)(m) | 86,000 | 71,053 | ||
Series 2004-C2: | ||||
Class G, 4.595% 3/15/36 (h)(m) | 165,000 | 124,608 | ||
Class K, 5.0914% 3/15/36 (h)(m) | 500,000 | 262,420 | ||
LNR CFL Series 2004-1: | ||||
Class I10, 7.72% 2/26/28 (h) | 180,000 | 178,560 | ||
Class I11, 7.72% 2/26/28 (h) | 100,000 | 98,850 | ||
Class I12, 7.72% 2/26/28 (h) | 100,000 | 98,500 | ||
Class I9, 7.72% 2/26/28 (h) | 153,200 | 152,051 | ||
Merrill Lynch Mortgage Investors Trust: | ||||
Series 1997-C2 Class F, 6.25% 12/10/29 (m) | 620,000 | 615,977 | ||
Series 1998-C3 Class E, 6.8541% 12/15/30 (m) | 155,000 | 157,329 | ||
Merrill Lynch Mortgage Trust: | ||||
Series 2004-KEY2 Class K, 5.091% 8/12/39 (h)(m) | 100,000 | 36,355 | ||
Series 2006-KEY2 Class L, 5.091% 8/12/39 (h) | 300,000 | 104,836 | ||
Merrill Lynch-CFC Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2006-4 Class A2, 5.112% 12/12/49 (m) | 1,075,000 | 1,039,173 | ||
Series 2007-5 Class A3, 5.364% 8/12/48 | 10,675,000 | 9,683,848 | ||
Series 2006-2 Class A4, 5.9094% 6/12/46 (m) | 15,250,000 | 14,513,646 | ||
Morgan Stanley Capital I Trust: | ||||
sequential payer: | ||||
Series 2004-RR2 Class A2, 5.45% 10/28/33 (h) | 333,394 | 311,971 | ||
Series 2007-IQ13 Class A4, 5.364% 3/15/44 | 10,000,000 | 8,866,256 | ||
Series 2007-T25 Class A2, 5.507% 11/12/49 | 1,555,000 | 1,462,024 | ||
Series 2004-IQ7 Class E, 5.4043% 6/15/38 (h)(m) | 120,000 | 83,328 | ||
Series 2005-HQ7: | ||||
Class E, 5.208% 11/14/42 (m) | 75,000 | 53,394 | ||
Class F, 5.208% 11/14/42 (m) | 150,000 | 103,952 | ||
Series 2007-HQ12 Class A2, 5.6325% 4/12/49 (m) | 12,880,000 | 12,467,535 | ||
Morgan Stanley Dean Witter Capital I Trust Series 2003-TOP9 Class E, 5.7122% 11/13/36 (h)(m) | 70,000 | 56,070 | ||
Mortgage Capital Funding, Inc. Series 1998-MC3 | 131,114 | 130,249 | ||
NationsLink Funding Corp. Series 1998-2 Class J, 5% 8/20/30 (h) | 160,000 | 105,475 | ||
Commercial Mortgage Securities - continued | ||||
| Principal | Value | ||
Providence Place Group Ltd. Partnership Series 2000-C1 Class A2, 7.75% 7/20/28 | $ 411,182 | $ 401,402 | ||
Real Estate Asset Liquidity Trust: | ||||
Series 2006-2: | ||||
Class F, 4.456% 9/12/38 (h) | CAD | 107,000 | 82,647 | |
Class G, 4.456% 9/12/38 (h) | CAD | 54,000 | 41,014 | |
Class H, 4.456% 9/12/38 (h) | CAD | 36,000 | 26,444 | |
Class J, 4.456% 9/12/38 (h) | CAD | 36,000 | 22,423 | |
Class K, 4.456% 9/12/38 (h) | CAD | 18,000 | 10,133 | |
Class L, 4.456% 9/12/38 (h) | CAD | 26,000 | 13,665 | |
Class M, 4.456% 9/12/38 (h) | CAD | 130,000 | 36,429 | |
Series 2007-1: | ||||
Class F, 4.57% 4/12/23 | CAD | 126,000 | 96,874 | |
Class G, 4.57% 4/12/23 | CAD | 42,000 | 31,130 | |
Class H, 4.57% 4/12/23 | CAD | 42,000 | 28,673 | |
Class J, 4.57% 4/12/23 | CAD | 42,000 | 25,623 | |
Class K, 4.57% 4/12/23 | CAD | 21,000 | 12,031 | |
Class L, 4.57% 4/12/23 | CAD | 63,000 | 33,927 | |
Class M, 4.57% 4/12/23 | CAD | 185,000 | 54,288 | |
Salomon Brothers Mortgage Securities VII, Inc.: | ||||
Series 2001-C1 Class E, 6.31% 12/18/35 | 135,000 | 129,679 | ||
Series 2001-MMA: | ||||
Class E6, 6.5% 2/18/34 (h)(m) | 165,000 | 155,284 | ||
Class F6, 6.5% 2/18/34 (h)(m) | 37,000 | 34,172 | ||
SBA CMBS Trust Series 2006-1A Class J, 7.825% 11/15/36 (h) | 90,000 | 81,874 | ||
Structured Asset Securities Corp. Series 1997-LLI | 170,000 | 167,928 | ||
UBS Commercial Mortgage Trust Series 2007-FL1: | ||||
Class F, 3.0419% 9/15/09 (h)(m) | 110,000 | 94,600 | ||
Class G, 3.0419% 9/15/09 (h)(m) | 200,000 | 170,000 | ||
Wachovia Bank Commercial Mortgage Trust: | ||||
sequential payer: | ||||
Series 2007-C30 Class A4, 5.305% 12/15/43 | 8,045,000 | 7,380,171 | ||
Series 2007-C32 Class A2, 5.7357% 6/15/49 (m) | 13,285,000 | 12,881,485 | ||
Series 2006-C23 Class A5, 5.416% 1/15/45 (m) | 7,870,000 | 7,230,913 | ||
Series 2007-C30 Class B, 5.463% 12/15/43 (m) | 10,505,000 | 6,711,899 | ||
Wachovia Ltd./Wachovia LLC Series 2006-1 Class 1ML, 10.7025% 9/25/26 (h)(m) | 400,000 | 140,000 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $243,154,443) | 233,240,371 | |||
Municipal Securities - 0.3% | ||||
| Principal | Value | ||
Connecticut Gen. Oblig. Series 2007 B, 5% 5/1/15 | $ 10,000,000 | $ 11,039,800 | ||
Montgomery County Gen. Oblig.: | ||||
(Consolidated Pub. Impt. Proj.) Series A, 5% 5/1/13 | 3,300,000 | 3,604,326 | ||
Series A, 5% 1/1/12 | 11,025,000 | 11,895,093 | ||
Ohio Gen. Oblig. (Common Schools Proj.) Series 2006 D, 5% 9/15/12 | 10,195,000 | 11,068,508 | ||
TOTAL MUNICIPAL SECURITIES (Cost $37,434,862) | 37,607,727 | |||
Foreign Government and Government Agency Obligations - 1.2% | ||||
| ||||
Argentine Republic: | ||||
discount (with partial capitalization through 12/31/13) 8.28% 12/31/33 | 2,764,725 | 2,059,720 | ||
par 1.33% 12/31/38 (f) | 3,405,000 | 1,089,600 | ||
7% 3/28/11 | 17,450,000 | 14,648,790 | ||
7% 9/12/13 | 17,420,000 | 12,559,336 | ||
Brazilian Federative Republic: | ||||
6% 1/17/17 | 505,000 | 517,625 | ||
7.125% 1/20/37 | 140,000 | 156,100 | ||
8.25% 1/20/34 | 410,000 | 510,450 | ||
8.75% 2/4/25 | 280,000 | 351,400 | ||
12.25% 3/6/30 | 895,000 | 1,519,263 | ||
12.75% 1/15/20 | 490,000 | 764,400 | ||
Central Bank of Nigeria promissory note 5.092% 1/5/10 | 412,312 | 395,591 | ||
Colombian Republic 7.375% 9/18/37 | 1,830,000 | 2,008,425 | ||
Democratic Socialist Republic of Sri Lanka 8.25% 10/24/12 (h) | 1,385,000 | 1,260,350 | ||
Dominican Republic: | ||||
3.6713% 8/30/24 (m) | 1,100,000 | 1,057,375 | ||
9.04% 1/23/18 (h) | 3,120,449 | 3,190,659 | ||
9.5% 9/27/11 (Reg. S) | 1,606,150 | 1,638,273 | ||
Ecuador Republic: | ||||
5% 2/28/25 | 218,000 | 146,878 | ||
10% 8/15/30 (Reg. S) | 4,550,000 | 4,026,750 | ||
12% 11/15/12 (Reg. S) | 626,280 | 629,411 | ||
Gabonese Republic 8.2% 12/12/17 (h) | 2,580,000 | 2,657,400 | ||
Georgia Republic 7.5% 4/15/13 | 460,000 | 414,000 | ||
Ghana Republic 8.5% 10/4/17 (h) | 2,130,000 | 2,114,025 | ||
Indonesian Republic: | ||||
6.625% 2/17/37 (h) | 1,475,000 | 1,290,625 | ||
6.75% 3/10/14 (h) | 510,000 | 515,100 | ||
Foreign Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
Indonesian Republic: - continued | ||||
6.75% 3/10/14 (Reg. S) | $ 315,000 | $ 318,150 | ||
7.5% 1/15/16 (h) | 485,000 | 505,031 | ||
7.75% 1/17/38 (h) | 1,245,000 | 1,232,550 | ||
8.5% 10/12/35 (h) | 650,000 | 696,345 | ||
8.5% 10/12/35 (Reg. S) | 735,000 | 787,406 | ||
Islamic Republic of Pakistan: | ||||
6.75% 2/19/09 | 3,520,000 | 3,344,000 | ||
7.125% 3/31/16 (h) | 1,450,000 | 942,500 | ||
Lebanese Republic: | ||||
6.1088% 11/30/09 (Reg. S) (m) | 1,645,000 | 1,620,325 | ||
7.125% 3/5/10 | 250,000 | 249,688 | ||
7.5% 8/2/11 | 1,325,000 | 1,301,813 | ||
7.75% 9/7/12 | 400,000 | 396,000 | ||
7.875% 5/20/11 (Reg. S) | 1,080,000 | 1,073,250 | ||
8.625% 6/20/13 (Reg. S) | 3,495,000 | 3,521,213 | ||
9% 5/2/14 | 360,000 | 367,650 | ||
Philippine Republic: | ||||
9.5% 2/2/30 | 1,375,000 | 1,763,438 | ||
10.625% 3/16/25 | 1,365,000 | 1,861,587 | ||
Republic of Fiji 6.875% 9/13/11 | 890,000 | 801,000 | ||
Republic of Serbia 3.75% 11/1/24 (f)(h) | 2,935,000 | 2,744,225 | ||
Russian Federation: | ||||
7.5% 3/31/30 (Reg. S) | 8,990,095 | 10,013,168 | ||
12.75% 6/24/28 (Reg. S) | 1,490,000 | 2,615,397 | ||
Turkish Republic: | ||||
6.75% 4/3/18 | 1,965,000 | 1,964,607 | ||
6.875% 3/17/36 | 3,285,000 | 3,070,161 | ||
7% 9/26/16 | 1,390,000 | 1,422,943 | ||
7.25% 3/15/15 | 765,000 | 800,190 | ||
7.25% 3/5/38 | 1,350,000 | 1,300,725 | ||
7.375% 2/5/25 | 2,200,000 | 2,233,440 | ||
11.875% 1/15/30 | 1,085,000 | 1,636,940 | ||
Ukraine Government: | ||||
6.385% 6/26/12 (h) | 2,240,000 | 2,080,512 | ||
6.75% 11/14/17 (h) | 4,290,000 | 3,635,775 | ||
United Mexican States: | ||||
7.5% 4/8/33 | 700,000 | 816,200 | ||
8.3% 8/15/31 | 420,000 | 528,150 | ||
Uruguay Republic 8% 11/18/22 | 2,431,902 | 2,583,896 | ||
Venezuelan Republic: | ||||
3.7906% 4/20/11 (Reg. S) (m) | 3,130,000 | 2,809,175 | ||
Foreign Government and Government Agency Obligations - continued | ||||
| Principal | Value | ||
Venezuelan Republic: - continued | ||||
5.375% 8/7/10 (Reg. S) | $ 1,145,000 | $ 1,090,613 | ||
7% 3/31/38 | 720,000 | 500,400 | ||
8.5% 10/8/14 | 1,690,000 | 1,580,150 | ||
9% 5/7/23 (Reg. S) | 1,160,000 | 1,005,140 | ||
9.25% 9/15/27 | 4,050,000 | 3,766,500 | ||
9.375% 1/13/34 | 1,160,000 | 1,020,800 | ||
10.75% 9/19/13 | 5,460,000 | 5,637,450 | ||
13.625% 8/15/18 | 2,343,000 | 2,764,740 | ||
Vietnamese Socialist Republic: | ||||
4% 3/12/28 (f) | 90,000 | 74,925 | ||
6.875% 1/15/16 (h) | 1,740,000 | 1,687,800 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $142,861,644) | 135,687,514 |
Preferred Stocks - 0.1% | |||
Shares |
| ||
Convertible Preferred Stocks - 0.1% | |||
ENERGY - 0.1% | |||
Oil, Gas & Consumable Fuels - 0.1% | |||
El Paso Corp. 4.99% | 1,927 | 2,629,905 | |
UTILITIES - 0.0% | |||
Electric Utilities - 0.0% | |||
AES Trust III 6.75% | 28,100 | 1,278,550 | |
TOTAL CONVERTIBLE PREFERRED STOCKS | 3,908,455 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
TELECOMMUNICATION SERVICES - 0.0% | |||
Wireless Telecommunication Services - 0.0% | |||
Rural Cellular Corp. 12.25% pay-in-kind (a) | 520 | 715,000 | |
TOTAL PREFERRED STOCKS (Cost $4,527,961) | 4,623,455 |
Floating Rate Loans - 0.3% | ||||
| Principal | Value | ||
CONSUMER DISCRETIONARY - 0.1% | ||||
Auto Components - 0.0% | ||||
Federal-Mogul Corp.: | ||||
Tranche B, term loan 4.4075% 12/27/14 (m) | $ 1,551,735 | $ 1,194,836 | ||
Tranche C, term loan 4.4075% 12/27/15 (m) | 1,201,347 | 925,037 | ||
| 2,119,873 | |||
Hotels, Restaurants & Leisure - 0.0% | ||||
OSI Restaurant Partners, Inc.: | ||||
Credit-Linked Deposit 5.0263% 6/14/13 (m) | 80,120 | 61,893 | ||
term loan 5.125% 6/14/14 (m) | 1,004,266 | 775,795 | ||
| 837,688 | |||
Media - 0.1% | ||||
CSC Holdings, Inc. Tranche B, term loan 4.2138% 3/31/13 (m) | 1,516,709 | 1,440,874 | ||
Education Media and Publishing Group Ltd. Tranche 2LN, term loan 11.9638% 12/12/14 (m) | 2,477,791 | 1,982,233 | ||
Univision Communications, Inc. Tranche 1LN, term loan 5.0288% 9/29/14 (m) | 1,795,000 | 1,442,731 | ||
Zuffa LLC term loan 4.5625% 6/19/15 (m) | 3,621,002 | 3,041,642 | ||
| 7,907,480 | |||
Specialty Retail - 0.0% | ||||
Toys 'R' US, Inc. term loan 5.4638% 12/9/08 (m) | 160,000 | 148,800 | ||
Textiles, Apparel & Luxury Goods - 0.0% | ||||
Hanesbrands, Inc.: | ||||
term loan 6.545% 3/5/14 (m) | 165,000 | 161,081 | ||
Tranche B 1LN, term loan 4.546% 9/5/13 (m) | 610,000 | 593,225 | ||
Levi Strauss & Co. term loan 4.7131% 4/4/14 (m) | 790,000 | 639,900 | ||
| 1,394,206 | |||
TOTAL CONSUMER DISCRETIONARY | 12,408,047 | |||
FINANCIALS - 0.0% | ||||
Diversified Financial Services - 0.0% | ||||
LandSource Holding Co. LLC term loan 8.25% 5/31/09 (m) | 59,525 | 38,394 | ||
Real Estate Investment Trusts - 0.0% | ||||
General Growth Properties, Inc. Tranche A1, term loan 3.62% 2/24/10 (m) | 209,211 | 183,582 | ||
Floating Rate Loans - continued | ||||
| Principal | Value | ||
FINANCIALS - continued | ||||
Real Estate Management & Development - 0.0% | ||||
Tishman Speyer Properties term loan 4.22% 12/27/12 (m) | $ 143,000 | $ 117,260 | ||
TOTAL FINANCIALS | 339,236 | |||
HEALTH CARE - 0.1% | ||||
Health Care Providers & Services - 0.0% | ||||
Community Health Systems, Inc.: | ||||
term loan 4.9776% 7/25/14 (m) | 2,065,032 | 1,948,874 | ||
Tranche DD, term loan 7/25/14 (m)(q) | 105,648 | 99,705 | ||
HCA, Inc. Tranche B, term loan 5.0506% 11/17/13 (m) | 2,198,839 | 2,061,411 | ||
| 4,109,990 | |||
Pharmaceuticals - 0.1% | ||||
PTS Acquisition Corp. term loan 5.0506% 4/10/14 (m) | 4,717,196 | 4,115,753 | ||
TOTAL HEALTH CARE | 8,225,743 | |||
INDUSTRIALS - 0.1% | ||||
Airlines - 0.1% | ||||
United Air Lines, Inc. Tranche B, term loan 4.5733% 2/1/14 (m) | 2,775,378 | 2,026,026 | ||
Commercial Services & Supplies - 0.0% | ||||
ARAMARK Corp.: | ||||
Credit-Linked Deposit 4.6756% 1/26/14 (m) | 120,664 | 114,028 | ||
term loan 4.6756% 1/26/14 (m) | 1,899,336 | 1,794,872 | ||
| 1,908,900 | |||
Machinery - 0.0% | ||||
Dresser, Inc. Tranche 2LN, term loan 8.5569% 5/4/15 pay-in-kind (m) | 1,255,000 | 1,207,938 | ||
TOTAL INDUSTRIALS | 5,142,864 | |||
INFORMATION TECHNOLOGY - 0.0% | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Flextronics International Ltd.: | ||||
Tranche B-A, term loan 5.041% 10/1/14 (m) | 640,670 | 576,603 | ||
Tranche B-A1, term loan 5.0406% 10/1/14 (m) | 99,330 | 89,397 | ||
Texas Competitive Electric Holdings Co. LLC Tranche B3, term loan 6.269% 10/10/14 (m) | 1,532,281 | 1,426,936 | ||
| 2,092,936 | |||
Floating Rate Loans - continued | ||||
| Principal | Value | ||
INFORMATION TECHNOLOGY - continued | ||||
Software - 0.0% | ||||
Kronos, Inc. Tranche 1LN, term loan 5.0506% 6/11/14 (m) | $ 1,800,441 | $ 1,638,401 | ||
SS&C Technologies, Inc. term loan 4.7808% 11/23/12 (m) | 1,064,386 | 995,201 | ||
| 2,633,602 | |||
TOTAL INFORMATION TECHNOLOGY | 4,726,538 | |||
MATERIALS - 0.0% | ||||
Containers & Packaging - 0.0% | ||||
Anchor Glass Container Corp. term loan 7.75% 6/20/14 (m) | 2,858,000 | 2,800,840 | ||
Paper & Forest Products - 0.0% | ||||
Georgia-Pacific Corp. Tranche B1, term loan 4.4395% 12/23/12 (m) | 1,172,053 | 1,109,055 | ||
TOTAL MATERIALS | 3,909,895 | |||
TELECOMMUNICATION SERVICES - 0.0% | ||||
Diversified Telecommunication Services - 0.0% | ||||
Insight Midwest Holdings LLC Tranche B, term loan 4.47% 4/6/14 (m) | 465,000 | 446,400 | ||
Intelsat Ltd. Tranche B, term loan 5.2875% 7/3/13 (m) | 980,025 | 943,274 | ||
| 1,389,674 | |||
Wireless Telecommunication Services - 0.0% | ||||
Crown Castle International Corp. Tranche B, term loan 4.3006% 3/6/14 (m) | 9,875 | 9,233 | ||
TOTAL TELECOMMUNICATION SERVICES | 1,398,907 | |||
UTILITIES - 0.0% | ||||
Multi-Utilities - 0.0% | ||||
Ashmore Energy International: | ||||
Revolving Credit-Linked Deposit 5.8006% 3/30/12 (m) | 355,590 | 323,548 | ||
term loan 5.8006% 3/30/14 (m) | 845,023 | 768,971 | ||
| 1,092,519 | |||
TOTAL FLOATING RATE LOANS (Cost $37,602,554) | 37,243,749 |
Fixed-Income Funds - 53.3% | |||
Shares | Value | ||
Fidelity 1-3 Year Duration Securitized Bond Central Fund (n) | 3,366,821 | $ 283,991,380 | |
Fidelity Commercial Mortgage-Backed Securities Central Fund (n) | 7,414,807 | 658,434,817 | |
Fidelity Corporate Bond 1-10 Year Central Fund (n) | 18,851,759 | 1,816,743,999 | |
Fidelity Floating Rate Central Fund (n) | 4,475,644 | 408,626,297 | |
Fidelity Mortgage Backed Securities Central Fund (n) | 21,787,296 | 2,138,641,000 | |
Fidelity Ultra-Short Central Fund (n) | 7,340,076 | 599,904,422 | |
TOTAL FIXED-INCOME FUNDS (Cost $6,228,917,563) | 5,906,341,915 | ||
Preferred Securities - 0.1% | |||
Principal |
| ||
CONSUMER DISCRETIONARY - 0.0% | |||
Media - 0.0% | |||
Globo Comunicacoes e Participacoes SA 9.375% | $ 3,765,000 | 3,880,584 | |
Net Servicos de Comunicacao SA 9.25% (h) | 1,623,000 | 1,681,437 | |
| 5,562,021 | ||
ENERGY - 0.1% | |||
Oil, Gas & Consumable Fuels - 0.1% | |||
Pemex Project Funding Master Trust 7.75% | 6,834,000 | 6,994,450 | |
TOTAL PREFERRED SECURITIES (Cost $12,428,953) | 12,556,471 | ||
Cash Equivalents - 7.2% | |||
Maturity Amount |
| ||
Investments in repurchase agreements in a joint trading account at: | |||
2.01%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Treasury Obligations) # | $ 2,755,616 | 2,755,000 | |
Cash Equivalents - continued | |||
Maturity Amount | Value | ||
Investments in repurchase agreements in a joint trading account at: - continued | |||
2.12%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Government Obligations) # | $ 436,212,763 | $ 436,110,000 | |
2.14%, dated 8/29/08 due 9/2/08 (Collateralized by U.S. Government Obligations) # (b) | 353,592,056 | 353,508,000 | |
TOTAL CASH EQUIVALENTS (Cost $792,373,000) | 792,373,000 | ||
TOTAL INVESTMENT PORTFOLIO - 108.3% (Cost $12,390,318,621) | 11,996,564,286 | ||
NET OTHER ASSETS - (8.3)% | (914,582,124) | ||
NET ASSETS - 100% | $ 11,081,982,162 |
Swap Agreements | |||||
| Expiration Date | Notional Amount |
| ||
Credit Default Swaps | |||||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34 | Oct. 2034 | $ 43,728 | (35,417) | ||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 6.3950% 8/25/34 | Sept. 2034 | 39,167 | (36,249) | ||
Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7 Class B3, 7.6913% 7/25/34 | August 2034 | 57,619 | (52,395) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive from Citibank upon credit event of Bristol-Myers Squibb Co., par value of the notional amount of Bristol-Myers Squibb Co. 5.25% 8/15/13, and pay quarterly notional amount multiplied by .32% | Sept. 2017 | $ 1,500,000 | $ 9,615 | ||
Receive from Citibank upon credit event of Merrill Lynch & Co., Inc., par value of the notional amount of Merrill Lynch & Co., Inc. 5% 1/15/15, and pay quarterly notional amount multiplied by .90% | Dec. 2012 | 4,000,000 | 323,342 | ||
Receive from Deutsche Bank upon credit event of Household Finance Corp., par value of the notional amount of Household Finance Corp. 7% 5/15/12, and pay quarterly notional amount multiplied by .73% | Sept. 2012 | 5,900,000 | 478,878 | ||
Receive from Deutsche Bank upon credit event of Southwest Airlines Co., par value of the notional amount of Southwest Airlines Co. 5.25% 10/1/14, and pay quarterly notional amount multiplied by 1.4% | June 2013 | 14,400,000 | 135,376 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.18% | March 2013 | 2,429,000 | 21,381 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.18% | March 2013 | 2,429,000 | 21,381 | ||
Receive from Goldman Sachs upon credit event of CSX Corp., par value of the notional amount of CSX Corp. 5.30% 2/15/14, and pay quarterly notional amount multiplied by 1.19% | March 2018 | 2,143,000 | 66,824 | ||
Receive from Goldman Sachs upon credit event of Lowe's Companies, Inc., par value of the notional amount of Lowe's Companies, Inc. 8.25% 6/1/10, and pay quarterly notional amount multiplied by 1.07% | March 2013 | 3,800,000 | (57,737) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive from Lehman Brothers, Inc. upon credit event of Lowe's Companies, Inc., par value of the notional amount of Lowe's Companies, Inc. 8.25% 6/1/10, and pay quarterly notional amount multiplied by 1.03% | March 2013 | $ 3,800,000 | $ (51,175) | ||
Receive from Morgan Stanley, Inc. upon credit event of H.J. Heinz Co., par value of the notional amount of H.J. Heinz Co. 6% 3/15/08, and pay quarterly notional amount multiplied by .65% | March 2013 | 5,000,000 | (34,679) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Credit Suisse First Boston upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 4,000,000 | (3,640,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Credit Suisse First Boston upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 4,600,000 | (4,186,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to JPMorgan Chase, Inc. upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 2,800,000 | (2,548,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to Lehman Brothers, Inc. upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | Sept. 2037 | 6,000,000 | (5,460,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to UBS upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | August 2037 | 7,200,000 | (6,552,000) | ||
Receive monthly a fixed rate of .15% multiplied by the notional amount and pay to UBS upon each credit event of one of the issues of Dow Jones ABX AA 07-1 Index, par value of the proportional notional amount (l) | August 2037 | 2,600,000 | (2,366,000) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive monthly notional amount multiplied by .82% and pay UBS upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34 | August 2034 | $ 34,860 | $ (16,996) | ||
Receive monthly notional amount multiplied by .85% and pay UBS upon credit event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34 | Nov. 2034 | 134,000 | (62,264) | ||
Receive monthly notional amount multiplied by .85% and pay UBS upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34 | Oct. 2034 | 120,859 | (25,494) | ||
Receive monthly notional amount multiplied by 1.6% and pay Morgan Stanley, Inc. upon credit event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M7, 5.4413% 5/25/35 | June 2035 | 100,000 | (94,250) | ||
Receive monthly notional amount multiplied by 2.22% and pay JPMorgan Chase, Inc. upon credit event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2005-HE3 Class B2, 6.87% 7/25/35 | August 2035 | 5,325,000 | (4,737,537) | ||
Receive monthly notional amount multiplied by 2.39% and pay UBS upon credit event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.73% 2/25/34 | March 2034 | 57,176 | (43,756) | ||
Receive monthly notional amount multiplied by 2.4% and pay Deutsche Bank upon credit event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.2288% 1/25/34 | Feb. 2034 | 787 | (693) | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Credit Default Swaps - continued | |||||
Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon credit event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32 | April 2032 | $ 11,800 | $ (10,517) | ||
Receive monthly notional amount multiplied by 3% and pay UBS upon credit event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2005-R4 Class M9, 7.07% 7/25/35 | August 2035 | 1,200,000 | (1,061,024) | ||
Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon credit event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33 | May 2033 | 134,000 | (100,184) | ||
Receive monthly notional amount multiplied by 5.55% and pay Deutsche Bank upon credit event of Carrington Mortgage Loan Trust, par value of the notional amount of Carrington Mortgage Loan Trust Series 2006-FRE1 Class M10, 7.74% 7/25/36 | August 2036 | 1,200,000 | (1,102,156) | ||
Receive monthly notional amount multiplied by 6.25% and pay Deutsche Bank upon credit event of Residential Asset Mortgage Products, Inc., par value of the notional amount of Residential Asset Mortgage Products, Inc. Series 2006-RS5, 7.17% 9/25/36 | Oct. 2036 | 1,200,000 | (1,084,294) | ||
Receive quarterly notional amount multiplied by .72% and pay Bank of America upon credit event of Allegheny Energy Supply Co. LLC, par value of the notional amount of Allegheny Energy Supply Co. LLC 8.25% 4/15/12 | June 2012 | 4,000,000 | (80,377) | ||
Receive quarterly notional amount multiplied by .78% and pay Deutsche Bank upon credit event of Allegheny Energy Supply Co. LLC, par value of the notional amount of Allegheny Energy Supply Co. LLC 8.25% 4/15/12 | June 2012 | 3,955,000 | (70,727) | ||
TOTAL CREDIT DEFAULT SWAPS | 90,214,996 | (32,453,124) | |||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Interest Rate Swaps | |||||
Receive quarterly a fixed rate equal to 4.3875% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | March 2010 | $ 1,250,000 | $ 27,972 | ||
Receive quarterly a fixed rate equal to 4.774% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | March 2015 | 1,250,000 | 60,703 | ||
Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | July 2014 | 1,135,000 | 46,173 | ||
Receive semi-annually a fixed rate equal to 3.567% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2011 | 293,294,000 | 2,517,342 | ||
Receive semi-annually a fixed rate equal to 4.449% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2018 | 102,760,000 | 878,228 | ||
Receive semi-annually a fixed rate equal to 4.87% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | Oct. 2012 | 100,000,000 | 5,181,070 | ||
Receive semi-annually a fixed rate equal to 5.015% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2012 | 50,000,000 | 2,819,225 | ||
Receive semi-annually a fixed rate equal to 5.062% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | May 2012 | 75,000,000 | 4,223,055 | ||
Receive semi-annually a fixed rate equal to 5.09% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | Jan. 2012 | 75,000,000 | 3,376,635 | ||
Receive semi-annually a fixed rate equal to 5.144% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2012 | 100,000,000 | 6,074,970 | ||
Swap Agreements - continued | |||||
| Expiration Date | Notional Amount | Value | ||
Interest Rate Swaps - continued | |||||
Receive semi-annually a fixed rate equal to 5.263% and pay quarterly a floating rate based on 3-month LIBOR with Credit Suisse First Boston | Feb. 2012 | $ 50,000,000 | $ 2,482,665 | ||
Receive semi-annually a fixed rate equal to 5.276% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | April 2011 | 20,000,000 | 1,195,664 | ||
Receive semi-annually a fixed rate equal to 5.375% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | April 2009 | 30,000,000 | 941,400 | ||
Receive semi-annually a fixed rate equal to 5.44% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | July 2012 | 50,000,000 | 2,985,640 | ||
Receive semi-annually a fixed rate equal to 5.556% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | June 2012 | 25,000,000 | 1,661,915 | ||
Receive semi-annually a fixed rate equal to 5.636% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | July 2009 | 100,000,000 | 2,614,710 | ||
Receive semi-annually a fixed rate equal to 5.6485% and pay quarterly a floating rate based on 3-month LIBOR with Deutsche Bank | July 2010 | 100,000,000 | 4,609,320 | ||
TOTAL INTEREST RATE SWAPS | 1,174,689,000 | 41,696,687 | |||
| $ 1,264,903,996 | $ 9,243,563 |
Currency Abbreviation | ||
CAD | - | Canadian dollar |
Legend |
(a) Non-income producing |
(b) Includes investment made with cash collateral received from securities on loan. |
(c) Non-income producing - Issuer is in default. |
(d) Principal amount is stated in United States dollars unless otherwise noted. |
(e) Security 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. |
(f) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(g) Security or a portion of the security is on loan at period end. |
(h) 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 end of the period, the value of these securities amounted to $411,251,869 or 3.7% of net assets. |
(i) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(j) A portion of the security is subject to a forward commitment to sell. |
(k) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $16,020,498. |
(l) Represents a tradable index of credit default swaps on home equity asset-backed debt securities. |
(m) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(n) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's web site at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's web site or upon request. |
(o) Security represents right to receive monthly interest payments on an underlying pool of mortgages or assets. Principal shown is the outstanding par amount of the pool held as of the end of the period. |
(p) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $156,750 or 0.0% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
GMAC Commercial Mortgage Securities, Inc. Series 1999-C2I Class K, 6.481% 9/15/33 | 3/23/07 | $ 163,875 |
(q) Position or a portion of the position represents an unfunded loan commitment. At period end, the total principal amount and market value of unfunded commitments totaled $105,648 and $99,705, respectively. The coupon rate will be determined at time of settlement. |
# Additional Information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement / Counterparty | Value |
$2,755,000 due 9/02/08 at 2.01% | |
BNP Paribas Securities Corp. | $ 1,012,105 |
Banc of America Securities LLC | 546,770 |
Barclays Capital, Inc. | 766,747 |
Deutsche Bank Securities, Inc. | 429,378 |
| $ 2,755,000 |
$436,110,000 due 9/02/08 at 2.12% | |
ABN AMRO Bank N.V., New York Branch | $ 12,638,373 |
Banc of America Securities LLC | 34,165,795 |
Bank of America, NA | 126,383,734 |
Barclays Capital, Inc. | 227,490,039 |
Greenwich Capital Markets, Inc. | 12,638,373 |
ING Financial Markets LLC | 16,474,499 |
RBC Capital Markets Corp. | 6,319,187 |
| $ 436,110,000 |
$353,508,000 due 9/02/08 at 2.14% | |
Banc of America Securities LLC | $ 112,434,096 |
Bank of America, NA | 241,073,904 |
| $ 353,508,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows: |
Fund | Income earned |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | $ 14,792,274 |
Fidelity Commercial Mortgage-Backed Securities Central Fund | 29,162,743 |
Fidelity Corporate Bond 1-10 Year Central Fund | 81,406,674 |
Fidelity Floating Rate Central Fund | 24,729,364 |
Fidelity Mortgage Backed Securities Central Fund | 96,892,856 |
Fidelity Ultra-Short Central Fund | 33,658,178 |
Total | $ 280,642,089 |
Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows: |
Fund | Value, | Purchases | Sales | Value, | % ownership, end of |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | $ 310,910,980 | $ 62,786,499 | $ 48,982,775 | $ 283,991,380 | 18.9% |
Fidelity Commercial Mortgage-Backed Securities Central Fund | 402,255,147 | 308,170,881 | - | 658,434,817 | 19.0% |
Fidelity Corporate Bond 1-10 Year Central Fund | 763,168,246 | 1,105,094,191 | - | 1,816,743,999 | 23.0% |
Fidelity Floating Rate Central Fund | 228,686,671 | 223,302,409 | 23,315,935 | 408,626,297 | 15.3% |
Fidelity Mortgage Backed Securities Central Fund | 964,085,734 | 1,235,465,746 | 49,866,701 | 2,138,641,000 | 23.8% |
Fidelity Ultra-Short Central Fund | 875,572,723 | 377,273,786 | 529,852,254 | 599,904,422 | 16.9% |
Total | $ 3,544,679,501 | $ 3,312,093,512 | $ 652,017,665 | $ 5,906,341,915 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
| August 31, 2008 | |
|
|
|
Assets | ||
Investment in securities, at value (including securities loaned of $345,134,698 and repurchase agreements of $792,373,000) - See accompanying schedule: Unaffiliated issuers (cost $6,161,401,058) | $ 6,090,222,371 |
|
Fidelity Central Funds (cost $6,228,917,563) | 5,906,341,915 |
|
Total Investments (cost $12,390,318,621) |
| $ 11,996,564,286 |
Commitment to sell securities on a delayed delivery basis | (24,201,442) | |
Receivable for securities sold on a delayed delivery basis | 24,142,500 | (58,942) |
Receivable for investments sold, regular delivery | 26,097,269 | |
Cash | 391,339 | |
Receivable for swap agreements | 30,562 | |
Receivable for fund shares sold | 6,324,418 | |
Interest receivable | 56,922,769 | |
Distributions receivable from Fidelity Central Funds | 25,743,229 | |
Unrealized appreciation on swap agreements | 42,753,484 | |
Other receivables | 36,971 | |
Total assets | 12,154,805,385 | |
|
|
|
Liabilities | ||
Payable for investments purchased | $ 66,643,753 | |
Delayed delivery | 608,653,056 | |
Payable for fund shares redeemed | 4,295,845 | |
Distributions payable | 1,067,348 | |
Unrealized depreciation on swap agreements | 33,509,921 | |
Accrued management fee | 2,918,053 | |
Distribution fees payable | 55,295 | |
Other affiliated payables | 1,315,009 | |
Other payables and accrued expenses | 856,943 | |
Collateral on securities loaned, at value | 353,508,000 | |
Total liabilities | 1,072,823,223 | |
|
|
|
Net Assets | $ 11,081,982,162 | |
Net Assets consist of: |
| |
Paid in capital | $ 11,370,457,234 | |
Undistributed net investment income | 8,813,868 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 83,267,778 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (380,556,718) | |
Net Assets | $ 11,081,982,162 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Assets and Liabilities - continued
| August 31, 2008 | |
|
|
|
Calculation of Maximum Offering Price | $ 10.07 | |
|
|
|
Maximum offering price per share (100/96.00 of $10.07) | $ 10.49 | |
Class T: | $ 10.06 | |
|
|
|
Maximum offering price per share (100/96.00 of $10.06) | $ 10.48 | |
Class B: | $ 10.07 | |
|
|
|
Class C: | $ 10.07 | |
|
|
|
Total Bond: | $ 10.07 | |
|
|
|
Institutional Class: | $ 10.06 |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
| Year ended August 31, 2008 | |
|
|
|
Investment Income |
|
|
Dividends |
| $ 1,204,234 |
Interest |
| 283,244,652 |
Income from Fidelity Central Funds |
| 280,642,089 |
Total income |
| 565,090,975 |
|
|
|
Expenses | ||
Management fee | $ 31,993,893 | |
Transfer agent fees | 10,846,695 | |
Distribution fees | 633,899 | |
Fund wide operations fee | 3,495,827 | |
Independent trustees' compensation | 40,783 | |
Miscellaneous | 17,948 | |
Total expenses before reductions | 47,029,045 | |
Expense reductions | (352,777) | 46,676,268 |
Net investment income | 518,414,707 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: |
|
|
Unaffiliated issuers | 143,164,408 | |
Fidelity Central Funds | (55,342,894) |
|
Foreign currency transactions | (891) | |
Swap agreements | 7,472,837 |
|
Total net realized gain (loss) |
| 95,293,460 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (338,543,318) | |
Assets and liabilities in foreign currencies | (131) | |
Swap agreements | 6,488,170 | |
Delayed delivery commitments | (58,942) |
|
Total change in net unrealized appreciation (depreciation) |
| (332,114,221) |
Net gain (loss) | (236,820,761) | |
Net increase (decrease) in net assets resulting from operations | $ 281,593,946 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
| Year ended | Year ended |
Increase (Decrease) in Net Assets |
|
|
Operations |
|
|
Net investment income | $ 518,414,707 | $ 212,551,890 |
Net realized gain (loss) | 95,293,460 | (6,020,604) |
Change in net unrealized appreciation (depreciation) | (332,114,221) | (85,266,164) |
Net increase (decrease) in net assets resulting | 281,593,946 | 121,265,122 |
Distributions to shareholders from net investment income | (501,867,517) | (198,338,706) |
Distributions to shareholders from net realized gain | (24,508,784) | (4,857,769) |
Total distributions | (526,376,301) | (203,196,475) |
Share transactions - net increase (decrease) | 4,412,741,476 | 4,556,920,613 |
Total increase (decrease) in net assets | 4,167,959,121 | 4,474,989,260 |
|
|
|
Net Assets | ||
Beginning of period | 6,914,023,041 | 2,439,033,781 |
End of period (including undistributed net investment income of $8,813,868 and undistributed net investment income of $4,530,397, respectively) | $ 11,081,982,162 | $ 6,914,023,041 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .488 | .508 | .043 | .476 | .387 | .046 |
Net realized and unrealized gain (loss) | (.189) | (.141) | .105 | (.294) H | .183 | .145 |
Total from investment operations | .299 | .367 | .148 | .182 | .570 | .191 |
Distributions from net investment income | (.474) | (.470) | (.038) | (.432) | (.370) | (.041) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.499) | (.487) | (.038) | (.472) | (.460) | (.041) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.93% | 3.57% | 1.44% | 1.78% | 5.52% | 1.85% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | .80% | .77% | .73% A | .79% | .96% | .87% A |
Expenses net of fee waivers, if any | .80% | .77% | .73% A | .79% | .80% | .80% A |
Expenses net of all reductions | .80% | .77% | .73% A | .79% | .80% | .80% A |
Net investment income | 4.77% | 4.93% | 4.98% A | 4.61% | 3.69% | 3.51% A |
Supplemental Data |
|
|
|
|
| |
Net assets, | $ 80,755 | $ 48,076 | $ 6,780 | $ 4,545 | $ 2,974 | $ 102 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.56 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .489 | .508 | .042 | .466 | .377 | .045 |
Net realized and unrealized gain (loss) | (.191) | (.143) | .105 | (.296) H | .173 | .144 |
Total from investment operations | .298 | .365 | .147 | .170 | .550 | .189 |
Distributions from net investment income | (.473) | (.468) | (.037) | (.420) | (.360) | (.039) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.498) | (.485) | (.037) | (.460) | (.450) | (.039) |
Net asset value, | $ 10.06 | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.56 | $ 10.46 |
Total Return B, C, D | 2.92% | 3.55% | 1.43% | 1.66% | 5.33% | 1.84% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | .81% | .78% | .87% A | .91% | 1.13% | .96% A |
Expenses net of fee waivers, if any | .81% | .78% | .87% A | .90% | .90% | .90% A |
Expenses net of all reductions | .80% | .78% | .87% A | .90% | .90% | .90% A |
Net investment income | 4.76% | 4.92% | 4.84% A | 4.50% | 3.59% | 3.41% A |
Supplemental Data |
|
|
|
|
| |
Net assets, | $ 38,574 | $ 42,191 | $ 6,293 | $ 4,583 | $ 5,739 | $ 102 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .413 | .432 | .037 | .399 | .309 | .036 |
Net realized and unrealized gain (loss) | (.190) | (.145) | .104 | (.296) H | .182 | .145 |
Total from investment operations | .223 | .287 | .141 | .103 | .491 | .181 |
Distributions from net investment income | (.398) | (.390) | (.031) | (.353) | (.291) | (.031) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.423) | (.407) | (.031) | (.393) | (.381) | (.031) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.17% | 2.77% | 1.38% | 1.01% | 4.74% | 1.76% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | 1.54% | 1.53% | 1.51% A | 1.59% | 1.75% | 1.62% A |
Expenses net of fee waivers, if any | 1.54% | 1.53% | 1.51% A | 1.55% | 1.55% | 1.55% A |
Expenses net of all reductions | 1.54% | 1.53% | 1.51% A | 1.55% | 1.55% | 1.55% A |
Net investment income | 4.03% | 4.17% | 4.22% A | 3.85% | 2.94% | 2.76% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 9,645 | $ 6,054 | $ 1,720 | $ 1,667 | $ 2,029 | $ 104 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended August 31, | 2008 | 2007 | 2006 M | 2006 K | 2005 K | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income E | .413 | .429 | .036 | .389 | .299 | .035 |
Net realized and unrealized gain (loss) | (.189) | (.145) | .105 | (.293) H | .181 | .145 |
Total from investment operations | .224 | .284 | .141 | .096 | .480 | .180 |
Distributions from net investment income | (.399) | (.387) | (.031) | (.346) | (.280) | (.030) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.424) | (.404) | (.031) | (.386) | (.370) | (.030) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C, D | 2.18% | 2.75% | 1.37% | .94% | 4.63% | 1.74% |
Ratios to Average Net Assets F, J |
|
|
|
|
| |
Expenses before reductions | 1.53% | 1.55% | 1.60% A | 1.62% | 1.74% | 1.74% A |
Expenses net of fee waivers, if any | 1.53% | 1.55% | 1.60% A | 1.62% | 1.65% | 1.65% A |
Expenses net of all reductions | 1.53% | 1.55% | 1.60% A | 1.62% | 1.65% | 1.65% A |
Net investment income | 4.03% | 4.15% | 4.13% A | 3.78% | 2.84% | 2.66% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 28,786 | $ 18,890 | $ 2,106 | $ 1,770 | $ 677 | $ 142 |
Portfolio turnover rate G | 122% | 116% L | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
H The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
I For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
K For the period ended July 31.
L Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
M For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Total Bond
Years ended August 31, | 2008 | 2007 | 2006 K | 2006 I | 2005 I | 2004 I |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 | $ 10.28 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income D | .524 | .543 | .046 | .506 | .411 | .340 |
Net realized and unrealized gain (loss) | (.189) | (.143) | .105 | (.290) G | .182 | .237 |
Total from investment operations | .335 | .400 | .151 | .216 | .593 | .577 |
Distributions from net investment income | (.510) | (.503) | (.041) | (.466) | (.393) | (.337) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | (.060) |
Total distributions | (.535) | (.520) | (.041) | (.506) | (.483) | (.397) |
Net asset value, | $ 10.07 | $ 10.27 | $ 10.39 | $ 10.28 | $ 10.57 | $ 10.46 |
Total Return B, C | 3.29% | 3.89% | 1.46% | 2.11% | 5.75% | 5.68% |
Ratios to Average Net Assets E, H |
|
|
|
|
| |
Expenses before reductions | .45% | .45% | .45% A | .45% | .64% | .75% |
Expenses net of fee waivers, if any | .45% | .45% | .45% A | .45% | .61% | .65% |
Expenses net of all reductions | .45% | .45% | .45% A | .45% | .61% | .65% |
Net investment income | 5.12% | 5.25% | 5.26% A | 4.95% | 3.87% | 3.25% |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 9,976,432 | $ 6,450,177 | $ 2,421,077 | $ 2,306,817 | $ 420,225 | $ 373,699 |
Portfolio turnover rate F | 122% | 116% J | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I For the period ended July 31.
J Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
K For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended August 31, | 2008 | 2007 | 2006 L | 2006 J | 2005 J | 2004 H |
Selected Per-Share Data |
|
|
|
|
| |
Net asset value, beginning of period | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.57 | $ 10.46 | $ 10.31 |
Income from Investment Operations |
|
|
|
|
|
|
Net investment income D | .516 | .527 | .045 | .493 | .410 | .048 |
Net realized and unrealized gain (loss) | (.186) | (.134) | .105 | (.294) G | .182 | .145 |
Total from investment operations | .330 | .393 | .150 | .199 | .592 | .193 |
Distributions from net investment income | (.505) | (.496) | (.040) | (.459) | (.392) | (.043) |
Distributions from net realized gain | (.025) | (.017) | - | (.040) | (.090) | - |
Total distributions | (.530) | (.513) | (.040) | (.499) | (.482) | (.043) |
Net asset value, end of period | $ 10.06 | $ 10.26 | $ 10.38 | $ 10.27 | $ 10.57 | $ 10.46 |
Total Return B, C | 3.24% | 3.83% | 1.46% | 1.95% | 5.74% | 1.87% |
Ratios to Average Net Assets E, I |
|
|
|
|
| |
Expenses before reductions | .51% | .50% | .54% A | .56% | .62% | .71% A |
Expenses net of fee waivers, if any | .51% | .50% | .54% A | .56% | .62% | .65% A |
Expenses net of all reductions | .51% | .49% | .54% A | .56% | .61% | .65% A |
Net investment income | 5.06% | 5.21% | 5.16% A | 4.84% | 3.87% | 3.66% A |
Supplemental Data |
|
|
|
|
|
|
Net assets, | $ 947,791 | $ 348,636 | $ 1,058 | $ 933 | $ 114 | $ 102 |
Portfolio turnover rate F | 122% | 116% K | 53% A | 99% | 193% | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E Fees and expenses of the underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.
F Amount does not include the portfolio activity of any underlying Fidelity Central Funds.
G The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the Fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J For the period ended July 31.
K Portfolio turnover rate excludes securities received or delivered through non-taxable in-kind activity.
L For the one month period ended August 31. The Fund changed its fiscal year from July 31 to August 31, effective August 31, 2006.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended August 31, 2008
1. Organization.
Fidelity Total Bond Fund (the Fund) is a fund of Fidelity Income Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund offers Class A, Class T, Class B, Class C, Total Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
2. Investments in Fidelity Central Funds.
The Fund may invest in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on their investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. The following summarizes the Fund's investment in each Fidelity Central Fund.
Annual Report
2. Investments in Fidelity Central Funds - continued
Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices |
Fidelity 1-3 Year Duration Securitized Bond Central Fund | Fidelity Investment Money Management, Inc. (FIMM) | Seeks a high level of income by normally investing in investment-grade securitized debt securities and repurchase agreements for those securities. | Futures Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Commercial Mortgage-Backed Securities Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade commercial mortgage-backed securities and repurchase agreements for those securities. | Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Corporate Bond 1-10 Year Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade corporate bonds and other corporate debt securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Repurchase Agreements Restricted Securities Swap Agreements |
Fidelity Floating Rate Central Fund | Fidelity Management & Research Company, Inc. (FMRC) | Seeks a high level of income by normally investing in floating rate loans and other floating rate securities. | Loans & Direct Debt Instruments Repurchase Agreements Restricted Securities
|
Fidelity Mortgage Backed Securities Central Fund | FIMM | Seeks a high level of income by normally investing in investment-grade mortgage-related securities and repurchase agreements for those securities. | Delayed Delivery & When Issued Securities Futures Mortgage Dollar Rolls Repurchase Agreements Swap Agreements |
Fidelity Ultra-Short Central Fund | FIMM | Seeks to obtain a high level of current income consistent with preservation of capital by investing in U.S. dollar denominated money market and investment-grade debt securities. | Futures Repurchase Agreements Restricted Securities Swap Agreements |
Annual Report
Notes to Financial Statements - continued
2. Investments in Fidelity Central Funds - continued
An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or advisor.fidelity.com,as applicable. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the SEC's web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC's web site or upon request.
3. Significant Accounting Policies.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Fund:
Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Debt securities, including restricted securities, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value. Actual prices received at disposition may differ.
When current market prices or quotations are not readily available or reliable, valuations may be determined in good faith in accordance with procedures adopted by the Board of Trustees. Factors used in determining value may include significant market or security specific events, changes in interest rates and credit quality, and developments in foreign markets which are monitored by evaluating the performance of ADRs, futures contracts
Annual Report
3. Significant Accounting Policies - continued
Security Valuation - continued
and exchange-traded funds. The frequency with which these procedures are used cannot be predicted and may be utilized to a significant extent. The value of securities used for net asset value (NAV) calculation under these procedures may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 pm Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which 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 and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
Notes to Financial Statements - continued
3. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing substantially all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code and filing its U.S. federal tax return. As a result, no provision for income taxes is required. The Fund is subject to the provisions of FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the Fund's federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service (IRS). Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swap agreements, foreign currency transactions, market discount, partnerships (including allocations from Fidelity Central Funds), deferred trustees compensation and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 79,456,091 |
|
Unrealized depreciation | (416,279,836) |
|
Net unrealized appreciation (depreciation) | $ (336,823,745) |
|
Undistributed ordinary income | 74,595,018 |
|
|
|
|
Cost for federal income tax purposes | $ 12,333,388,031 |
|
Annual Report
3. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
| August 31, 2008 | August 31, 2007 |
Ordinary Income | $ 521,474,544 | $ 203,196,475 |
Long-term Capital Gains | 4,901,757 | - |
Total | $ 526,376,301 | $ 203,196,475 |
New Accounting Pronouncements. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and results in expanded disclosures about fair value measurements.
In addition, in March 2008, Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), was issued and is effective for reporting periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures to provide information about the reasons the Fund invests in derivative instruments, the accounting treatment and the effect derivatives have on financial performance.
4. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Annual Report
Notes to Financial Statements - continued
4. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities. The Fund may purchase or sell securities on a delayed delivery or when-issued 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. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued 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 or when-issued 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 value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Restricted Securities. The Fund may 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. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The Fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the Fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments.
Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.
Annual Report
4. Operating Policies - continued
Swap Agreements - continued
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The Fund may enter into credit default swaps in which either it or its counterparty act as guarantors. By acting as the guarantor of a swap, a fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value.
Periodic payments and premiums received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."
5. Purchases and Sales of Investments.
Purchases and sales of securities (including the Fixed-Income Central Funds), other than short-term securities and U.S. government securities, aggregated $5,714,855,579 and $1,275,500,461, respectively.
6. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and a group fee rate that averaged .12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.
Annual Report
Notes to Financial Statements - continued
6. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
| Distribution | Service | Paid to | Retained |
Class A | 0% | .25% | $ 182,737 | $ 37,558 |
Class T | 0% | .25% | 115,549 | 1,138 |
Class B | .65% | .25% | 83,546 | 60,524 |
Class C | .75% | .25% | 252,067 | 75,748 |
|
|
| $ 633,899 | $ 174,968 |
Sales Load. FDC receives a front-end sales charge of up to 4.00% for selling Class A shares and Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, ..75% to .50% for certain purchases of Class A shares and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained |
Class A | $ 25,515 |
Class T | 5,823 |
Class B* | 11,561 |
Class C* | 3,836 |
| $ 46,735 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
6. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of each respective class of the Fund. FIIOC receives an asset-based fee of .10% of Total Bond's average net assets. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. Prior to January 1, 2008, Fidelity Service Company, Inc. (FSC), also an affiliate of FMR, was the sub-transfer agent for Total Bond shares. For the period, each class paid the following transfer agent fees:
| Amount | % of |
Class A | $ 143,015 | .20 |
Class T | 94,941 | .21 |
Class B | 26,504 | .29 |
Class C | 46,393 | .18 |
Total Bond | 9,096,927 | .10 |
Institutional Class | 1,438,915 | .16 |
| $ 10,846,695 |
|
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent Trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent Trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.
7. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounted to $17,948 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
8. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, 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, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities during the period amounted to $5,167,155.
9. Expense Reductions.
Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's management fee by $79,612. During the period, credits reduced each class' transfer agent expense as noted in the table below.
| Transfer Agent |
|
Total Bond | $ 249,985 |
|
Institutional Class | 23,180 |
|
| $ 273,165 |
|
10. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Annual Report
10. Other - continued
At the end of the period, the Fidelity Advisor Freedom Funds and Fidelity Freedom Funds were owners of record, in the aggregate, of approximately 34% of the total outstanding shares of the Fund.
11. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended August 31, | 2008 | 2007 |
From net investment income |
|
|
Class A | $ 3,361,032 | $ 1,100,606 |
Class T | 2,139,983 | 1,373,421 |
Class B | 357,685 | 136,878 |
Class C | 975,717 | 457,270 |
Total Bond | 451,129,055 | 191,143,423 |
Institutional Class | 43,904,045 | 4,127,108 |
Total | $ 501,867,517 | $ 198,338,706 |
From net realized gain |
|
|
Class A | $ 158,977 | $ 27,576 |
Class T | 118,778 | 34,295 |
Class B | 17,979 | 5,072 |
Class C | 58,576 | 16,001 |
Total Bond | 22,110,637 | 4,768,190 |
Institutional Class | 2,043,837 | 6,635 |
Total | $ 24,508,784 | $ 4,857,769 |
12. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars | ||
| Years ended | Years ended | Years ended | Years ended |
Class A |
|
|
|
|
Shares sold | 5,588,201 | 5,058,526 | $ 57,565,572 | $ 52,475,077 |
Reinvestment of distributions | 305,321 | 89,369 | 3,130,894 | 927,501 |
Shares redeemed | (2,555,919) | (1,118,505) | (26,109,819) | (11,603,024) |
Net increase (decrease) | 3,337,603 | 4,029,390 | $ 34,586,647 | $ 41,799,554 |
Annual Report
Notes to Financial Statements - continued
12. Share Transactions - continued
| Shares | Dollars | ||
| Years ended | Years ended | Years ended | Years ended |
Class T |
|
|
|
|
Shares sold | 2,804,342 | 4,727,867 | $ 28,824,011 | $ 49,238,640 |
Reinvestment of distributions | 209,490 | 129,776 | 2,149,894 | 1,346,799 |
Shares redeemed | (3,292,088) | (1,351,158) | (33,740,425) | (13,923,481) |
Net increase (decrease) | (278,256) | 3,506,485 | $ (2,766,520) | $ 36,661,958 |
Class B |
|
|
|
|
Shares sold | 792,814 | 539,386 | $ 8,188,014 | $ 5,591,610 |
Reinvestment of distributions | 25,155 | 9,450 | 258,101 | 98,229 |
Shares redeemed | (449,829) | (124,884) | (4,577,167) | (1,299,404) |
Net increase (decrease) | 368,140 | 423,952 | $ 3,868,948 | $ 4,390,435 |
Class C |
|
|
|
|
Shares sold | 1,925,088 | 1,926,281 | $ 19,771,131 | $ 20,051,168 |
Reinvestment of distributions | 87,624 | 38,210 | 898,560 | 397,140 |
Shares redeemed | (993,539) | (327,493) | (10,165,574) | (3,406,204) |
Net increase (decrease) | 1,019,173 | 1,636,998 | $ 10,504,117 | $ 17,042,104 |
Total Bond |
|
|
|
|
Shares sold | 547,722,071 | 449,525,248 | $ 5,645,252,478 | $ 4,670,295,711 |
Reinvestment of distributions | 45,012,353 | 18,043,057 | 461,616,494 | 187,426,399 |
Shares redeemed | (230,103,358) | (72,384,207) | (2,368,082,060) | (750,709,047) |
Net increase (decrease) | 362,631,066 | 395,184,098 | $ 3,738,786,912 | $ 4,107,013,063 |
Institutional Class |
|
|
|
|
Shares sold | 78,780,201 | 34,101,050 | $ 814,530,864 | $ 352,256,185 |
Reinvestment of distributions | 4,451,142 | 377,910 | 45,563,586 | 3,888,447 |
Shares redeemed | (22,980,579) | (594,798) | (232,333,078) | (6,131,133) |
Net increase (decrease) | 60,250,764 | 33,884,162 | $ 627,761,372 | $ 350,013,499 |
Annual Report
13. Credit Risk.
The Fund invests a portion of its assets, directly or indirectly, in structured securities of issuers backed by residential mortgage loans, credit card receivables and automotive loans. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults. Continuing shifts in the market's perception of credit quality on structured securities have resulted in increased volatility of market price and periods of decreased market activity that have adversely impacted the valuation of certain issuers of the Fund.
Subsequent to period end, Lehman Brothers Holdings, Inc. (LBHI) and certain of its affiliates sought protection under the insolvency laws of their jurisdictions of organization, including the United States, the United Kingdom and Japan. During this period, the Fund had outstanding securities trades and other transactions with counterparties affiliated with LBHI, which may include interest rate and credit default swap agreements, and commitments to purchase securities on a delayed delivery or when-issued basis. As a result of these events, LBHI's affiliates are unable to fulfill their commitments and, in certain cases, the Fund may have terminated its trades and related agreements with the relevant entities and, where appropriate, is in the process of initiating claims for damages. FMR believes that the financial impact to the Fund relating to these events is immaterial.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Total Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Total Bond Fund (a fund of Fidelity Income Fund) at August 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Total Bond Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2008 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 23, 2008
Annual Report
Trustees and Officers
The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for Edward C. Johnson 3d and James C. Curvey, each of the Trustees oversees 158 funds advised by FMR or an affiliate. Messrs. Johnson and Curvey oversee 376 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (78) | |
| Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR LLC; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman and a Director of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of FIL Limited. Previously, Mr. Johnson served as President of FMR LLC (2006-2007). Mr. Edward C. Johnson 3d and Mr. Arthur E. Johnson are not related. |
James C. Curvey (73) | |
| Year of Election or Appointment: 2007 Mr. Curvey also serves as Trustee (2007-present) of other investment companies advised by FMR. Mr. Curvey is a Director of FMR and FMR Co., Inc. (2007-present). Mr. Curvey is also Vice Chairman (2006- present) and Director of FMR LLC. In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the Trustees of Villanova University. |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR. FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (66) | |
| Year of Election or Appointment: 2006 Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities), a member of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. Previously, Mr. Gamper served as Chairman of the Board of Governors, Rutgers University (2004-2007). |
George H. Heilmeier (72) | |
| Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology), Compaq, Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing), INET Technologies Inc. (telecommunications network surveillance, 2001- 2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display, and a member of the Consumer Electronics Hall of Fame. |
Arthur E. Johnson (61) | |
| Year of Election or Appointment: 2008 Mr. Johnson serves as Senior Vice President of Corporate Strategic Development of Lockheed Martin Corporation (defense contractor). In addition, Mr. Johnson serves as a member of the Board of Directors of AGL Resources, Inc. (holding company), and IKON Office Solutions, Inc. (document management systems and services). Mr. Arthur E. Johnson and Mr. Edward C. Johnson 3d are not related. |
James H. Keyes (67) | |
| Year of Election or Appointment: 2007 Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines) and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions). Previously, Mr. Keyes served as a member of the Board of LSI Logic Corporation (semiconductor technologies, 1984-2008). |
Marie L. Knowles (61) | |
| Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of McKesson Corporation (healthcare service). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. Previously, Ms. Knowles served as a Director of Phelps Dodge Corporation (copper mining and manufacturing, 1994-2007). |
Kenneth L. Wolfe (69) | |
| Year of Election or Appointment: 2005 Mr. Wolfe is Chairman and a Director of Hershey Foods Corporation (2007-present), where prior to his retirement in 2001, he was Chairman and Chief Executive Officer. Mr. Wolfe currently serves as a member of the board of Revlon Inc. (2004-present). Previously, Mr. Wolfe served as a member of the boards of Adelphia Communications Corporation (2003-2006) and Bausch & Lomb, Inc. (1993-2007). |
Advisory Board Member and Executive Officers**:
Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Peter S. Lynch (64) | |
| Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. |
John R. Hebble (50) | |
| Year of Election or Appointment: 2008 President and Treasurer of the fund. Mr. Hebble also serves as President and Treasurer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2003-present). Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds. |
Boyce I. Greer (52) | |
| Year of Election or Appointment: 2006 Vice President of the fund. Mr. Greer also serves as Vice President of Asset Allocation Funds (2005-present), Fixed-Income Funds (2006- present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). Mr. Greer is President and a Director of Fidelity Investments Money Management, Inc. (2007-present), and an Executive Vice President of FMR and FMR Co., Inc. (2005-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005). |
Dwight D. Churchill (54) | |
| Year of Election or Appointment: 2008 Vice President of the fund. Mr. Churchill also serves as Vice President of Fidelity's Bond Funds (2008-present). Mr. Churchill is Executive Vice President of FMR (2005-present), FMR Co., Inc. (2005-present) and Fidelity Investments Money Management, Inc. (2008-present). Previously, Mr. Churchill served as Senior Vice President of FMR (1997-2005) and Senior Vice President of Fidelity Investments Money Management, Inc. (2000-2006). |
Scott C. Goebel (40) | |
| Year of Election or Appointment: 2008 Secretary and Chief Legal Officer (CLO) of the fund. Mr. Goebel also serves as Secretary and CLO of other Fidelity funds (2008-present); General Counsel, Secretary, and Senior Vice President of FMR (2008- present); and Deputy General Counsel of FMR LLC. Previously, Mr. Goebel served as Assistant Secretary of the Funds (2007-2008) and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007). |
Nancy D. Prior (41) | |
| Year of Election or Appointment: 2008 Assistant Secretary of the fund. Ms. Prior also serves as Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds (2008- present) and is an employee of FMR (2002-present). |
Holly C. Laurent (54) | |
| Year of Election or Appointment: 2008 Anti-Money Laundering (AML) Officer of the fund. Ms. Laurent also serves as AML Officer of other Fidelity funds (2008-present) and is an employee of FMR LLC. Previously, Ms. Laurent was Senior Vice President and Head of Legal for Fidelity Business Services India Pvt. Ltd. (2006- 2008), Senior Vice President, Deputy General Counsel and Group Head for FMR LLC (2005-2006). |
Christine Reynolds (49) | |
| Year of Election or Appointment: 2008 Chief Financial Officer of the fund. Ms. Reynolds also serves as Chief Financial Officer of other Fidelity funds (2008-present). Ms. Reynolds became President of Fidelity Pricing and Cash Management Services (FPCMS) in August 2008. She served as Chief Operating Officer of FPCMS from 2007 through July 2008. Previously, Ms. Reynolds served as President, Treasurer, and Anti-Money Laundering officer of the Fidelity funds (2004-2007). Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980- 2002), where she was an audit partner with PwC's investment management practice. |
Michael H. Whitaker (41) | |
| Year of Election or Appointment: 2008 Chief Compliance Officer of the fund. Mr. Whitaker also serves as Chief Compliance Officer of Fidelity's Fixed Income and Asset Allocation Funds (2008-present) and is an employee of FMR (2007-present). Prior to joining Fidelity Investments, Mr. Whitaker worked at MFS Investment Management where he served as Senior Vice President and Chief Compliance Officer (2004-2006), and Assistant General Counsel. |
Bryan A. Mehrmann (47) | |
| Year of Election or Appointment: 2005 Deputy Treasurer of the fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). |
Robert G. Byrnes (41) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). |
Peter L. Lydecker (54) | |
| Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004-present) and is an employee of FMR. |
Paul M. Murphy (61) | |
| Year of Election or Appointment: 2007 Assistant Treasurer of the fund. Mr. Murphy also serves as Assistant Treasurer of other Fidelity funds (2007-present) and is an employee of FMR (2007-present). Previously, Mr. Murphy served as Chief Financial Officer of the Fidelity Funds (2005-2006), Vice President and Associate General Counsel of FMR (2007), and Senior Vice President of Fidelity Pricing and Cash Management Services (FPCMS) (1994-2007). |
Gary W. Ryan (50) | |
| Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in Fidelity Pricing and Cash Management Services (FPCMS) (1999-2005). |
** FMR Corp. merged with and into FMR LLC on October 1, 2007. Any references to FMR LLC for prior periods are deemed to be references to the prior entity.
Annual Report
Distributions
The Board of Trustees of Fidelity Total Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:
| Pay Date | Record Date | Capital Gains |
Institutional Class | 10/13/08 | 10/10/08 | $.065 |
The fund hereby designates as a capital gain dividend with respect to the taxable year ended August 31, 2008 $3,879,500, or, if subsequently determined to be different, the net capital gain of such year.
A total of 6.69% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund designates $426,216,385 of distributions paid during the period January 1, 2008 to August 31, 2008 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2009 of amounts for use in preparing 2008 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Total Bond Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly and, acting directly and through its separate committees, requests and receives information concerning, and considers at each of its meetings factors that are relevant to, its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has a written charter outlining the structure and purposes of the committee. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of Advisory Contracts.
At its June 2008 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expenses; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders. The Board also approved agreements with foreign sub-advisers Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Japan) Inc., and Fidelity Management & Research (Hong Kong) Limited.
In considering whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. The Board's decision to renew the Advisory Contracts was not based on any single factor noted above, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the fund's investment personnel and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that Fidelity has taken a number of actions over the previous year that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) contractually agreeing to reduce the management fees on Fidelity's Institutional Money Market Funds and launching Class IV and Institutional Class of certain of these funds; (iii) reducing the transfer agent fees for the Fidelity Select Portfolios and Investor Class of the VIP funds; and (iv) launching Class K of 29 equity funds as a lower-fee class available to certain employer-sponsored retirement plans.
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2007, as available, the cumulative total returns of Fidelity Total Bond (retail class) and Class C of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Fidelity Total Bond (retail class) and Class C show the performance of the highest and lowest performing classes, respectively (based on three-year performance). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Fidelity Total Bond Fund
The Board reviewed the fund's relative investment performance against its peer group and stated that the performance of Fidelity Total Bond (retail class) of the fund was in the fourth quartile for the one-year period, the second quartile for the three-year period, and the first quartile for the five-year period. The Board also stated that the investment performance of the fund was lower than its benchmark for all periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes. The Board discussed with FMR actions that may be taken by FMR to improve the fund's below-benchmark performance and how investment personnel evaluate potential for incremental return against the risks involved in obtaining that incremental return. The Board considered the steps that FMR has taken to strengthen and refine its risk management processes in light of recent credit events that have affected various sectors of the fixed-income markets.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Total Bond Fund
Annual Report
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2007.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that the current contractual arrangements for the fund (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Total Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Total Bond (retail class) to 45 basis points. These contractual arrangements may not be increased without the approval of the Board and the shareholders of the applicable class. The fund's Advisor classes are subject to different class-level expenses (transfer agent fees and 12b-1 fees).
The Board noted that each class's total expenses ranked below its competitive median for 2007.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total fund assets under FMR's management increase, and for higher group fee rates as total fund assets under FMR's management decrease. FMR determines the group fee rates based on a tiered asset "breakpoint" schedule. The Board noted, however, that because the current contractual arrangements set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including (i) fund performance trends and actions to be taken by FMR to improve certain funds' overall performance; (ii) portfolio manager changes that have occurred during the past year; (iii) Fidelity's fund profitability methodology, the profitability of certain fund service providers, and profitability trends for certain funds; (iv) Fidelity's compensation structure for portfolio managers and key personnel, including its effects on fund profitability and the extent to which portfolio manager compensation is linked to fund performance; (v) Fidelity's fee structures; (vi) the funds' sub-advisory arrangements; and (vii) accounts managed by Fidelity other than the Fidelity funds.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co. Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Hong Kong) Limited
Fidelity Management & Research
(Japan) Inc.
Fidelity Research & Analysis Company
Fidelity Investments
Money Management, Inc.
Fidelity Investments Japan Limited
FIL Investment Advisors
FIL Investment Advisors
(U.K.) Ltd.
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
ATBI-UANN-1008 1.804580.104
Item 2. Code of Ethics
As of the end of the period, August 31, 2008, Fidelity Income Fund (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Marie L. Knowles is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Knowles is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
Fees and Services
The following table presents fees billed by PricewaterhouseCoopers LLP ("PwC") in each of the last two fiscal years for services rendered to Fidelity Total Bond Fund (the "Fund"):
Services Billed by PwC
August 31, 2008 FeesA
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
Fidelity Total Bond Fund | $ 202,000 | $ - | $ 9,000 | $ 7,200 |
August 31, 2007 FeesA
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
Fidelity Total Bond Fund | $ 119,000 | $ - | $ 2,900 | $ 3,600 |
A Amounts may reflect rounding.
The following table presents fees billed by PwC that were required to be approved by the Audit Committee for services that relate directly to the operations and financial reporting of the Fund and that are rendered on behalf of Fidelity Management & Research Company ("FMR") and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund ("Fund Service Providers"):
Services Billed by PwC
| August 31, 2008A | August 31, 2007A |
Audit-Related Fees | $ 1,295,000 | $ - |
Tax Fees | $ - | $ - |
All Other Fees | $ 185,000 | $ 275,000 |
A Amounts may reflect rounding.
"Audit-Related Fees" represent fees billed for assurance and related services that are reasonably related to the performance of the fund audit or the review of the fund's financial statements and that are not reported under Audit Fees.
"Tax Fees" represent fees billed for tax compliance, tax advice or tax planning that relate directly to the operations and financial reporting of the fund.
"All Other Fees" represent fees billed for assurance services provided to the fund or Fund Service Provider that relate directly to the operations and financial reporting of the fund, excluding those services that are reported under Audit Fees, Audit-Related Fees or Tax Fees.
Assurance services must be performed by an independent public accountant.
* * *
The aggregate non-audit fees billed by PwC for services rendered to the Fund, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any Fund Service Provider for each of the last two fiscal years of the Fund are as follows:
Billed By | August 31, 2008 A | August 31, 2007 A |
PwC | $2,470,000 | $1,390,000 |
A Amounts may reflect rounding.
The trust's Audit Committee has considered non-audit services that were not pre-approved that were provided by PwC to Fund Service Providers to be compatible with maintaining the independence of PwC in its audit of the Fund, taking into account representations from PwC, in accordance with Independence Standards Board Standard No. 1, regarding its independence from the Fund and its related entities and FMR's review of the appropriateness and permissibility under applicable law of such non-audit services prior to their provision to the Fund Service Providers.
Audit Committee Pre-Approval Policies and Procedures
The Fidelity fund's Audit Committee must pre-approve all audit and non-audit services provided by a fund's independent registered public accounting firm relating to the operations or financial reporting of the fund. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund ("Covered Service") are subject to approval by the Audit Committee before such service is provided.
All Covered Services must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee.
Non-audit services provided by a fund audit firm to a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund are reported to the Audit Committee on a periodic basis.
Non-Audit Services Approved Pursuant to Rule 2-01(c)(7)(i)(C) and (ii) of Regulation S-X ("De Minimis Exception")
There were no non-audit services approved or required to be approved by the Audit Committee pursuant to the De Minimis Exception during the Fund's last two fiscal years relating to services provided to (i) the Fund or (ii) any Fund Service Provider that relate directly to the operations and financial reporting of the Fund.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Investments
(a) Not applicable.
(b) Not applicable
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the trust's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the trust's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) |
| Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Income Fund
By: | /s/John R. Hebble |
| John R. Hebble |
| President and Treasurer |
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|
Date: | October 29, 2008 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/John R. Hebble |
| John R. Hebble |
| President and Treasurer |
|
|
Date: | October 29, 2008 |
By: | /s/Christine Reynolds |
| Christine Reynolds |
| Chief Financial Officer |
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|
Date: | October 29, 2008 |