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)
Eric D. Roiter, 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: | July 31 |
Date of reporting period: | July 31, 2003 |
Item 1. Reports to Stockholders
Fidelity
Total Bond
Fund
Annual Report
July 31, 2003
(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. | |
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. | |
Auditors' Opinion | The auditors' opinion. | |
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines visit www.fidelity.com/goto/proxyguidelines, call 1-800-544-8544, or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
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.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
This shareholder update and report on the performance of your fund is among the first to be produced under the new Sarbanes-Oxley Public Company Accounting and Investor Protection Act of 2002. This act requires that public companies certify, under penalty of law, the financial information they report to shareholders. It was adopted by Congress in reaction to several incidents of corporate malfeasance that brought the integrity of management of some publicly traded companies into question.
After the act was signed into law, the Securities and Exchange Commission interpreted it as applying to mutual funds as well as public companies. Thus, every mutual fund now is required to certify that the financial information provided in annual and semiannual reports to shareholders fully and fairly presents its financial position.
There is little doubt that the intent of Congress and regulators in this matter is a noble one - to improve the accuracy and accountability of financial reporting to investors by corporate America. We in no way condone any of the activities that brought about these requirements, and we welcome any and every reasonable proposal to strengthen investor protection and information disclosure.
That said, we are proud that mutual funds have always provided full and fair disclosure. Governed by the Investment Company Act of 1940 - and monitored and regulated by federal and state agencies, industry oversight associations, and independent directors - mutual funds are among the most transparent of all financial products. For example, the prices of mutual fund shares are established and published every business day, and the majority of members of the Board of Trustees that oversees our funds are not affiliated with the business of Fidelity. The disclosure standards of mutual funds actually have become models for governance and transparency across corporate America.
We are, of course, complying in full with the letter of this new requirement and hope that any future efforts by Congress to reassure investors about the honesty of corporate America will focus on practical and substantive solutions of genuine value to shareholders.
This sort of careful consideration was evident as Congress deliberated President Bush's tax cut package this spring, then enacted legislation that contains a variety of benefits for American families, investors and businesses. Although the final bill did not completely eliminate the tax that individual investors pay when they receive dividends from companies, it still will benefit American investors, and we applaud it in the spirit of compromise that marked the debate in Congress.
At Fidelity, we are committed to acting at all times in accordance with the highest standards of integrity and in the best interests of our fund shareholders. We are proud of the amount of information we provide to those who invest in our funds and pleased to continue that level of communication with you in these reports.
Best regards,
/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 fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. If Fidelity had not reimbursed certain fund expenses, the total returns and dividends would have been lower. 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. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Average annual total returns take Fidelity® Total Bond Fund's cumulative total return and show you what would have happened if Fidelity Total Bond Fund shares had performed at a constant rate each year. These numbers will be reported once the fund is a year old.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Total Bond Fund on October 15, 2002, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers® U.S. Universal Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Kevin Grant, Portfolio Manager of Fidelity® Total Bond Fund
Investment-grade debt performed well for most of the 12 months ending July 31, 2003, as the Lehman Brothers® Aggregate Bond Index returned 5.42%. Bonds prospered in an environment of low inflation, low interest rates and weak equity markets. The Federal Reserve Board lowered rates twice in the period, dropping the fed funds target rate to its lowest level in 45 years. At various times in the past year, investors sought the highest-quality bonds, driving Treasury prices up and yields down to 40-year lows. However, Treasury yields climbed to a 12-month high in the final six weeks of the period. For the year overall, the Lehman Brothers Treasury Index gained 4.54%. Corporate credit was the best-performing investment-grade segment, rising 10.71% according to the Lehman Brothers Credit Bond Index. Agencies were tempered by an accounting issue at a leading government-sponsored enterprise, which limited the Lehman Brothers U.S. Agency Index to a 4.29% advance. Mortgages were the weakest performers, hampered by heavy refinancing activity. The Lehman Brothers Mortgage-Backed Securities Index returned 2.56%.
Fidelity Total Bond Fund gained 5.01% from its inception on October 15, 2002, through July 31, 2003, outpacing the Lehman Brothers U.S. Universal Index, which returned 4.97%. It was an ideal time to be in riskier assets, and the fund was rewarded for overweighting more-volatile high-yield corporate bonds and emerging-markets debt securities, both of which rebounded sharply from last fall's depressed levels amid improved credit conditions. So, despite the fund's focus on investment-grade debt - with roughly an 85% weighting on average - having modest bets in the below-investment-grade sectors was a big win versus its benchmark. Complementing this strategy was our underweighting in government bonds - namely Treasuries and agencies - which trailed the market by wide margins. As a result, we captured the massive performance disparity between the segments, with results benefiting not only from the high coupon income received during the period, but also from the capital appreciation on our investments. Within corporates, we did well by underweighting investment-grade issues as we favored stronger-performing high-yield bonds. Conversely, while we benefited from generally owning the right mortgage securities, we simply had too much exposure overall to the sector, which struggled against a backdrop of increased volatility and record refinancing activity.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2003 | As of January 31, 2003 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 2.3% | ![]() | AAA 1.6% | ||||
![]() | AA 1.9% | ![]() | AA 2.3% | ||||
![]() | A 7.9% | ![]() | A 6.9% | ||||
![]() | BBB 12.4% | ![]() | BBB 9.1% | ||||
![]() | BB and Below 10.2% | ![]() | BB and Below 11.5% | ||||
![]() | Not Rated 1.2% | ![]() | Not Rated 0.7% | ||||
![]() | Equities 0.1% | ![]() | Equities 0.1% | ||||
![]() | Short-Term | ![]() | Short-Term |
A Short-Term Investments and Net Other Assets are not included in the pie chart. |
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. |
Average Years to Maturity as of July 31, 2003 | ||
6 months ago | ||
Years | 4.9 | 3.7 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2003 | ||
6 months ago | ||
Years | 4.9 | 3.7 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2003* | As of January 31, 2003** | ||||||
![]() | Corporate Bonds 25.8% | ![]() | Corporate Bonds 23.8% | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 1.9% | ![]() | CMOs and Other Mortgage Related Securities 1.2% | ||||
![]() | Municipal Bonds 0.3% | ![]() | Municipal Bonds 0.0% | ||||
![]() | Stocks 0.1% | ![]() | Stocks 0.1% | ||||
![]() | Other Investments 2.1% | ![]() | Other Investments 2.8% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 6.8% | ** Foreign investments | 6.3% | ||||
* Futures and Swaps | 0.0% | ** Futures and Swaps | (0.5)% |
A Short-Term Investments and Net Other Assets are not included in the pie chart. |
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
Annual Report
Investments July 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 25.3% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 4.9% | ||||
Auto Components - 0.5% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
3.4% 12/15/04 | $ 100,000 | $ 100,842 | ||
4.75% 1/15/08 | 200,000 | 199,203 | ||
Dana Corp. 6.25% 3/1/04 | 15,000 | 14,850 | ||
Navistar International Corp. 8% 2/1/08 | 65,000 | 65,975 | ||
United Components, Inc. 9.375% 6/15/13 (c) | 10,000 | 10,300 | ||
391,170 | ||||
Automobiles - 0.3% | ||||
General Motors Corp.: | ||||
7.125% 7/15/13 | 25,000 | 24,382 | ||
8.25% 7/15/23 | 90,000 | 85,287 | ||
8.375% 7/15/33 | 115,000 | 107,451 | ||
217,120 | ||||
Hotels, Restaurants & Leisure - 0.7% | ||||
Alliance Gaming Corp. 10% 8/1/07 | 50,000 | 51,750 | ||
Bally Total Fitness Holding Corp.: | ||||
9.875% 10/15/07 | 80,000 | 74,400 | ||
10.5% 7/15/11 (c) | 60,000 | 61,200 | ||
Friendly Ice Cream Corp. 10.5% 12/1/07 | 20,000 | 20,400 | ||
Herbst Gaming, Inc. 10.75% 9/1/08 | 25,000 | 27,375 | ||
Mohegan Tribal Gaming Authority 8.375% 7/1/11 | 35,000 | 37,450 | ||
MTR Gaming Group, Inc. 9.75% 4/1/10 (c) | 20,000 | 20,700 | ||
Park Place Entertainment Corp. 7.875% 12/15/05 | 50,000 | 52,750 | ||
Premier Parks, Inc. 9.75% 6/15/07 | 50,000 | 47,375 | ||
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | 45,000 | 48,488 | ||
Town Sports International, Inc. 9.625% 4/15/11 | 20,000 | 21,200 | ||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 50,000 | 55,000 | ||
Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (c) | 10,000 | 10,400 | ||
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | 30,000 | 30,300 | ||
558,788 | ||||
Household Durables - 0.1% | ||||
D.R. Horton, Inc. 8.5% 4/15/12 | 30,000 | 32,400 | ||
Juno Lighting, Inc. 11.875% 7/1/09 | 30,000 | 32,400 | ||
K. Hovnanian Enterprises, Inc. 8.875% 4/1/12 | 10,000 | 10,500 | ||
William Lyon Homes, Inc. 10.75% 4/1/13 | 40,000 | 42,800 | ||
118,100 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Internet & Catalog Retail - 0.4% | ||||
USA Interactive 7% 1/15/13 | $ 300,000 | $ 325,125 | ||
Leisure Equipment & Products - 0.0% | ||||
The Hockey Co. 11.25% 4/15/09 | 15,000 | 16,950 | ||
Media - 2.7% | ||||
AMC Entertainment, Inc. 9.875% 2/1/12 | 10,000 | 10,800 | ||
CBD Media LLC/ CBD Finance, Inc. 8.625% 6/1/11 (c) | 10,000 | 10,300 | ||
Clear Channel Communications, Inc. 6.625% 6/15/08 | 200,000 | 220,457 | ||
Coaxial Communications of Central Ohio, Inc. 10% 8/15/06 | 40,000 | 41,300 | ||
Comcast Corp. 5.85% 1/15/10 | 500,000 | 521,030 | ||
Comcast UK Cable Partners Ltd. yankee 11.2% 11/15/07 | 50,000 | 49,250 | ||
Cox Communications, Inc.: | ||||
4.625% 6/1/13 | 90,000 | 83,561 | ||
7.125% 10/1/12 | 355,000 | 396,568 | ||
EchoStar DBS Corp. 9.125% 1/15/09 | 110,000 | 121,000 | ||
LodgeNet Entertainment Corp. 9.5% 6/15/13 | 40,000 | 41,600 | ||
News America, Inc. 6.55% 3/15/33 (c) | 500,000 | 480,188 | ||
PEI Holdings, Inc. 11% 3/15/10 (c) | 15,000 | 16,500 | ||
PRIMEDIA, Inc.: | ||||
7.625% 4/1/08 | 5,000 | 4,875 | ||
8.875% 5/15/11 | 25,000 | 25,500 | ||
Rogers Cablesystems Ltd. yankee 11% 12/1/15 | 5,000 | 5,525 | ||
TV Azteca SA de CV yankee 10.5% 2/15/07 | 25,000 | 25,375 | ||
Walt Disney Co. 5.375% 6/1/07 | 100,000 | 105,891 | ||
2,159,720 | ||||
Multiline Retail - 0.0% | ||||
Barneys, Inc. 9% 4/1/08 unit (c) | 20,000 | 18,200 | ||
Specialty Retail - 0.1% | ||||
Asbury Automotive Group, Inc. 9% 6/15/12 | 15,000 | 14,400 | ||
Toys 'R' US, Inc. 7.875% 4/15/13 | 20,000 | 20,100 | ||
United Auto Group, Inc. 9.625% 3/15/12 | 50,000 | 52,750 | ||
87,250 | ||||
Textiles Apparel & Luxury Goods - 0.1% | ||||
Dan River, Inc. 12.75% 4/15/09 (c) | 20,000 | 15,000 | ||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 10,000 | 8,700 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Textiles Apparel & Luxury Goods - continued | ||||
Levi Strauss & Co.: - continued | ||||
11.625% 1/15/08 | $ 10,000 | $ 9,100 | ||
12.25% 12/15/12 | 15,000 | 12,900 | ||
45,700 | ||||
TOTAL CONSUMER DISCRETIONARY | 3,938,123 | |||
CONSUMER STAPLES - 0.5% | ||||
Food & Staples Retailing - 0.1% | ||||
Rite Aid Corp.: | ||||
6% 12/15/05 (c) | 20,000 | 19,100 | ||
7.625% 4/15/05 | 15,000 | 14,850 | ||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | 45,000 | 40,725 | ||
9.125% 12/15/11 | 10,000 | 9,050 | ||
83,725 | ||||
Food Products - 0.4% | ||||
Corn Products International, Inc. 8.25% 7/15/07 | 5,000 | 5,350 | ||
Del Monte Corp. 9.25% 5/15/11 | 50,000 | 53,500 | ||
Doane Pet Care Co. 9.75% 5/15/07 | 50,000 | 48,000 | ||
Kraft Foods, Inc.: | ||||
1.12% 10/27/03 (f) | 200,000 | 200,002 | ||
5.25% 6/1/07 | 20,000 | 20,954 | ||
327,806 | ||||
TOTAL CONSUMER STAPLES | 411,531 | |||
ENERGY - 1.3% | ||||
Energy Equipment & Services - 0.1% | ||||
Grant Prideco, Inc. 9% 12/15/09 | 10,000 | 10,750 | ||
Universal Compression, Inc. 7.25% 5/15/10 (c) | 40,000 | 39,800 | ||
50,550 | ||||
Oil & Gas - 1.2% | ||||
Chesapeake Energy Corp. 8.375% 11/1/08 | 50,000 | 52,875 | ||
General Maritime Corp. 10% 3/15/13 (c) | 45,000 | 49,275 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12 | 60,000 | 68,400 | ||
NGC Corp. 6.75% 12/15/05 | 20,000 | 19,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
ENERGY - continued | ||||
Oil & Gas - continued | ||||
Nuevo Energy Co.: | ||||
9.375% 10/1/10 | $ 10,000 | $ 10,600 | ||
9.5% 6/1/08 | 4,000 | 4,190 | ||
OAO Gazprom 9.625% 3/1/13 | 50,000 | 52,000 | ||
Overseas Shipholding Group, Inc. 8.25% 3/15/13 (c) | 40,000 | 41,200 | ||
Pecom Energia SA: | ||||
8.125% 7/15/10 (Reg. S) | 25,000 | 23,375 | ||
9% 5/1/09 (Reg. S) | 20,000 | 19,800 | ||
Pemex Project Funding Master Trust: | ||||
6.125% 8/15/08 (c) | 250,000 | 260,625 | ||
7.375% 12/15/14 (c) | 200,000 | 206,500 | ||
Teekay Shipping Corp. 8.875% 7/15/11 | 30,000 | 32,850 | ||
The Coastal Corp.: | ||||
6.375% 2/1/09 | 5,000 | 3,875 | ||
6.5% 5/15/06 | 65,000 | 54,763 | ||
7.5% 8/15/06 | 20,000 | 17,500 | ||
YPF SA yankee 9.125% 2/24/09 | 45,000 | 48,038 | ||
965,366 | ||||
TOTAL ENERGY | 1,015,916 | |||
FINANCIALS - 8.0% | ||||
Capital Markets - 1.4% | ||||
Amvescap PLC 5.9% 1/15/07 | 35,000 | 37,431 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (f) | 100,000 | 97,325 | ||
4.25% 9/4/12 (f) | 205,000 | 208,133 | ||
Bear Stearns Companies, Inc. 4% 1/31/08 | 200,000 | 201,750 | ||
Goldman Sachs Group, Inc. 5.7% 9/1/12 | 100,000 | 102,631 | ||
Legg Mason, Inc. 6.75% 7/2/08 | 30,000 | 33,067 | ||
Lehman Brothers Holdings, Inc. 4% 1/22/08 | 100,000 | 100,691 | ||
Merrill Lynch & Co., Inc. 4% 11/15/07 | 250,000 | 250,247 | ||
Morgan Stanley 6.6% 4/1/12 | 100,000 | 108,871 | ||
1,140,146 | ||||
Commercial Banks - 0.1% | ||||
Bank of America Corp. 4.875% 1/15/13 | 55,000 | 53,221 | ||
Consumer Finance - 1.6% | ||||
American General Finance Corp. 4.5% 11/15/07 | 200,000 | 205,219 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Bank: | ||||
4.875% 5/15/08 | $ 75,000 | $ 75,284 | ||
6.5% 6/13/13 | 90,000 | 84,024 | ||
Capital One Financial Corp. 8.75% 2/1/07 | 5,000 | 5,519 | ||
Ford Motor Credit Co. 7.875% 6/15/10 | 250,000 | 257,601 | ||
General Motors Acceptance Corp.: | ||||
6.875% 9/15/11 | 250,000 | 244,242 | ||
6.875% 8/28/12 | 250,000 | 242,628 | ||
Household Finance Corp.: | ||||
6.375% 11/27/12 | 30,000 | 31,869 | ||
6.5% 1/24/06 | 100,000 | 109,067 | ||
6.75% 5/15/11 | 40,000 | 43,755 | ||
1,299,208 | ||||
Diversified Financial Services - 2.7% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 20,000 | 18,400 | ||
6.875% 5/1/29 | 60,000 | 49,200 | ||
8.25% 7/15/10 | 40,000 | 39,200 | ||
Ameritech Capital Funding Corp. euro 6.25% 5/18/09 | 35,000 | 37,930 | ||
CMS Energy X-TRAS pass thru trust I 7% 1/15/05 | 10,000 | 9,700 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.748% 9/15/18 | 3,963 | 2,933 | ||
6.9% 1/2/17 | 4,755 | 3,376 | ||
7.73% 9/15/12 | 4,934 | 3,602 | ||
8.321% 11/1/06 | 5,000 | 4,300 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 15,000 | 12,750 | ||
7.57% 11/18/10 | 5,000 | 4,987 | ||
7.779% 1/2/12 | 27,657 | 22,126 | ||
Deutsche Telekom International Finance BV: | ||||
5.25% 7/22/13 | 85,000 | 81,386 | ||
8.5% 6/15/10 | 200,000 | 235,662 | ||
Devon Financing Corp. U.L.C. 7.875% 9/30/31 | 100,000 | 114,221 | ||
FIMEP SA 10.5% 2/15/13 (c) | 20,000 | 21,900 | ||
Gemstone Investor Ltd./Gemstone Investor, Inc. 7.71% 10/31/04 (c) | 60,000 | 58,275 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 (c) | 35,000 | 32,725 | ||
Hurricane Finance BV 9.625% 2/12/10 (c) | 10,000 | 10,650 | ||
IOS Capital LLC 7.25% 6/30/08 | 20,000 | 18,400 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Leucadia National Corp. 7% 8/15/13 (c) | $ 20,000 | $ 19,400 | ||
Mobile Telesystems Finance SA: | ||||
9.75% 1/30/08 (c) | 35,000 | 36,838 | ||
9.75% 1/30/08 (Reg. S) | 25,000 | 26,313 | ||
Moore North America Finance, Inc. 7.875% 1/15/11 (c) | 20,000 | 20,300 | ||
MSW Energy Holding LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 (c) | 10,000 | 10,350 | ||
Northern Telecom Capital Corp. 7.875% 6/15/26 | 25,000 | 22,750 | ||
Northwest Airlines, Inc. pass thru trust certificates: | ||||
7.068% 7/2/17 | 8,404 | 6,219 | ||
7.67% 1/2/15 | 8,740 | 7,167 | ||
PDVSA Finance Ltd.: | ||||
9.375% 11/15/07 | 25,000 | 24,625 | ||
9.75% 2/15/10 | 65,000 | 62,725 | ||
Pemex Project Funding Master Trust 7.375% 12/15/14 | 50,000 | 51,625 | ||
Petronas Capital Ltd. 7% 5/22/12 (c) | 5,000 | 5,488 | ||
Qwest Capital Funding, Inc.: | ||||
5.875% 8/3/04 | 15,000 | 14,100 | ||
7% 8/3/09 | 50,000 | 38,000 | ||
7.25% 2/15/11 | 35,000 | 26,250 | ||
7.625% 8/3/21 | 20,000 | 14,300 | ||
7.75% 8/15/06 | 145,000 | 126,150 | ||
7.75% 2/15/31 | 25,000 | 17,750 | ||
Satelindo International Finance BV 3.8925% 12/31/05 (Reg. S) (f) | 10,000 | 9,775 | ||
Sprint Capital Corp. 6.125% 11/15/08 | 500,000 | 518,935 | ||
TRW Automotive Acquisition Corp. 9.375% 2/15/13 (c) | 40,000 | 43,500 | ||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (c) | 20,000 | 22,100 | ||
Verizon Global Funding Corp.: | ||||
7.25% 12/1/10 | 30,000 | 34,038 | ||
7.375% 9/1/12 | 100,000 | 113,033 | ||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 115,000 | 122,948 | ||
Western Financial Bank 9.625% 5/15/12 | 15,000 | 16,350 | ||
2,192,752 | ||||
Insurance - 0.8% | ||||
Aegon NV 4.75% 6/1/13 | 500,000 | 470,638 | ||
Crum & Forster Holdings Corp. 10.375% 6/15/13 (c) | 50,000 | 51,375 | ||
Prudential Financial, Inc. 3.75% 5/1/08 | 55,000 | 54,538 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Insurance - continued | ||||
Travelers Property Casualty Corp.: | ||||
5% 3/15/13 | $ 25,000 | $ 24,566 | ||
6.375% 3/15/33 | 35,000 | 34,156 | ||
635,273 | ||||
Real Estate - 1.0% | ||||
Boston Properties, Inc. 6.25% 1/15/13 | 100,000 | 102,676 | ||
Camden Property Trust 5.875% 11/30/12 | 200,000 | 203,541 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 200,000 | 205,526 | ||
CBRE Escrow, Inc. 9.75% 5/15/10 (c) | 15,000 | 16,050 | ||
LNR Property Corp.: | ||||
7.625% 7/15/13 (c) | 20,000 | 19,600 | ||
10.5% 1/15/09 | 10,000 | 10,600 | ||
Senior Housing Properties Trust 7.875% 4/15/15 | 20,000 | 20,000 | ||
Vornado Realty Trust 5.625% 6/15/07 | 200,000 | 208,089 | ||
786,082 | ||||
Thrifts & Mortgage Finance - 0.4% | ||||
Washington Mutual, Inc.: | ||||
4.375% 1/15/08 | 200,000 | 204,336 | ||
5.625% 1/15/07 | 100,000 | 108,016 | ||
312,352 | ||||
TOTAL FINANCIALS | 6,419,034 | |||
HEALTH CARE - 0.3% | ||||
Health Care Providers & Services - 0.3% | ||||
AmeriPath, Inc. 10.5% 4/1/13 | 50,000 | 53,000 | ||
PacifiCare Health Systems, Inc. 10.75% 6/1/09 | 50,000 | 57,250 | ||
Psychiatric Solutions, Inc. 10.625% 6/15/13 (c) | 30,000 | 31,425 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 45,000 | 40,500 | ||
6.5% 6/1/12 | 5,000 | 4,513 | ||
7.375% 2/1/13 | 50,000 | 47,500 | ||
234,188 | ||||
Pharmaceuticals - 0.0% | ||||
aaiPharma, Inc. 11% 4/1/10 | 25,000 | 27,625 | ||
TOTAL HEALTH CARE | 261,813 | |||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - 2.0% | ||||
Aerospace & Defense - 0.7% | ||||
Aviall, Inc. 7.625% 7/1/11 (c) | $ 20,000 | $ 19,600 | ||
Raytheon Co.: | ||||
5.5% 11/15/12 | 550,000 | 549,159 | ||
6.75% 8/15/07 | 20,000 | 21,901 | ||
Transdigm, Inc. 8.375% 7/15/11 (c) | 20,000 | 20,550 | ||
611,210 | ||||
Airlines - 0.1% | ||||
Northwest Airlines, Inc.: | ||||
7.875% 3/15/08 | 5,000 | 3,550 | ||
9.875% 3/15/07 | 60,000 | 45,600 | ||
49,150 | ||||
Building Products - 0.0% | ||||
Jacuzzi Brands, Inc. 9.625% 7/1/10 (c) | 20,000 | 20,600 | ||
Nortek, Inc. 9.125% 9/1/07 | 15,000 | 15,375 | ||
35,975 | ||||
Commercial Services & Supplies - 0.4% | ||||
Allied Waste North America, Inc.: | ||||
7.875% 1/1/09 | 30,000 | 31,050 | ||
7.875% 4/15/13 | 30,000 | 30,150 | ||
10% 8/1/09 | 60,000 | 63,300 | ||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 130,000 | 135,705 | ||
National Waterworks, Inc. 10.5% 12/1/12 | 10,000 | 10,850 | ||
Wackenhut Corrections Corp. 8.25% 7/15/13 (c) | 30,000 | 30,375 | ||
301,430 | ||||
Construction & Engineering - 0.0% | ||||
Shaw Group, Inc. 10.75% 3/15/10 (c) | 40,000 | 36,000 | ||
Industrial Conglomerates - 0.2% | ||||
Textron Financial Corp. 2.75% 6/1/06 | 55,000 | 54,053 | ||
Tyco International Group SA yankee: | ||||
6.375% 6/15/05 | 5,000 | 5,150 | ||
6.375% 2/15/06 | 20,000 | 20,600 | ||
6.75% 2/15/11 | 70,000 | 70,700 | ||
150,503 | ||||
Machinery - 0.2% | ||||
Columbus McKinnon Corp. 10% 8/1/10 (c) | 10,000 | 10,200 | ||
Cummins, Inc.: | ||||
5.65% 3/1/98 | 15,000 | 9,900 | ||
9.5% 12/1/10 (c) | 20,000 | 22,400 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Machinery - continued | ||||
Dresser, Inc. 9.375% 4/15/11 | $ 15,000 | $ 15,450 | ||
Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09 | 50,000 | 54,250 | ||
Terex Corp. 8.875% 4/1/08 | 20,000 | 20,500 | ||
TriMas Corp. 9.875% 6/15/12 (c) | 10,000 | 10,100 | ||
142,800 | ||||
Road & Rail - 0.2% | ||||
CSX Corp. 7.45% 5/1/07 | 100,000 | 113,381 | ||
TFM SA de CV yankee 11.75% 6/15/09 | 20,000 | 20,400 | ||
133,781 | ||||
Transportation Infrastructure - 0.2% | ||||
Korea Highway Corp. 4.9% 7/1/13 (c) | 200,000 | 187,500 | ||
TOTAL INDUSTRIALS | 1,648,349 | |||
INFORMATION TECHNOLOGY - 1.3% | ||||
Communications Equipment - 0.7% | ||||
Motorola, Inc.: | ||||
7.625% 11/15/10 | 200,000 | 221,500 | ||
8% 11/1/11 | 200,000 | 226,000 | ||
Nortel Networks Corp. 6.125% 2/15/06 | 25,000 | 23,875 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (c) | 20,000 | 21,400 | ||
13.5% 12/15/10 (c) | 20,000 | 21,700 | ||
14% 12/15/14 (c) | 30,000 | 33,600 | ||
548,075 | ||||
Electronic Equipment & Instruments - 0.1% | ||||
Avnet, Inc. 9.75% 2/15/08 | 20,000 | 21,800 | ||
Jabil Circuit, Inc. 5.875% 7/15/10 | 20,000 | 19,700 | ||
PerkinElmer, Inc. 8.875% 1/15/13 | 20,000 | 21,800 | ||
Solectron Corp. 7.375% 3/1/06 | 25,000 | 25,375 | ||
88,675 | ||||
IT Services - 0.2% | ||||
Electronic Data Systems Corp. 6% 8/1/13 (c) | 150,000 | 140,287 | ||
Office Electronics - 0.1% | ||||
Xerox Corp.: | ||||
7.125% 6/15/10 | 20,000 | 19,400 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INFORMATION TECHNOLOGY - continued | ||||
Office Electronics - continued | ||||
Xerox Corp.: - continued | ||||
7.2% 4/1/16 | $ 65,000 | $ 59,150 | ||
7.625% 6/15/13 | 50,000 | 48,500 | ||
127,050 | ||||
Semiconductors & Semiconductor Equipment - 0.2% | ||||
AMI Semiconductor, Inc. 10.75% 2/1/13 | 40,000 | 44,700 | ||
Amkor Technology, Inc. 7.75% 5/15/13 (c) | 80,000 | 76,400 | ||
SCG Holding Corp./Semiconductor Components Industries LLC 12% 8/1/09 | 55,000 | 49,500 | ||
170,600 | ||||
TOTAL INFORMATION TECHNOLOGY | 1,074,687 | |||
MATERIALS - 1.1% | ||||
Chemicals - 0.2% | ||||
Berry Plastics Corp. 10.75% 7/15/12 | 30,000 | 32,850 | ||
Huntsman International LLC 9.875% 3/1/09 (c) | 15,000 | 15,600 | ||
Millennium America, Inc.: | ||||
9.25% 6/15/08 | 20,000 | 20,700 | ||
9.25% 6/15/08 (c) | 10,000 | 10,350 | ||
OMNOVA Solutions, Inc. 11.25% 6/1/10 (c) | 20,000 | 21,400 | ||
PolyOne Corp. 8.875% 5/1/12 | 25,000 | 21,000 | ||
Resolution Performance Products LLC: | ||||
9.5% 4/15/10 | 20,000 | 20,000 | ||
13.5% 11/15/10 | 10,000 | 9,300 | ||
151,200 | ||||
Construction Materials - 0.1% | ||||
Texas Industries, Inc. 10.25% 6/15/11 (c) | 80,000 | 84,000 | ||
Containers & Packaging - 0.5% | ||||
Anchor Glass Container Corp. 11% 2/15/13 | 50,000 | 53,875 | ||
BWAY Corp. 10% 10/15/10 (c) | 10,000 | 10,350 | ||
Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 (c) | 30,000 | 30,000 | ||
Owens-Brockway Glass Container, Inc.: | ||||
8.25% 5/15/13 (c) | 15,000 | 15,300 | ||
8.875% 2/15/09 | 50,000 | 51,500 | ||
Owens-Illinois, Inc.: | ||||
7.15% 5/15/05 | 60,000 | 60,900 | ||
7.5% 5/15/10 | 20,000 | 19,300 | ||
7.8% 5/15/18 | 45,000 | 42,300 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Containers & Packaging - continued | ||||
Owens-Illinois, Inc.: - continued | ||||
8.1% 5/15/07 | $ 10,000 | $ 10,075 | ||
Sealed Air Corp.: | ||||
5.625% 7/15/13 (c) | 25,000 | 23,907 | ||
6.875% 7/15/33 (c) | 55,000 | 51,721 | ||
369,228 | ||||
Metals & Mining - 0.1% | ||||
Peabody Energy Corp. 6.875% 3/15/13 (c) | 20,000 | 19,950 | ||
Phelps Dodge Corp. 8.75% 6/1/11 | 40,000 | 45,450 | ||
Steel Dynamics, Inc. 9.5% 3/15/09 | 10,000 | 10,575 | ||
75,975 | ||||
Paper & Forest Products - 0.2% | ||||
Boise Cascade Corp.: | ||||
7.5% 2/1/08 | 40,000 | 42,427 | ||
8% 2/24/06 | 25,000 | 26,839 | ||
Georgia-Pacific Corp.: | ||||
7.375% 12/1/25 | 15,000 | 12,750 | ||
7.5% 5/15/06 | 50,000 | 50,000 | ||
8.125% 5/15/11 | 5,000 | 5,000 | ||
8.875% 5/15/31 | 10,000 | 9,450 | ||
9.625% 3/15/22 | 10,000 | 9,700 | ||
Millar Western Forest Products Ltd. yankee 9.875% 5/15/08 | 20,000 | 20,700 | ||
176,866 | ||||
TOTAL MATERIALS | 857,269 | |||
TELECOMMUNICATION SERVICES - 3.1% | ||||
Diversified Telecommunication Services - 1.9% | ||||
AT&T Corp. 7% 11/15/06 | 45,000 | 49,736 | ||
British Telecommunications PLC: | ||||
8.375% 12/15/10 | 60,000 | 71,692 | ||
8.875% 12/15/30 | 20,000 | 24,567 | ||
France Telecom SA 9.25% 3/1/11 (b) | 200,000 | 237,690 | ||
Koninklijke KPN NV yankee 8% 10/1/10 | 500,000 | 591,631 | ||
Rogers Cantel, Inc. yankee: | ||||
8.8% 10/1/07 | 90,000 | 91,350 | ||
9.375% 6/1/08 | 5,000 | 5,225 | ||
Telefonica de Argentina SA 11.875% 11/1/04 | 20,000 | 19,600 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
TELUS Corp. yankee: | ||||
7.5% 6/1/07 | $ 200,000 | $ 218,699 | ||
8% 6/1/11 | 100,000 | 111,746 | ||
Triton PCS, Inc.: | ||||
8.75% 11/15/11 | 70,000 | 67,550 | ||
9.375% 2/1/11 | 10,000 | 9,950 | ||
U.S. West Communications 6.875% 9/15/33 | 15,000 | 12,150 | ||
1,511,586 | ||||
Wireless Telecommunication Services - 1.2% | ||||
American Tower Corp. 9.375% 2/1/09 | 60,000 | 60,600 | ||
Cingular Wireless LLC 7.125% 12/15/31 | 500,000 | 536,103 | ||
Crown Castle International Corp.: | ||||
9.375% 8/1/11 | 25,000 | 25,750 | ||
9.5% 8/1/11 | 30,000 | 30,900 | ||
Nextel Communications, Inc.: | ||||
9.375% 11/15/09 | 10,000 | 10,625 | ||
9.5% 2/1/11 | 60,000 | 65,550 | ||
9.75% 10/31/07 | 10,000 | 10,250 | ||
9.95% 2/15/08 | 75,000 | 78,000 | ||
Nextel Partners, Inc. 8.125% 7/1/11 (c) | 35,000 | 32,550 | ||
Rogers Wireless, Inc. 9.625% 5/1/11 | 56,000 | 63,280 | ||
SBA Communications Corp. 10.25% 2/1/09 | 35,000 | 32,288 | ||
Western Wireless Corp. 9.25% 7/15/13 (c) | 40,000 | 38,400 | ||
984,296 | ||||
TOTAL TELECOMMUNICATION SERVICES | 2,495,882 | |||
UTILITIES - 2.8% | ||||
Electric Utilities - 1.7% | ||||
Allegheny Energy Supply Co. LLC: | ||||
8.75% 4/15/12 (c) | 90,000 | 75,150 | ||
10.25% 11/15/07 (c) | 26,657 | 26,924 | ||
10.25% 11/15/07 (c)(f) | 3,339 | 3,164 | ||
CMS Energy Corp.: | ||||
6.75% 1/15/04 | 50,000 | 50,000 | ||
8.5% 4/15/11 | 45,000 | 43,763 | ||
9.875% 10/15/07 | 45,000 | 46,125 | ||
Dominion Resources, Inc. 8.125% 6/15/10 | 45,000 | 52,714 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
DTE Energy Co.: | ||||
6.375% 4/15/33 | $ 250,000 | $ 225,950 | ||
7.05% 6/1/11 | 50,000 | 54,444 | ||
Duke Capital Corp. 6.75% 2/15/32 | 400,000 | 356,126 | ||
Edison International 6.875% 9/15/04 | 15,000 | 14,850 | ||
FPL Group Capital, Inc. 3.25% 4/11/06 | 30,000 | 30,321 | ||
Illinois Power Co. 11.5% 12/15/10 (c) | 55,000 | 60,500 | ||
Nevada Power Co. 10.875% 10/15/09 | 60,000 | 65,400 | ||
Ohio Edison Co. 4% 5/1/08 (c) | 125,000 | 122,927 | ||
Oncor Electric Delivery Co. 6.375% 5/1/12 | 45,000 | 48,312 | ||
Pacific Gas & Electric Co. 10% 11/1/05 (c)(f) | 50,000 | 50,000 | ||
PG&E Corp. 6.875% 7/15/08 (c) | 20,000 | 20,500 | ||
Southern California Edison Co.: | ||||
7.25% 3/1/26 | 15,000 | 15,225 | ||
8% 2/15/07 (c) | 30,000 | 32,100 | ||
TECO Energy, Inc. 10.5% 12/1/07 | 25,000 | 27,750 | ||
1,422,245 | ||||
Gas Utilities - 0.4% | ||||
Dynegy Holdings, Inc.: | ||||
7.45% 7/15/06 | 25,000 | 24,000 | ||
8.125% 3/15/05 | 40,000 | 39,200 | ||
El Paso Energy Corp.: | ||||
6.75% 5/15/09 | 25,000 | 19,500 | ||
7.375% 12/15/12 | 5,000 | 3,875 | ||
7.75% 1/15/32 | 15,000 | 10,575 | ||
8.05% 10/15/30 | 95,000 | 68,400 | ||
SEMCO Energy, Inc.: | ||||
7.125% 5/15/08 (c) | 10,000 | 9,975 | ||
7.75% 5/15/13 (c) | 10,000 | 9,950 | ||
Sonat, Inc.: | ||||
6.625% 2/1/08 | 20,000 | 15,600 | ||
6.75% 10/1/07 | 15,000 | 11,831 | ||
6.875% 6/1/05 | 85,000 | 80,325 | ||
Williams Holdings of Delaware, Inc. 6.25% 2/1/06 | 30,000 | 28,425 | ||
321,656 | ||||
Multi-Utilities & Unregulated Power - 0.7% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 10,000 | 9,100 | ||
8.5% 11/1/07 | 40,000 | 36,400 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Multi-Utilities & Unregulated Power - continued | ||||
AES Corp.: - continued | ||||
8.75% 6/15/08 | $ 2,000 | $ 1,970 | ||
8.75% 5/15/13 (c) | 30,000 | 29,288 | ||
8.875% 2/15/11 | 7,000 | 6,353 | ||
9% 5/15/15 (c) | 30,000 | 29,400 | ||
9.375% 9/15/10 | 7,000 | 6,528 | ||
9.5% 6/1/09 | 19,000 | 17,908 | ||
10% 12/12/05 (c) | 10,000 | 10,075 | ||
10.25% 7/15/06 | 14,000 | 13,440 | ||
El Paso Production Holding Co. 7.75% 6/1/13 (c) | 40,000 | 36,600 | ||
Reliant Resources, Inc.: | ||||
9.25% 7/15/10 (c) | 50,000 | 48,000 | ||
9.5% 7/15/13 (c) | 20,000 | 19,200 | ||
Southern Energy, Inc. New York 7.4% 7/15/04 (a)(c) | 45,000 | 19,350 | ||
Western Resources, Inc. 9.75% 5/1/07 | 30,000 | 33,263 | ||
Williams Companies, Inc.: | ||||
6.5% 8/1/06 | 10,000 | 9,500 | ||
6.75% 1/15/06 | 35,000 | 33,250 | ||
7.125% 9/1/11 | 5,000 | 4,600 | ||
7.625% 7/15/19 | 30,000 | 26,700 | ||
7.875% 9/1/21 | 35,000 | 31,150 | ||
8.125% 3/15/12 | 30,000 | 28,800 | ||
8.625% 6/1/10 | 30,000 | 29,700 | ||
8.75% 3/15/32 | 15,000 | 14,138 | ||
9.25% 3/15/04 | 55,000 | 55,550 | ||
550,263 | ||||
TOTAL UTILITIES | 2,294,164 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $20,253,633) | 20,416,768 | |||
U.S. Government and Government Agency Obligations - 15.9% | ||||
U.S. Government Agency Obligations - 6.0% | ||||
Fannie Mae: | ||||
3.125% 8/15/05 | 1,100,000 | 1,100,793 | ||
4.375% 3/15/13 | 1,000,000 | 945,107 | ||
5.5% 7/18/12 | 500,000 | 501,821 | ||
6.2% 8/12/08 | 530,000 | 530,764 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency Obligations - continued | ||||
Fannie Mae: - continued | ||||
6.25% 7/19/11 | $ 500,000 | $ 518,720 | ||
7.55% 8/4/10 | 100,000 | 100,057 | ||
Freddie Mac: | ||||
5.25% 11/5/12 | 280,000 | 271,576 | ||
5.875% 3/21/11 | 500,000 | 522,541 | ||
6% 5/25/12 | 400,000 | 410,305 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 4,901,684 | |||
U.S. Treasury Obligations - 9.9% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 1,740,000 | 1,888,239 | ||
9% 11/15/18 | 200,000 | 280,859 | ||
U.S. Treasury Notes: | ||||
4% 11/15/12 | 1,500,000 | 1,448,907 | ||
5% 8/15/11 | 3,600,000 | 3,782,390 | ||
6.5% 2/15/10 | 500,000 | 575,742 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 7,976,137 | |||
TOTAL U.S. GOVERNMENT AND (Cost $13,527,983) | 12,877,821 | |||
U.S. Government Agency - Mortgage Securities - 51.8% | ||||
Fannie Mae - 49.5% | ||||
4% 8/1/18 (d) | 10,000,000 | 9,474,981 | ||
4% 8/1/18 | 1,000,100 | 946,618 | ||
4.5% 8/1/18 (d)(e) | 6,000,000 | 5,850,000 | ||
4.5% 8/1/33 (d) | 6,000,000 | 5,506,875 | ||
4.5% 8/13/33 (d) | 3,000,000 | 2,753,438 | ||
5% 8/1/33 (d) | 2,000,000 | 1,910,625 | ||
5.5% 11/1/16 to 10/1/17 | 920,288 | 938,332 | ||
6.5% 8/1/18 (d) | 3,740,000 | 3,928,169 | ||
6.5% 10/1/28 to 2/1/33 | 1,345,122 | 1,383,487 | ||
7% 8/1/33 (d) | 7,000,000 | 7,345,625 | ||
TOTAL FANNIE MAE | 40,038,150 | |||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Government National Mortgage Association - 2.3% | ||||
5.5% 8/1/33 (d) | $ 1,000,000 | $ 992,188 | ||
7% 9/15/32 to 12/15/32 | 803,134 | 843,790 | ||
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION | 1,835,978 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $43,482,663) | 41,874,128 | |||
Asset-Backed Securities - 3.3% | ||||
ACE Securities Corp. Series 2003-FM1 Class M2, 2.95% 11/25/32 (f) | 40,000 | 40,000 | ||
Asset Backed Securities Corp. Home Equity Loan Trust Series 2003-HE2 Class A2, 1.4869% 4/15/33 (f) | 94,822 | 94,659 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2003-2B Class B2, 3.5% 2/17/09 | 60,000 | 60,072 | ||
Series 2003-A1 Class A1, 1.4969% 1/15/09 (f) | 200,000 | 200,988 | ||
Series 2003-B1 Class B1, 2.2769% 2/17/09 (f) | 120,000 | 120,900 | ||
CDC Mortgage Capital Trust Series 2003-HE2: | ||||
Class M1, 1.9% 6/25/33 (f) | 25,000 | 25,089 | ||
Class M2, 3% 6/25/33 (f) | 30,000 | 30,064 | ||
CDC Mortgage Capital, Inc. NIMS Trust Series 2002-HE2N Class NOTE, 10% 1/25/33 (c) | 40,859 | 40,859 | ||
GSAMP NIMS Trust Series 2002-HE2N Class NOTE, 8.25% 10/20/32 (c) | 103,850 | 103,850 | ||
Home Equity Asset Trust: | ||||
Series 2003-2: | ||||
Class A2, 1.48% 8/25/33 (f) | 19,184 | 19,201 | ||
Class M1, 1.98% 8/25/33 (f) | 25,000 | 25,159 | ||
Series 2003-4: | ||||
Class M1, 1.9% 10/25/33 (f) | 40,000 | 40,000 | ||
Class M2, 3% 10/25/33 (f) | 45,000 | 45,000 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-4N Class A, 8% 5/27/33 (c) | 135,383 | 131,321 | ||
Series 2003-2N Class A, 8% 9/27/33 (c) | 36,502 | 35,736 | ||
Long Beach Mortgage Loan Trust Series 2003-3 | 45,000 | 45,014 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (c) | 126,419 | 126,470 | ||
Series 2003-HE1 Class M2, 3% 6/27/33 (f) | 55,000 | 55,118 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4 Class M1, 2.1% 1/25/32 (f) | 40,000 | 40,386 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Morgan Stanley Dean Witter Capital I Trust: - continued | ||||
Series 2002-NC3N Class NOTE, 9.5% 8/25/32 (c) | $ 82,921 | $ 83,031 | ||
Series 2002-NC5N Class NOTE, 9.5% 9/25/32 (c) | 34,527 | 34,527 | ||
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (c) | 74,197 | 74,383 | ||
Morgan Stanley Dean Witter Capital I, Inc.: | ||||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (c) | 34,753 | 34,780 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (c) | 352,549 | 352,549 | ||
New Century Home Equity Loan Trust Series 2003-2 Class A2, 1.53% 1/25/33 (f) | 86,118 | 86,351 | ||
Residential Finance LP/Residential Finance Development Corp.: | ||||
Series 2003-B Class B8, 7.6106% 7/10/35 (c)(f) | 500,000 | 500,000 | ||
Series 2003-CB1: | ||||
Class B3, 2.5606% 6/10/35 (c)(f) | 44,943 | 44,943 | ||
Class B4, 2.7606% 6/10/35 (c)(f) | 39,949 | 39,949 | ||
Class B5, 3.6306% 6/10/35 (c)(f) | 29,962 | 29,962 | ||
Class B6, 3.8606% 6/10/35 (c)(f) | 14,981 | 14,981 | ||
Sears Credit Account Master Trust II Series 2002-4 | 100,000 | 99,899 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $2,673,725) | 2,675,241 | |||
Collateralized Mortgage Obligations - 0.2% | ||||
U.S. Government Agency - 0.2% | ||||
Freddie Mac Manufactured Housing participation certificates guaranteed sequential pay Series 2333 Class UE, 6.5% 4/15/28 | 41,721 | 41,820 | ||
Ginnie Mae guaranteed REMIC pass thru securities sequential pay Series 2003-59 Class D, 3.654% 10/1/27 | 115,000 | 105,869 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $157,170) | 147,689 | |||
Commercial Mortgage Securities - 2.7% | ||||
Bear Stearns Commercial Mortgage Securities, Inc. floater Series 2003-BA1A Class A1, 1.39% 4/14/15 (c)(f) | 300,000 | 300,000 | ||
COMM floater: | ||||
Series 2001-FL5A Class A2, 1.6569% 11/15/13 (c)(f) | 38,694 | 38,715 | ||
Series 2002-FL7 Class A2, 1.4569% 11/15/14 (c)(f) | 55,000 | 54,983 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-22 Class B, 3.963% 5/16/32 | $ 60,000 | $ 57,939 | ||
Series 2003-36 Class C, 4.254% 2/16/31 | 55,000 | 53,640 | ||
Series 2003-47 Class C, 4.227% 10/16/27 | 105,000 | 100,958 | ||
Series 2003-59 Class XA, 0.3039% 6/16/34 (f)(h) | 6,500,000 | 513,396 | ||
Series 2003-47 Class XA, 0.2985% 6/16/43 (f)(h) | 7,449,107 | 561,290 | ||
GS Mortgage Securities Corp. II Series 2003-C1 Class A2A, 3.59% 1/10/40 | 65,000 | 63,884 | ||
Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (c) | 200,000 | 175,250 | ||
Trizechahn Office Properties Trust 7.253% 3/15/13 (c) | 235,000 | 245,691 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $2,133,296) | 2,165,746 | |||
Municipal Securities - 0.3% | ||||
Illinois Gen. Oblig.: | ||||
3.3% 6/1/10 | 15,000 | 14,104 | ||
3.55% 6/1/11 | 10,000 | 9,379 | ||
3.75% 6/1/12 | 35,000 | 32,692 | ||
5.1% 6/1/33 | 210,000 | 177,755 | ||
TOTAL MUNICIPAL SECURITIES (Cost $269,871) | 233,930 | |||
Foreign Government and Government Agency Obligations - 2.1% | ||||
Argentinian Republic 1.369% 8/3/12 (f) | 10,000 | 5,625 | ||
Bahamian Republic 6.625% 5/15/33 (c) | 55,000 | 54,931 | ||
Bogota Distrito Capital 9.5% 12/12/06 (Reg. S) | 15,000 | 16,200 | ||
Brazilian Federative Republic: | ||||
11% 1/11/12 | 10,000 | 9,500 | ||
11% 8/17/40 | 25,000 | 21,338 | ||
11.25% 7/26/07 | 120,000 | 124,800 | ||
11.5% 3/12/08 | 5,000 | 5,150 | ||
12% 4/15/10 | 15,000 | 15,038 | ||
12.25% 3/6/30 | 50,000 | 46,250 | ||
Chilean Republic: | ||||
5.5% 1/15/13 | 250,000 | 247,500 | ||
5.625% 7/23/07 | 100,000 | 106,063 | ||
Colombian Republic 10.5% 7/9/10 | 42,000 | 46,935 | ||
Dominican Republic 9.5% 9/27/06 (Reg. S) | 30,000 | 29,850 | ||
Foreign Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
Ecuador Republic euro par 4.75% 2/28/25 (b) | $ 5,000 | $ 2,663 | ||
Ontario Province 5.125% 7/17/12 | 100,000 | 103,088 | ||
Panamanian Republic: | ||||
Brady par 4.75% 7/17/26 (b) | 10,000 | 7,150 | ||
9.625% 2/8/11 | 25,000 | 27,500 | ||
10.75% 5/15/20 | 30,000 | 35,100 | ||
Philippine Republic: | ||||
Brady principal collateralized interest reduction bond 6.5% 12/1/17 | 25,000 | 24,000 | ||
9% 2/15/13 | 25,000 | 25,500 | ||
9.875% 1/15/19 | 15,000 | 15,300 | ||
Quebec Province 7.5% 9/15/29 | 100,000 | 118,014 | ||
Russian Federation 5% 3/31/30 (Reg. S) (b) | 132,000 | 118,305 | ||
State of Israel 4.625% 6/15/13 | 95,000 | 89,359 | ||
Turkish Republic: | ||||
11.75% 6/15/10 | 35,000 | 37,275 | ||
12.375% 6/15/09 | 35,000 | 38,238 | ||
Ukraine Government 11% 3/15/07 (Reg. S) | 11,200 | 12,348 | ||
United Mexican States: | ||||
4.625% 10/8/08 | 75,000 | 74,438 | ||
6.375% 1/16/13 | 85,000 | 83,810 | ||
7.5% 1/14/12 | 100,000 | 107,250 | ||
Vietnamese Socialist Republic Brady par 3.5% 3/12/28 (b) | 15,000 | 10,200 | ||
TOTAL FOREIGN GOVERNMENT AND (Cost $1,654,923) | 1,658,718 | |||
Supranational Obligations - 0.0% | ||||
Corporacion Andina de Fomento 5.2% 5/21/13 | 35,000 | 33,069 |
Nonconvertible Preferred Stocks - 0.1% | |||
Shares | Value | ||
CONSUMER DISCRETIONARY - 0.1% | |||
Media - 0.1% | |||
CSC Holdings, Inc.: | |||
Series H, 11.75% | 530 | $ 55,120 | |
Series M, 11.125% | 530 | 54,988 | |
110,108 | |||
TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $105,531) | 110,108 |
Sovereign Loan Participations - 0.0% | ||||
Principal | ||||
Indonesian Republic loan participation - Deutsche Bank 2% 3/21/05 (f) | $ 15,000 | 13,238 |
Fixed-Income Funds - 6.2% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (g) | 50,426 | 5,011,840 | |
Cash Equivalents - 43.0% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.12%, dated 7/31/03 due 8/1/03) | $ 34,744,085 | 34,743,000 | |
TOTAL INVESTMENT PORTFOLIO - 150.9% (Cost $124,050,207) | 121,961,296 | ||
NET OTHER ASSETS - (50.9)% | (41,145,723) | ||
NET ASSETS - 100% | $ 80,815,573 |
Swap Agreements | |||||
Expiration | Notional | Unrealized | |||
Credit Default Swap | |||||
Receive from Morgan Stanley, Inc., upon default of Vornado Realty Trust, par value of the notional amount of Vornado Realty Trust 5.625% 6/15/07, and pay quarterly notional amount multiplied by 1.37% | June 2007 | $ 200,000 | $ (1,261) | ||
Receive quarterly notional amount multiplied by .62% and pay Goldman Sachs upon default of SLM Corp., par value of the notional amount of SLM Corp. 5.125% 8/27/12 | August 2007 | 25,000 | 17 | ||
$ 225,000 | $ (1,244) |
Legend |
(a) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(b) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,783,518 or 7.2% of net assets. |
(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(e) A portion of the security is subject to a forward commitment to sell. |
(f) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(g) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(h) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
Other Information |
The fund invested in loans and loan participations, trade claims or other receivables. At period end the value of these investments amounted to $13,238 or 0.0% of net assets. |
Purchases and sales of securities, other than short-term securities, aggregated $256,600,360 and $172,792,474, respectively, of which long-term U.S. government and government agency obligations aggregated $217,486,373 and $159,789,596, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $34,743,000) (cost $124,050,207) - See accompanying schedule | $ 121,961,296 | |
Commitment to sell securities on a delayed | $ (3,900,000) | |
Receivable for securities sold on a delayed | 4,038,750 | 138,750 |
Cash | 222 | |
Receivable for investments sold | 10,220 | |
Receivable for fund shares sold | 88,337 | |
Interest receivable | 712,455 | |
Prepaid expenses | 5,140 | |
Receivable from investment adviser for expense reductions | 32,496 | |
Total assets | 122,948,916 | |
Liabilities | ||
Payable for investments purchased | $ 1,141,853 | |
Delayed delivery | 39,425,741 | |
Payable for fund shares redeemed | 1,470,492 | |
Distributions payable | 9,492 | |
Unrealized loss on swap agreements | 1,244 | |
Accrued management fee | 31,064 | |
Other payables and accrued expenses | 53,457 | |
Total liabilities | 42,133,343 | |
Net Assets | $ 80,815,573 | |
Net Assets consist of: | ||
Paid in capital | $ 81,526,992 | |
Undistributed net investment income | 48,177 | |
Accumulated undistributed net realized gain (loss) on investments | 1,191,809 | |
Net unrealized appreciation (depreciation) on investments | (1,951,405) | |
Net Assets, for 7,862,214 shares outstanding | $ 80,815,573 | |
Net Asset Value, offering price and redemption price per share ($80,815,573 ÷ 7,862,214 shares) | $ 10.28 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
October 15, 2002 (commencement of operations) to July 31, 2003 | ||
Investment Income | ||
Dividends | $ 2,715 | |
Interest | 1,417,875 | |
Total income | 1,420,590 | |
Expenses | ||
Management fee | $ 176,428 | |
Transfer agent fees | 80,646 | |
Accounting fees and expenses | 48,198 | |
Non-interested trustees' compensation | 140 | |
Custodian fees and expenses | 12,828 | |
Registration fees | 40,082 | |
Audit | 52,634 | |
Legal | 555 | |
Miscellaneous | 266 | |
Total expenses before reductions | 411,777 | |
Expense reductions | (146,556) | 265,221 |
Net investment income (loss) | 1,155,369 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 1,196,805 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (2,088,911) | |
Swap agreements | (1,244) | |
Delayed delivery commitments | 138,750 | |
Total change in net unrealized appreciation (depreciation) | (1,951,405) | |
Net gain (loss) | (754,600) | |
Net increase (decrease) in net assets resulting from operations | $ 400,769 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
October 15, 2002 | |
Increase (Decrease) in Net Assets | |
Operations | |
Net investment income (loss) | $ 1,155,369 |
Net realized gain (loss) | 1,196,805 |
Change in net unrealized appreciation (depreciation) | (1,951,405) |
Net increase (decrease) in net assets resulting from operations | 400,769 |
Distributions to shareholders from net investment income | (1,105,904) |
Share transactions | 153,496,596 |
Reinvestment of distributions | 1,022,553 |
Cost of shares redeemed | (72,998,441) |
Net increase (decrease) in net assets resulting from share transactions | 81,520,708 |
Total increase (decrease) in net assets | 80,815,573 |
Net Assets | |
Beginning of period | - |
End of period (including undistributed net investment income of $48,177) | $ 80,815,573 |
Other Information Shares | |
Sold | 14,730,271 |
Issued in reinvestment of distributions | 98,006 |
Redeemed | (6,966,063) |
Net increase (decrease) | 7,862,214 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Period ended | |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss) D | .232 |
Net realized and unrealized gain (loss) | .269 E |
Total from investment operations | .501 |
Distributions from net investment income | (.221) |
Net asset value, end of period | $ 10.28 |
Total Return B, C | 5.01% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | 1.01% A |
Expenses net of voluntary waivers, if any | .65% A |
Expenses net of all reductions | .65% A |
Net investment income (loss) | 2.83% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 80,816 |
Portfolio turnover rate | 423% A |
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 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.
F For the period October 15, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund 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 any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2003
1. Significant Accounting Policies.
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 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. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. 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, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Prepaid Expenses. Fidelity Management & Research Company (FMR) bears all organizational expenses of the fund, except for the cost of registering and qualifying new shares for distribution under federal and state securities law. These registration expenses are borne by the fund and amortized over one year.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. 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 and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to market discount, non-taxable dividends, financing transactions and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 872,548 | | |
Unrealized depreciation | (2,803,632) | |
Net unrealized appreciation (depreciation) | (1,931,084) | |
Undistributed ordinary income | 672,885 | |
Cost for federal income tax purposes | $ 123,892,380 |
The tax character of distributions paid was as follows:
July 31, 2003 | |
Ordinary Income | $ 1,105,904 |
Annual Report
2. 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. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
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. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, 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 under the captions "Legend" and/or "Other Information" at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
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 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. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
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 the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. 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."
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sales price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage
Annual Report
2. Operating Policies - continued
Annual Report
Financing Transactions - continued
dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Joint Trading Account.
At the end of the period, the fund had 20% or more of its total investments in repurchase agreements through a joint trading account. These repurchase agreements were with entities whose creditworthiness has been reviewed and found satisfactory by FMR. The investments in repurchase agreements through the joint trading account are summarized as follows:
Summary of Joint Trading
Dated July 31, 2003, due August 1, 2003 | 1.12% |
Number of dealers or banks | 11 |
Maximum amount with one dealer or bank | 25.3% |
Aggregate principal amount of agreements | $10,855,430,000 |
Aggregate maturity amount of agreements | $10,855,769,100 |
Aggregate market value of transferred assets | $11,082,190,068 |
Coupon rates of transferred assets | 0% to 11.5% |
Maturity dates of transferred assets | 8/1/03 to 10/1/42 |
4. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Fees and Other Transactions with Affiliates.
Notes to Financial Statements - continued
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 .30% of the fund's average net assets and a group fee rate that averaged .13% 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 annualized management fee rate was .43% of the fund's average net assets.
Annual Report
5. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .20% of average net assets.
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $63,282 for the period.
6. Expense Reductions.
FMR agreed to reimburse the fund to the extent operating expenses exceeded .65% of average net assets. Some expenses, for example interest expense, are excluded from this reimbursement. During the period, this reimbursement reduced the fund's expenses by $146,091.
In addition, through arrangements with the fund's custodian, 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 custody expenses by $465.
Annual Report
Report of Independent Auditors
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 July 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the period 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 audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at July 31, 2003 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members 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 William O. McCoy, each of the Trustees oversees 279 funds advised by FMR or an affiliate. Mr. McCoy oversees 281 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. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members 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" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
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 Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Total Bond (2002). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* 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.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested 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 | |
J. Michael Cook (60) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (59) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (56) | |
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 Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). 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. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (69) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Trustees and Officers - continued
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. 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), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). 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. | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity Magellan Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 2002 Vice President of Total Bond. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments.] | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Total Bond. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Matthew J. Conti (37) | |
Year of Election or Appointment: 2002 Vice President of Total Bond. Prior to assuming his current responsibilities, Mr. Conti served as a high-yield bond analyst and manager of a variety of Fidelity funds. | |
Kevin E. Grant (43) | |
Year of Election or Appointment: 2002 Vice President of Total Bond. Mr. Grant is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Grant managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 2002 Secretary of Total Bond. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (43) | |
Year of Election or Appointment: 2003 Assistant Secretary of Total Bond. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Total Bond. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Total Bond. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Total Bond. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Total Bond. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. 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 (1998-2003). | |
John H. Costello (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Total Bond. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Total Bond. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Total Bond. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Total Bond. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Distributions
The Board of Trustees of Fidelity Total Bond Fund voted to pay on September 8, 2003, to shareholders of record at the opening of business on September 5, 2003, a distribution of $.06 per share derived from capital gains realized from sales of portfolio securities.
A total of 14.35% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
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
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
By PC
Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.
(computer_graphic)Fidelity's Web Site
www.fidelity.com
* 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 Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
7373 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
10100 Santa Monica Blvd.
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
8 Montgomery Street
San Francisco, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
Colorado
1625 Broadway
Denver, CO
9185 East Westview Road
Littleton, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
222 Delaware Avenue
Wilmington, DE
Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3501 PGA Boulevard
West Palm Beach, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
Annual Report
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7401 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
Michigan
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI
Minnesota
7600 France Avenue South
Edina, MN
Missouri
8885 Ladue Road
Ladue, MO
New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
3518 Route 1 North
Princeton, NJ
New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
North Carolina
4611 Sharon Road
Charlotte, NC
Ohio
3805 Edwards Road
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
Oregon
16850 SW 72nd Avenue
Tigard, OR
Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA
Rhode Island
47 Providence Place
Providence, RI
Tennessee
6150 Poplar Avenue
Memphis, TN
Texas
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
6005 West Park Boulevard
Plano, TX 75093
Annual Report
Utah
215 South State Street
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
595 North Barker Road
Brookfield, WI
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
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
(Far East) Inc.
Fidelity Investments
Money Management, Inc.
Fidelity Investments Japan Limited
Fidelity International
Investment Advisors
Fidelity International
Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
Fidelity's Taxable Bond Funds
Capital & Income
Floating Rate High Income
Ginnie Mae
Government Income
High Income
Inflation-Protected Bond
Intermediate Bond
Intermediate Government Income
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Target Timeline® 2003
Total Bond
Ultra-Short Bond
The Fidelity Telephone Connection
Mutual Fund 24-Hour Service
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST®) (automated graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
TBD-UANN-0903
1.789712.100
Fidelity® Ginnie Mae Fund
Fidelity Government
Income Fund
Fidelity Intermediate
Government Income Fund
Annual Report
July 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Fidelity Ginnie Mae Fund | ||
Performance | ||
Management's Discussion of Fund Performance | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Fidelity Government Income Fund | ||
Performance | ||
Management's Discussion of Fund Performance | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Fidelity Intermediate Government Income Fund | ||
Performance | ||
Management's Discussion of Fund Performance | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes | Notes to the financial statements | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the funds' proxy voting guidelines visit www.fidelity.com/goto/proxyguidelines, call 1-800-544-8544, or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
Annual Report
This report and the financial statements contained herein are submitted for the general information of the shareholders of the funds. This report is not authorized for distribution to prospective investors in the funds unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the funds nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
This shareholder update and report on the performance of your fund is among the first to be produced under the new Sarbanes-Oxley Public Company Accounting and Investor Protection Act of 2002. This act requires that public companies certify, under penalty of law, the financial information they report to shareholders. It was adopted by Congress in reaction to several incidents of corporate malfeasance that brought the integrity of management of some publicly traded companies into question.
After the act was signed into law, the Securities and Exchange Commission interpreted it as applying to mutual funds as well as public companies. Thus, every mutual fund now is required to certify that the financial information provided in annual and semiannual reports to shareholders fully and fairly presents its financial position.
There is little doubt that the intent of Congress and regulators in this matter is a noble one - to improve the accuracy and accountability of financial reporting to investors by corporate America. We in no way condone any of the activities that brought about these requirements, and we welcome any and every reasonable proposal to strengthen investor protection and information disclosure.
That said, we are proud that mutual funds have always provided full and fair disclosure. Governed by the Investment Company Act of 1940 - and monitored and regulated by federal and state agencies, industry oversight associations, and independent directors - mutual funds are among the most transparent of all financial products. For example, the prices of mutual fund shares are established and published every business day, and the majority of members of the Board of Trustees that oversees our funds are not affiliated with the business of Fidelity. The disclosure standards of mutual funds actually have become models for governance and transparency across corporate America.
We are, of course, complying in full with the letter of this new requirement and hope that any future efforts by Congress to reassure investors about the honesty of corporate America will focus on practical and substantive solutions of genuine value to shareholders.
This sort of careful consideration was evident as Congress deliberated President Bush's tax cut package this spring, then enacted legislation that contains a variety of benefits for American families, investors and businesses. Although the final bill did not completely eliminate the tax that individual investors pay when they receive dividends from companies, it still will benefit American investors, and we applaud it in the spirit of compromise that marked the debate in Congress.
At Fidelity, we are committed to acting at all times in accordance with the highest standards of integrity and in the best interests of our fund shareholders. We are proud of the amount of information we provide to those who invest in our funds and pleased to continue that level of communication with you in these reports.
Best regards,
/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 fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) 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. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2003 | Past 1 | Past 5 | Past 10 |
Fidelity® Ginnie Mae Fund | 3.02% | 6.04% | 6.19% |
If Fidelity had not reimbursed certain expenses for the fund, the fund's past five year and past 10 year total returns would have been lower.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Ginnie Mae Fund on July 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers® GNMA Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Tom Silvia, Portfolio Manager of Fidelity® Ginnie Mae Fund
Investment-grade debt performed well for most of the 12 months ending July 31, 2003, as the Lehman Brothers® Aggregate Bond Index returned 5.42%. Bonds prospered in an environment of low inflation, low interest rates and weak equity markets. The Federal Reserve Board lowered rates twice in the period, dropping the fed funds target rate to its lowest level in 45 years. At various times in the past year, investors sought the highest-quality bonds, driving Treasury prices up and yields down to 40-year lows. However, Treasury yields climbed to a 12-month high in the final six weeks of the period. For the year overall, the Lehman Brothers Treasury Index gained 4.54%. Corporate credit was the best-performing investment-grade segment, rising 10.71% according to the Lehman Brothers Credit Bond Index. Agencies were tempered by an accounting issue at a leading government-sponsored enterprise, which limited the Lehman Brothers U.S. Agency Index to a 4.29% advance. Mortgages were the weakest performers, hampered by heavy refinancing activity. The Lehman Brothers Mortgage-Backed Securities Index returned 2.56%.
Fidelity Ginnie Mae Fund returned 3.02% during the 12-month period, outpacing the fund's peer group as measured by the LipperSM Ginnie Mae Funds Average, which returned 1.94%. The fund also beat its benchmark, the Lehman Brothers GNMA Index, which returned 2.67%. The key contributor to the fund's outperformance was insulating the portfolio from mortgage security prepayments, which occur when home owners sell their homes or refinance and, thus, pay off their mortgage before maturity. Prepayments can mean that bondholders lose out on expected income and may be forced to reinvest at lower, prevailing interest rates. Helping to cushion against prepayment were securities made up of mortgages with relatively low stated interest rates; the lower the mortgage rate, the less financial incentive a homeowner had to refinance. The fund also was helped by its stake in prepayment-resistant collateralized mortgage obligations. In contrast, the fund's stake in securities issued by the Federal National Mortgage Association (Fannie Mae) detracted from performance at the end of the period. Fannie Mae bonds came under pressure due to questions about its exposure to risk along with concerns about accounting practices at Freddie Mac, another government-sponsored mortgage agency.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Coupon Distribution as of July 31, 2003 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.0 | 0.2 |
Less than 5% | 4.2 | 2.4 |
5 - 5.99% | 17.5 | 11.7 |
6 - 6.99% | 38.6 | 21.8 |
7 - 7.99% | 24.2 | 41.1 |
8% and over | 2.2 | 3.5 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of July 31, 2003 | ||
6 months ago | ||
Years | 2.7 | 2.3 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2003 | ||
6 months ago | ||
Years | 3.6 | 1.7 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2003 | As of January 31, 2003 | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 13.2% | ![]() | CMOs and Other Mortgage Related Securities 9.3% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* GNMA Securities | 85.0% | ** GNMA Securities | 80.4% |
***Short-Term Investments and Net Other Assets are not included in the pie chart. |
Annual Report
Investments July 31, 2003
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 94.2% | ||||
Principal | Value (Note 1) | |||
Fannie Mae - 9.0% | ||||
5% 8/1/18 (a) | $ 70,000 | $ 69,934 | ||
5% 8/1/33 (a) | 75,000 | 71,648 | ||
5.5% 8/1/33 (a) | 150,271 | 148,393 | ||
6.5% 9/1/17 to 8/13/33 (b) | 177,936 | 183,108 | ||
7% 11/1/16 to 10/1/32 | 11,091 | 11,738 | ||
7.5% 1/1/07 to 4/1/17 | 16,743 | 17,932 | ||
8.5% 12/1/27 | 1,554 | 1,697 | ||
9.5% 9/1/30 | 913 | 994 | ||
10.25% 10/1/18 | 87 | 96 | ||
11.5% 5/1/14 to 9/1/15 | 70 | 79 | ||
12.5% 11/1/13 to 7/1/16 | 225 | 257 | ||
13.25% 9/1/11 | 123 | 144 | ||
506,020 | ||||
Freddie Mac - 0.2% | ||||
7% 8/1/21 to 9/1/22 | 3,660 | 3,857 | ||
8.5% 2/1/04 to 6/1/25 | 164 | 177 | ||
9% 7/1/08 to 7/1/21 | 1,043 | 1,122 | ||
9.5% 7/1/30 to 8/1/30 | 834 | 905 | ||
9.75% 12/1/08 to 4/1/13 | 56 | 61 | ||
10% 10/1/04 to 11/1/20 | 1,880 | 2,084 | ||
10.25% 2/1/09 to 11/1/16 | 773 | 853 | ||
10.5% 5/1/10 | 18 | 20 | ||
11.25% 2/1/10 | 50 | 55 | ||
11.75% 11/1/11 | 24 | 26 | ||
12% 5/1/10 to 2/1/17 | 223 | 254 | ||
12.5% 11/1/12 to 5/1/15 | 275 | 313 | ||
13% 5/1/14 to 11/1/14 | 43 | 50 | ||
13.5% 1/1/13 to 12/1/14 | 19 | 22 | ||
9,799 | ||||
Government National Mortgage Association - 85.0% | ||||
5% 6/20/32 | 13,726 | 13,167 | ||
5% 8/1/33 (a) | 150,000 | 143,344 | ||
5% 8/20/33 (a) | 340,000 | 324,913 | ||
5.5% 7/1/33 (a)(b) | 3,000 | 2,977 | ||
5.5% 7/22/33 (b) | 200,000 | 198,306 | ||
5.5% 8/1/33 (a) | 170,451 | 169,034 | ||
6% 12/20/23 to 5/15/33 | 209,971 | 213,831 | ||
6.5% 4/15/23 to 7/20/33 | 1,631,176 | 1,687,745 | ||
6.5% 2/15/28 (a) | 645 | 676 | ||
6.5% 8/20/33 (a)(b) | 324,829 | 336,401 | ||
7% 3/15/22 to 2/15/33 | 1,290,426 | 1,355,576 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) | |||
Government National Mortgage Association - continued | ||||
7.25% 4/15/05 to 12/15/30 | $ 1,910 | $ 2,021 | ||
7.5% 4/15/06 to 9/20/32 | 192,154 | 203,913 | ||
8% 2/15/05 to 7/15/32 | 74,930 | 80,855 | ||
8.5% 2/15/05 to 2/15/31 | 16,530 | 18,039 | ||
9% 10/15/04 to 6/15/30 | 7,404 | 8,220 | ||
9.5% 12/20/15 to 8/20/17 | 2,219 | 2,455 | ||
10% 5/15/05 to 6/15/05 | 4 | 4 | ||
10.5% 1/15/14 to 9/15/19 | 1,623 | 1,829 | ||
13% 2/15/11 to 5/15/15 | 315 | 364 | ||
13.5% 5/15/10 to 1/15/15 | 113 | 129 | ||
4,763,799 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $5,309,263) | 5,279,618 | |||
Collateralized Mortgage Obligations - 7.5% | ||||
Private Sponsor - 0.2% | ||||
United States Department of Veterans Affairs guaranteed REMIC pass thru certificates Series 1997-1 Class 2K, 7.5% 10/15/09 | 10,212 | 10,729 | ||
U.S. Government Agency - 7.3% | ||||
Fannie Mae target amortization class Series G94-2 Class D, 6.45% 1/25/24 | 19,965 | 20,806 | ||
Freddie Mac Multi-class participation certificates guaranteed planned amortization class Series 2220 Class PD, 8% 3/15/30 | 21,000 | 22,257 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class: | ||||
Series 2000-26 Class PK, 7.5% 9/20/30 | 13,786 | 14,695 | ||
Series 2000-5 Class PD, 7.5% 4/16/29 | 12,800 | 13,431 | ||
Series 2001-13 Class PC, 6.5% 12/20/28 | 25,000 | 25,807 | ||
Series 2001-21 Class PH, 6.5% 9/16/28 | 10,950 | 11,256 | ||
Series 2001-60 Class PD, 6% 10/20/30 | 15,041 | 15,693 | ||
Series 2002-19 Class PE, 6% 10/20/30 | 40,280 | 41,478 | ||
Series 2002-4 Class TB, 6.5% 3/20/31 | 3,250 | 3,392 | ||
Series 2003-12 Class IO, 5.5% 11/16/25 (d) | 34,120 | 4,276 | ||
Series 2003-19: | ||||
Class IG, 5.5% 1/16/24 (d) | 3,545 | 341 | ||
Class IL, 5.5% 12/16/25 (d) | 3,318 | 622 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: - continued | ||||
planned amortization class: | ||||
Series 2003-20: | ||||
Class AI, 5.5% 6/16/22 (d) | $ 19,724 | $ 1,375 | ||
Class BI, 5.5% 5/16/27 (d) | 22,423 | 3,672 | ||
Series 2003-26 Class PI, 5.5% 1/16/32 (d) | 66,141 | 13,906 | ||
Series 2003-29: | ||||
Class IB, 5.5% 11/20/24 (d) | 55,021 | 4,908 | ||
Class IG, 5.5% 11/16/24 (d) | 3,682 | 516 | ||
Series 2003-31 Class PI, 5.5% 4/16/30 (d) | 65,832 | 10,323 | ||
Series 2003-33 Class NI, 5.5% 3/16/19 (d) | 84,590 | 11,053 | ||
Series 2003-34 Class IO, 5.5% 4/16/28 (d) | 60,515 | 9,768 | ||
Series 2003-4 Class LI, 5.5% 7/16/27 (d) | 26,496 | 3,499 | ||
Series 2003-7: | ||||
Class IN, 5.5% 1/16/28 (d) | 47,019 | 7,303 | ||
Class IP, 5.5% 10/16/25 (d) | 7,663 | 941 | ||
Series 2003-8 Class QI, 5.5% 1/16/27 (d) | 6,727 | 923 | ||
sequential pay: | ||||
Series 1999-2 Class D, 6.5% 10/20/26 | 3,659 | 3,691 | ||
Series 2000-12 Class B, 7.5% 12/16/28 | 5,293 | 5,436 | ||
Series 2001-15 Class VB, 6.5% 4/20/19 | 14,104 | 14,775 | ||
Series 2002-29 Class SK, 8.25% 5/20/32 (c) | 3,916 | 4,013 | ||
Series 2002-33 Class CN, 6.5% 7/20/29 | 19,939 | 20,760 | ||
Series 2002-41: | ||||
Class HB, 6% 8/16/27 | 5,000 | 5,165 | ||
Class VD, 6% 4/16/13 | 9,391 | 9,847 | ||
Series 2002-42 Class AD, 6% 12/20/28 | 10,000 | 10,361 | ||
Series 2002-54 Class GA, 6.5% 7/20/31 | 19,680 | 20,566 | ||
Series 2003-7 Class VP, 6% 11/20/13 | 7,324 | 7,765 | ||
sequential pay, Series 1995-4 Class CQ, 8% 6/20/25 | 4,539 | 4,836 | ||
Series 1994-4 Class KQ, 7.9875% 7/16/24 | 3,100 | 3,400 | ||
Series 1995-6 Class Z, 7% 9/20/25 | 13,182 | 13,881 | ||
Series 2001-53: | ||||
Class PB, 6.5% 11/20/31 | 10,000 | 10,282 | ||
Class TA, 6% 12/20/30 | 12,583 | 12,873 | ||
Series 2002-32 Class ZP, 6% 5/20/32 | 11 | 11 | ||
Series 2002-41 Class PD, 6.5% 7/20/30 | 21,122 | 21,853 | ||
TOTAL U.S. GOVERNMENT AGENCY | 411,756 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $416,121) | 422,485 | |||
Commercial Mortgage Securities - 5.7% | ||||
Principal | Value (Note 1) | |||
Fannie Mae: | ||||
sequential pay Series 2000-7 Class MB, 7.0524% 2/17/24 (c) | $ 22,462 | $ 24,830 | ||
Series 1997-M1 Class N, 0.4242% 10/17/36 (c)(d) | 102,827 | 1,928 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
Series 1998-M3 Class IB, 0.7779% 1/17/38 (c)(d) | 83,424 | 3,265 | ||
Series 1998-M4 Class N, 1.5761% 2/25/35 (c)(d) | 59,254 | 2,713 | ||
Ginnie Mae guaranteed Multi-family pass thru securities: | ||||
sequential pay: | ||||
Series 2001-58 Class X, 1.6953% 9/16/41 (c)(d) | 248,106 | 18,744 | ||
Series 2002-37 Class IO, 1.3516% 4/16/27 (c)(d) | 126,884 | 8,471 | ||
Series 2001-12 Class X, 1.3253% 7/16/40 (c)(d) | 110,428 | 6,466 | ||
Series 2001-34 Class X, 0.7634% 3/16/41 (c)(d) | 124,322 | 3,656 | ||
Series 2002-35 Class IO, 0.9868% 3/16/42 (c)(d) | 290,752 | 11,994 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay Series 2002-81 Class IO, 2.1182% 9/16/42 (c)(d) | 151,038 | 15,198 | ||
Series 2002-25 Class IO, 1.0852% 9/16/26 (c)(d) | 361,187 | 19,612 | ||
Series 2002-61 Class XA, 1.2152% 7/16/42 (c)(d) | 65,507 | 5,256 | ||
Series 2002-62 Class IO, 2.2847% 8/16/42 (c)(d) | 139,476 | 14,449 | ||
Series 2002-83 Class IO, 1.5574% 10/16/42 (c)(d) | 111,840 | 7,444 | ||
Series 2002-85 Class X, 2.6753% 3/16/42 (c)(d) | 133,438 | 17,748 | ||
Series 2002-9 Class IO, 1.4126% 12/16/41 (c)(d) | 724,466 | 48,449 | ||
Series 2002-91 Class AF, 1.1401% 6/16/44 (c)(d) | 351,542 | 26,915 | ||
Series 2002-94 Class XA, 0.5161% 11/16/42 (c)(d) | 350,768 | 27,910 | ||
Series 2003-16 Class IO, 1.3347% 2/16/44 (c)(d) | 48,493 | 3,016 | ||
Series 2003-22 Class XA, 0.2066% 2/16/43 (c)(d) | 301,693 | 20,753 | ||
Series 2003-36 Class XA, 0.2815% 2/16/43 (d) | 336,532 | 23,924 | ||
Series 2003-47 Class XA, 0.2985% 6/16/43 (c)(d) | 51,338 | 3,868 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $309,188) | 316,609 |
Cash Equivalents - 16.5% | |||
Maturity | Value (Note 1) | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.12%, dated 7/31/03 due 8/1/03) | $ 926,851 | $ 926,822 | |
TOTAL INVESTMENT PORTFOLIO - 123.9% (Cost $6,961,394) | 6,945,534 | ||
NET OTHER ASSETS - (23.9)% | (1,339,084) | ||
NET ASSETS - 100% | $ 5,606,450 |
Legend |
(a) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(b) A portion of the security is subject to a forward commitment to sell. |
(c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(d) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
Other Information |
Purchases and sales of long-term U.S. government and government agency obligations aggregated $16,543,994,000 and $16,848,677,000, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | July 31, 2003 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $926,822) (cost $6,961,394) - See accompanying schedule | $ 6,945,534 | |
Commitment to sell securities on a delayed | $ (391,380) | |
Receivable for securities sold on a delayed | 394,676 | 3,296 |
Receivable for investments sold | 5,650 | |
Delayed delivery | 3,508 | |
Receivable for fund shares sold | 1,865 | |
Interest receivable | 32,133 | |
Other receivables | 4 | |
Total assets | 6,991,990 | |
Liabilities | ||
Payable to custodian bank | 603 | |
Payable for investments purchased | 29,402 | |
Delayed delivery | 1,315,405 | |
Payable for fund shares redeemed | 36,209 | |
Distributions payable | 889 | |
Accrued management fee | 2,167 | |
Other payables and accrued expenses | 865 | |
Total liabilities | 1,385,540 | |
Net Assets | $ 5,606,450 | |
Net Assets consist of: | ||
Paid in capital | $ 5,575,533 | |
Distributions in excess of net investment income | (6,960) | |
Accumulated undistributed net realized gain (loss) on investments | 50,440 | |
Net unrealized appreciation (depreciation) on investments | (12,563) | |
Net Assets, for 507,520 shares outstanding | $ 5,606,450 | |
Net Asset Value, offering price and redemption price per share ($5,606,450 ÷ 507,520 shares) | $ 11.05 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Ginnie Mae Fund
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended July 31, 2003 | |
Investment Income | ||
Interest | $ 250,212 | |
Expenses | ||
Management fee | $ 28,263 | |
Transfer agent fees | 7,500 | |
Accounting fees and expenses | 849 | |
Non-interested trustees' compensation | 26 | |
Appreciation in deferred trustee compensation account | 2 | |
Custodian fees and expenses | 617 | |
Registration fees | 215 | |
Audit | 59 | |
Legal | 26 | |
Miscellaneous | 23 | |
Total expenses before reductions | 37,580 | |
Expense reductions | (13) | 37,567 |
Net investment income (loss) | 212,645 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 80,749 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (100,543) | |
Delayed delivery commitments | 3,928 | |
Total change in net unrealized appreciation (depreciation) | (96,615) | |
Net gain (loss) | (15,866) | |
Net increase (decrease) in net assets resulting from operations | $ 196,779 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 212,645 | $ 207,896 |
Net realized gain (loss) | 80,749 | 38,120 |
Change in net unrealized appreciation (depreciation) | (96,615) | 42,413 |
Net increase (decrease) in net assets resulting from operations | 196,779 | 288,429 |
Distributions to shareholders from net investment income | (231,003) | (215,729) |
Share transactions | 3,242,020 | 4,582,009 |
Reinvestment of distributions | 204,093 | 187,950 |
Cost of shares redeemed | (3,548,331) | (1,935,728) |
Net increase (decrease) in net assets resulting from share transactions | (102,218) | 2,834,231 |
Total increase (decrease) in net assets | (136,442) | 2,906,931 |
Net Assets | ||
Beginning of period | 5,742,892 | 2,835,961 |
End of period (including distributions in excess of net investment income of $6,960 and distributions in excess of net investment income of $3,638, respectively) | $ 5,606,450 | $ 5,742,892 |
Other Information Shares | ||
Sold | 289,678 | 416,651 |
Issued in reinvestment of distributions | 18,225 | 17,107 |
Redeemed | (317,081) | (176,975) |
Net increase (decrease) | (9,178) | 256,783 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.11 | $ 10.91 | $ 10.42 | $ 10.46 | $ 10.87 |
Income from Investment Operations | |||||
Net investment income | .364 | .563 D | .684 | .691 | .689 |
Net realized and unrealized gain (loss) | (.029) | .225 D | .487 | (.043) | (.460) |
Total from investment operations | .335 | .788 | 1.171 | .648 | .229 |
Distributions from net investment income | (.395) | (.588) | (.681) | (.688) | (.639) |
Net asset value, | $ 11.05 | $ 11.11 | $ 10.91 | $ 10.42 | $ 10.46 |
Total Return A | 3.02% | 7.42% | 11.55% | 6.42% | 2.08% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .57% | .60% | .63% | .63% | .71% |
Expenses net of voluntary waivers, if any | .57% | .60% | .62% | .63% | .64% |
Expenses net of all reductions | .57% | .60% | .62% | .63% | .64% |
Net investment income | 3.25% | 5.15% D | 6.40% | 6.67% | 6.43% |
Supplemental Data | |||||
Net assets, end of period (in millions) | $ 5,606 | $ 5,743 | $ 2,836 | $ 1,706 | $ 1,841 |
Portfolio turnover rate | 262% | 327% | 120% | 75% | 73% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.
D Effective August 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Government Income Fund
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and 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. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2003 | Past 1 | Past 5 | Past 10 |
Fidelity Government Income Fund | 3.45% | 6.09% | 5.98% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Government Income Fund on July 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Government Bond Index did over the same period.
Annual Report
Fidelity Government Income Fund
Management's Discussion of Fund Performance
Comments from George Fischer, Portfolio Manager of Fidelity® Government Income Fund
Investment-grade debt performed well for most of the 12 months ending July 31, 2003, as the Lehman Brothers® Aggregate Bond Index returned 5.42%. Bonds prospered in an environment of low inflation, low interest rates and weak equity markets. The Federal Reserve Board lowered rates twice in the period, dropping the fed funds target rate to its lowest level in 45 years. At various times in the past year, investors sought the highest-quality bonds, driving Treasury prices up and yields down to 40-year lows. However, Treasury yields climbed to a 12-month high in the final six weeks of the period. For the year overall, the Lehman Brothers Treasury Index gained 4.54%. Corporate credit was the best-performing investment-grade segment, rising 10.71% according to the Lehman Brothers Credit Bond Index. Agencies were tempered by an accounting issue at a leading government-sponsored enterprise, which limited the Lehman Brothers U.S. Agency Index to a 4.29% advance. Mortgages were the weakest performers, hampered by heavy refinancing activity. The Lehman Brothers Mortgage-Backed Securities Index returned 2.56%.
Fidelity Government Income Fund returned 3.45% during the 12-month period, surpassing the 2.41% return of the fund's peers as measured by the LipperSM General U.S. Government Funds Average. The fund's benchmark, the Lehman Brothers Government Bond Index, returned 4.44%. The fund's performance benefited relative to its peers from a "barbell" positioning, emphasizing securities with maturities of between five and 10 years and those with maturities of beyond 20 years. The combination of owning shorter- and longer-term bonds outpaced a strategy of emphasizing bonds with maturities in between. Also contributing to outperformance were some timely over- and underweightings of agency securities, which came under pressure at times due to questions about Fannie Mae's exposure to risk and concerns about Freddie Mac's accounting practices. Holdings in mortgage securities periodically detracted from performance. Declining interest rates prompted record home-loan refinancing and mortgage security prepayments, resulting in unusual amounts of volatility in the mortgage securities sector.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Government Income Fund
Investment Changes
Coupon Distribution as of July 31, 2003 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.0 | 1.0 |
Less than 3% | 4.4 | 4.5 |
3 - 3.99% | 5.7 | 1.0 |
4 - 4.99% | 4.9 | 9.6 |
5 - 5.99% | 13.3 | 9.3 |
6 - 6.99% | 22.4 | 31.1 |
7 - 7.99% | 5.1 | 6.6 |
8 - 8.99% | 10.8 | 14.2 |
9 - 9.99% | 0.2 | 1.2 |
10 - 10.99% | 0.0 | 1.5 |
11 - 11.99% | 6.0 | 9.8 |
12% and over | 0.6 | 3.2 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of July 31, 2003 | ||
6 months ago | ||
Years | 7.9 | 8.3 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2003 | ||
6 months ago | ||
Years | 5.0 | 5.2 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2003* | As of January 31, 2003** | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 12.0% | ![]() | CMOs and Other Mortgage Related Securities 19.7% | ||||
![]() | U.S. Treasury | ![]() | U.S. Treasury | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Futures and Swaps | 0.4% | ** Futures and Swaps | (3.5)% |
Annual Report
Annual Report
Fidelity Government Income Fund
Investments July 31, 2003
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 54.2% | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency Obligations - 23.9% | ||||
Fannie Mae: | ||||
2.125% 4/15/06 | $ 6,973 | $ 6,894 | ||
5.5% 3/15/11 | 17,194 | 18,099 | ||
6% 5/15/08 | 12,131 | 13,341 | ||
6.25% 2/1/11 | 19,445 | 20,840 | ||
6.625% 11/15/30 | 89,300 | 95,520 | ||
Farm Credit Systems Financial Assistance Corp. 8.8% 6/10/05 | 22,233 | 24,989 | ||
Federal Home Loan Bank: | ||||
5.8% 9/2/08 | 20,930 | 22,956 | ||
9.5% 2/25/04 | 2,355 | 2,466 | ||
Financing Corp. - coupon STRIPS: | ||||
0% 8/3/05 | 907 | 867 | ||
0% 8/3/05 | 1,082 | 1,035 | ||
Freddie Mac: | ||||
1.5% 8/15/05 | 31,780 | 31,423 | ||
2.875% 9/15/05 | 129,009 | 130,979 | ||
4.5% 7/15/13 | 128,700 | 121,835 | ||
5.125% 8/20/12 | 73,640 | 72,980 | ||
5.5% 9/15/11 | 1,240 | 1,295 | ||
5.875% 3/21/11 | 41,245 | 43,104 | ||
Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06 | 4,838 | 5,297 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank): | ||||
Series 1994-A, 7.12% 4/15/06 | 5,250 | 5,590 | ||
Series 1994-F, 8.187% 12/15/04 | 1,235 | 1,279 | ||
Series 1995-A, 6.28% 6/15/04 | 1,971 | 2,033 | ||
Series 1995-B, 6.13% 6/15/04 | 4,305 | 4,446 | ||
Series 1996-A, 6.55% 6/15/04 | 2,620 | 2,696 | ||
Guaranteed Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) Series 1994-B, 7.5% 1/26/06 | 3,249 | 3,514 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates: | ||||
Series 1998-196A, 5.926% 6/15/05 | 4,875 | 5,228 | ||
Series 2000-016, 6.07% 12/15/14 | 17,900 | 18,855 | ||
6.77% 11/15/13 | 6,704 | 7,194 | ||
6.99% 5/21/16 | 19,635 | 21,521 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency Obligations - continued | ||||
Private Export Funding Corp. secured: | ||||
5.34% 3/15/06 | $ 21,700 | $ 23,248 | ||
5.66% 9/15/11 (a) | 11,160 | 11,774 | ||
5.8% 2/1/04 | 342 | 350 | ||
6.49% 7/15/07 | 5,000 | 5,591 | ||
6.67% 9/15/09 | 2,120 | 2,398 | ||
7.17% 5/15/07 | 8,500 | 9,685 | ||
Small Business Administration guaranteed development participation certificates: | ||||
Series 2002-20J Class 1, 4.75% 10/1/22 | 9,804 | 9,480 | ||
Series 2002-20K Class 1, 5.08% 11/1/22 | 4,902 | 4,842 | ||
State of Israel (guaranteed by U.S. Government through Agency for International Development): | ||||
5.89% 8/15/05 | 29,600 | 31,581 | ||
6.6% 2/15/08 | 35,170 | 38,376 | ||
6.8% 2/15/12 | 18,000 | 19,887 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 9,300 | 10,103 | ||
5.96% 8/1/09 | 9,930 | 10,576 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 2,180 | 2,428 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 866,595 | |||
U.S. Treasury Inflation Protected Obligations - 6.1% | ||||
U.S. Treasury Inflation-Indexed Bonds 3.625% 4/15/28 | 173,952 | 218,508 | ||
U.S. Treasury Obligations - 24.2% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 119,008 | 129,147 | ||
7.125% 2/15/23 | 40,000 | 48,200 | ||
8% 11/15/21 | 277,000 | 362,043 | ||
11.25% 2/15/15 | 141,192 | 222,868 | ||
13.25% 5/15/14 | 15,000 | 22,559 | ||
U.S. Treasury Notes: | ||||
5% 2/15/11 | 36,000 | 37,991 | ||
5.625% 5/15/08 | 23,000 | 25,374 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Treasury Obligations - continued | ||||
U.S. Treasury Notes: - continued | ||||
5.75% 8/15/10 | $ 19,000 | $ 21,019 | ||
7% 7/15/06 | 7,102 | 8,037 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 877,238 | |||
TOTAL U.S. GOVERNMENT AND (Cost $2,002,131) | 1,962,341 | |||
U.S. Government Agency - Mortgage Securities - 11.5% | ||||
Fannie Mae - 9.5% | ||||
4% 8/1/18 (b) | 38,000 | 36,005 | ||
4.5% 5/1/33 to 7/1/33 | 13,976 | 12,814 | ||
5% 8/1/33 (b) | 10,000 | 9,553 | ||
5.5% 5/1/09 to 3/1/24 | 3,612 | 3,628 | ||
5.5% 8/13/33 (b) | 148,000 | 146,150 | ||
6% 9/1/17 to 7/1/20 | 44,912 | 46,440 | ||
6.5% 8/1/04 to 12/1/32 | 21,820 | 22,442 | ||
6.5% 8/1/18 (b) | 40,000 | 42,013 | ||
7% 7/1/13 to 6/1/32 | 10,484 | 10,995 | ||
7.5% 8/1/10 to 10/1/15 | 684 | 734 | ||
8% 1/1/22 | 281 | 304 | ||
8.5% 1/1/15 to 4/1/16 | 2,340 | 2,573 | ||
9% 5/1/14 | 2,155 | 2,385 | ||
9.5% 11/15/09 to 10/1/20 | 3,299 | 3,642 | ||
10% 8/1/10 | 118 | 129 | ||
11% 3/1/10 | 31 | 33 | ||
11.5% 6/15/19 to 1/15/21 | 4,547 | 5,167 | ||
345,007 | ||||
Freddie Mac - 0.4% | ||||
5% 1/1/09 to 6/1/09 | 1,837 | 1,866 | ||
7% 4/1/11 | 7 | 7 | ||
7.5% 7/1/10 to 5/1/16 | 8,365 | 8,923 | ||
8% 1/1/10 to 6/1/11 | 179 | 191 | ||
8.5% 8/1/08 to 12/1/25 | 813 | 877 | ||
9% 8/1/09 to 12/1/10 | 228 | 247 | ||
9.75% 8/1/14 | 451 | 501 | ||
12,612 | ||||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) | |||
Government National Mortgage Association - 1.6% | ||||
6% 7/15/08 to 5/15/33 | $ 45,926 | $ 47,217 | ||
6.5% 5/15/28 to 8/15/32 | 5,450 | 5,627 | ||
6.5% 8/1/33 (b) | 778 | 805 | ||
7% 10/15/26 to 3/15/29 | 146 | 154 | ||
7% 8/1/33 (b) | 141 | 148 | ||
7.5% 3/15/28 to 8/15/28 | 321 | 340 | ||
8% 11/15/06 to 12/15/23 | 4,051 | 4,407 | ||
8.5% 10/15/08 to 2/15/31 | 502 | 539 | ||
9.5% 2/15/25 | 5 | 5 | ||
59,242 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $420,266) | 416,861 | |||
Collateralized Mortgage Obligations - 12.0% | ||||
U.S. Government Agency - 12.0% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1993-160 Class PK, 6.5% 11/25/22 | 25,764 | 26,440 | ||
Series 1993-207 Class H, 6.5% 11/25/23 | 18,360 | 19,583 | ||
Series 1993-56 Class PH, 6.75% 6/25/22 | 4,942 | 5,007 | ||
Series 1994-23 Class PG, 6% 4/25/23 | 9,565 | 10,004 | ||
Series 1994-27 Class PJ, 6.5% 6/25/23 | 6,430 | 6,708 | ||
Series 1994-50 Class PJ, 6.5% 8/25/23 | 17,000 | 17,863 | ||
sequential pay Series 1997-41 Class J, 7.5% 6/18/27 | 13,680 | 14,481 | ||
Series 1993-109 Class NZ, 6% 7/25/08 | 12,799 | 13,366 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
planned amortization class: | ||||
Series 2001-62 Class PF, 6.5% 6/25/26 | 24,251 | 24,492 | ||
Series 2002-25 Class PD, 6.5% 4/25/31 | 35,000 | 36,416 | ||
Series 2001-45 Class TC, 6.5% 7/25/26 | 7,185 | 7,193 | ||
Series 2003-44 Class AS, 5.8667% 6/25/33 (c) | 4,761 | 4,773 | ||
Freddie Mac: | ||||
planned amortization class: | ||||
Series 1413 Class J, 4% 11/15/07 | 8,214 | 8,348 | ||
Series 2351 Class PX, 6.5% 7/15/30 | 3,189 | 3,263 | ||
sequential pay Series 2355 Class AE, 6% 9/15/31 | 28,519 | 29,869 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency - continued | ||||
Freddie Mac Manufactured Housing participation certificates guaranteed: | ||||
planned amortization class: | ||||
Series 1681 Class PJ, 7% 12/15/23 | $ 9,200 | $ 9,831 | ||
Series 1697 Class G, 6% 3/15/09 | 2,728 | 2,763 | ||
Series 1560 Class PN, 7% 12/15/12 | 15,000 | 16,066 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
Class 2325 Class PL, 7% 1/15/31 | 15,422 | 16,096 | ||
planned amortization class: | ||||
Series 1500 Class K, 7% 6/15/22 | 5,432 | 5,498 | ||
Series 1727 Class H, 6.5% 8/15/23 | 12,200 | 12,766 | ||
Series 2295 Class PE, 6.5% 2/15/30 | 31,296 | 32,036 | ||
Series 2328 Class QB, 6.5% 8/15/26 | 1,274 | 1,273 | ||
sequential pay: | ||||
Series 1974 Class Z, 7% 8/15/20 | 6,419 | 6,444 | ||
Series 2267 Class VB, 7.5% 10/15/14 | 3,692 | 3,712 | ||
Series 2303 Class VT, 6% 2/15/12 | 5,977 | 6,167 | ||
Series 2448 Class XB, 6.5% 10/15/29 | 15,000 | 15,426 | ||
Series 1535 Class PN, 7% 12/15/06 | 3,769 | 3,766 | ||
Series 1614 Class L, 6.5% 7/15/23 | 8,138 | 8,630 | ||
Series 2328 Class MB, 6.5% 10/15/21 | 2,339 | 2,339 | ||
Series 2473 Class JB, 5.5% 2/15/29 | 3,820 | 3,898 | ||
Series 2582 Class SD, 8.3931% 1/15/32 (c) | 6,851 | 6,891 | ||
target amortization class Series 2156 Class TC, 6.25% 5/15/29 | 22,000 | 22,286 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class: | ||||
Series 1997-8 Class PE, 7.5% 5/16/27 | 22,138 | 23,596 | ||
Series 2002-33 Class PA, 5.5% 2/20/24 | 193 | 193 | ||
Series 2001-53 Class TA, 6% 12/20/30 | 6,661 | 6,814 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $431,670) | 434,297 |
Cash Equivalents - 27.9% | |||
Maturity | Value (Note 1) | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.12%, dated 7/31/03 due 8/1/03) | $ 1,012,710 | $ 1,012,678 | |
TOTAL INVESTMENT PORTFOLIO - 105.6% (Cost $3,866,745) | 3,826,177 | ||
NET OTHER ASSETS - (5.6)% | (204,524) | ||
NET ASSETS - 100% | $ 3,621,653 |
Swap Agreements | |||||
Expiration | Notional | Unrealized | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.833% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs | March 2013 | $ 40,400 | $ (3,610) | ||
Receive quarterly a floating rate based on 3-month LIBOR and pay quarterly a fixed rate equal to 4.814% with Goldman Sachs | Nov. 2030 | 21,000 | 2,872 | ||
$ 61,400 | $ (738) |
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $11,774,000 or 0.3% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Other Information |
Purchases and sales of long-term U.S. government and government agency obligations aggregated $8,273,273,000 and $8,251,896,000, respectively. |
Income Tax Information |
The fund hereby designates approximately $9,502,000 as a 20%-rate capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Government Income Fund
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) J | July 31, 2003 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $1,012,678) (cost $3,866,745) - See accompanying schedule | $ 3,826,177 | |
Cash | 1 | |
Receivable for investments sold | 78,482 | |
Receivable for fund shares sold | 4,815 | |
Interest receivable | 36,489 | |
Total assets | 3,945,964 | |
Liabilities | ||
Payable for investments purchased | $ 76,374 | |
Delayed delivery | 238,551 | |
Payable for fund shares redeemed | 6,347 | |
Distributions payable | 263 | |
Unrealized loss on swap agreements | 738 | |
Accrued management fee | 1,337 | |
Other payables and accrued expenses | 701 | |
Total liabilities | 324,311 | |
Net Assets | $ 3,621,653 | |
Net Assets consist of: | ||
Paid in capital | $ 3,603,792 | |
Undistributed net investment income | 1,162 | |
Accumulated undistributed net realized gain (loss) on investments | 58,005 | |
Net unrealized appreciation (depreciation) on investments | (41,306) | |
Net Assets, for 356,583 shares outstanding | $ 3,621,653 | |
Net Asset Value, offering price and redemption price per share ($3,621,653 ÷ 356,583 shares) | $ 10.16 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Government Income Fund
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended July 31, 2003 | |
Investment Income | ||
Interest | $ 145,059 | |
Security lending | 362 | |
Total income | 145,421 | |
Expenses | ||
Management fee | $ 14,920 | |
Transfer agent fees | 6,443 | |
Accounting and security lending fees | 613 | |
Non-interested trustees' compensation | 14 | |
Custodian fees and expenses | 119 | |
Registration fees | 145 | |
Audit | 71 | |
Legal | 14 | |
Miscellaneous | 12 | |
Total expenses before reductions | 22,351 | |
Expense reductions | (35) | 22,316 |
Net investment income (loss) | 123,105 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 111,660 | |
Swap agreements | (5,911) | |
Total net realized gain (loss) | 105,749 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (135,176) | |
Swap agreements | (738) | |
Total change in net unrealized appreciation (depreciation) | (135,914) | |
Net gain (loss) | (30,165) | |
Net increase (decrease) in net assets resulting from operations | $ 92,940 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 123,105 | $ 112,224 |
Net realized gain (loss) | 105,749 | 39,445 |
Change in net unrealized appreciation (depreciation) | (135,914) | 48,664 |
Net increase (decrease) in net assets resulting from operations | 92,940 | 200,333 |
Distributions to shareholders from net investment income | (120,943) | (115,123) |
Distributions to shareholders from net realized gain | (41,172) | - |
Total distributions | (162,115) | (115,123) |
Share transactions | 1,675,499 | 1,454,291 |
Reinvestment of distributions | 156,422 | 109,747 |
Cost of shares redeemed | (1,060,935) | (882,940) |
Net increase (decrease) in net assets resulting from share transactions | 770,986 | 681,098 |
Total increase (decrease) in net assets | 701,811 | 766,308 |
Net Assets | ||
Beginning of period | 2,919,842 | 2,153,534 |
End of period (including undistributed net investment income of $1,162 and distributions in excess of net investment income of $853, respectively) | $ 3,621,653 | $ 2,919,842 |
Other Information Shares | ||
Sold | 159,482 | 144,234 |
Issued in reinvestment of distributions | 14,923 | 10,878 |
Redeemed | (101,206) | (87,618) |
Net increase (decrease) | 73,199 | 67,494 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.30 | $ 9.98 | $ 9.49 | $ 9.54 | $ 9.98 |
Income from Investment Operations | |||||
Net investment income | .374 | .452 D | .577 | .592 | .588 |
Net realized and unrealized gain (loss) | (.014) | .335 D | .525 | (.059) | (.429) |
Total from investment operations | .360 | .787 | 1.102 | .533 | .159 |
Distributions from net investment income | (.370) | (.467) | (.612) | (.583) | (.599) |
Distributions from net realized gain | (.130) | - | - | - | - |
Total distributions | (.500) | (.467) | (.612) | (.583) | (.599) |
Net asset value, | $ 10.16 | $ 10.30 | $ 9.98 | $ 9.49 | $ 9.54 |
Total Return A | 3.45% | 8.08% | 11.92% | 5.81% | 1.48% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .65% | .69% | .61% | .66% | .68% |
Expenses net of voluntary waivers, if any | .65% | .69% | .61% | .66% | .68% |
Expenses net of all reductions | .65% | .68% | .60% | .65% | .67% |
Net investment income | 3.56% | 4.50% D | 5.91% | 6.27% | 5.91% |
Supplemental Data | |||||
Net assets, end of period (in millions) | $ 3,622 | $ 2,920 | $ 2,154 | $ 1,421 | $ 1,580 |
Portfolio turnover rate | 253% | 284% | 214% | 131% | 168% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.
D Effective August 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Intermediate Government Income Fund
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and 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. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2003 | Past 1 | Past 5 | Past 10 |
Fidelity Intermediate Govt Income Fund | 3.80% | 6.41% | 6.14% |
If Fidelity had not reimbursed certain expenses for the fund, the fund's past five and 10 year total returns would have been lower.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Intermediate Government Income Fund on July 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Intermediate Government Bond Index did over the same period.
Annual Report
Fidelity Intermediate Government Income Fund
Management's Discussion of Fund Performance
Comments from George Fischer, Portfolio Manager of Fidelity® Intermediate Government Income Fund
Investment-grade debt performed well for most of the 12 months ending July 31, 2003, as the Lehman Brothers® Aggregate Bond Index returned 5.42%. Bonds prospered in an environment of low inflation, low interest rates and weak equity markets. The Federal Reserve Board lowered rates twice in the period, dropping the fed funds target rate to its lowest level in 45 years. At various times in the past year, investors sought the highest-quality bonds, driving Treasury prices up and yields down to 40-year lows. However, Treasury yields climbed to a 12-month high in the final six weeks of the period. For the year overall, the Lehman Brothers Treasury Index gained 4.54%. Corporate credit was the best-performing investment-grade segment, rising 10.71% according to the Lehman Brothers Credit Bond Index. Agencies were tempered by an accounting issue at a leading government-sponsored enterprise, which limited the Lehman Brothers U.S. Agency Index to a 4.29% advance. Mortgages were the weakest performers, hampered by heavy refinancing activity. The Lehman Brothers Mortgage-Backed Securities Index returned 2.56%.
Fidelity Intermediate Government Income Fund returned 3.80% during the 12-month period, surpassing the 2.65% return of the fund's peers, as measured by the LipperSM Short-Intermediate U.S. Government Funds Average. The fund's benchmark, the Lehman Brothers Intermediate Government Bond Index, returned 4.03%. The fund's performance benefited relative to its peers from a "barbell" positioning, emphasizing securities with maturities of two years and under and those with maturities of between five and 10 years. The combination of owning shorter- and longer-term bonds outpaced a strategy of emphasizing bonds with maturities in between. Also contributing to outperformance were some timely over- and underweightings of agency securities, which came under pressure at times due to questions about Fannie Mae's exposure to risk and concerns over Freddie Mac's accounting practices. Holdings in mortgage securities periodically detracted from performance. Declining interest rates prompted record home-loan refinancing and mortgage security prepayments, resulting in unusual amounts of volatility in the mortgage securities sector.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Intermediate Government Income Fund
Investment Changes
Coupon Distribution as of July 31, 2003 | ||
% of fund's investments | % of fund's investments | |
Less than 2% | 3.5 | 2.7 |
2 - 2.99% | 6.2 | 0.0 |
3 - 3.99% | 4.8 | 12.7 |
4 - 4.99% | 3.5 | 6.3 |
5 - 5.99% | 26.1 | 35.3 |
6 - 6.99% | 29.3 | 23.4 |
7 - 7.99% | 5.7 | 6.4 |
8% and over | 4.9 | 9.1 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of July 31, 2003 | ||
6 months ago | ||
Years | 4.3 | 4.5 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2003 | ||
6 months ago | ||
Years | 3.4 | 3.3 |
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 July 31, 2003* | As of January 31, 2003** | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 7.7% | ![]() | CMOs and Other Mortgage Related Securities 9.7% | ||||
![]() | U.S. Treasury | ![]() | U.S. Treasury | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Futures and Swaps | 0.3% | ** Futures and Swaps | (1.2)% |
***Short-Term Investments and Net Other Assets are not included in the pie chart. |
Annual Report
Fidelity Intermediate Government Income Fund
Investments July 31, 2003
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 71.8% | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency Obligations - 42.1% | ||||
Fannie Mae: | ||||
2.875% 5/19/08 | $ 2,100 | $ 2,011 | ||
3.25% 1/15/08 | 11,570 | 11,411 | ||
6.25% 2/1/11 | 1,285 | 1,377 | ||
6.25% 7/19/11 | 40,000 | 41,498 | ||
6.625% 11/15/10 | 24,965 | 28,088 | ||
6.625% 11/15/30 | 6,800 | 7,274 | ||
7.125% 2/15/05 | 18,090 | 19,569 | ||
7.125% 6/15/10 | 34,000 | 39,286 | ||
Farm Credit Systems Financial Assistance Corp. 8.8% 6/10/05 | 7,000 | 7,868 | ||
Federal Farm Credit Bank 9.15% 2/14/05 | 500 | 555 | ||
Federal Home Loan Bank: | ||||
2.5% 3/15/06 | 8,300 | 8,312 | ||
2.625% 7/15/08 | 5,700 | 5,431 | ||
5.8% 9/2/08 | 44,250 | 48,533 | ||
6.75% 4/10/06 | 1,000 | 1,110 | ||
Freddie Mac: | ||||
1.5% 8/15/05 | 21,250 | 21,011 | ||
2.875% 9/15/05 | 22,750 | 23,097 | ||
3.875% 2/15/05 | 52,500 | 54,170 | ||
4.375% 2/4/10 | 25,560 | 25,280 | ||
4.5% 7/15/13 | 23,350 | 22,104 | ||
5.125% 8/20/12 | 9,600 | 9,514 | ||
5.5% 9/15/11 | 1,000 | 1,044 | ||
5.75% 1/15/12 | 15,000 | 15,862 | ||
5.875% 3/21/11 | 1,285 | 1,343 | ||
6.875% 9/15/10 | 40,360 | 45,948 | ||
Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06 | 5,691 | 6,231 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | ||||
Series 1993-C, 5.2% 10/15/04 | 273 | 281 | ||
Series 1993-D, 5.23% 5/15/05 | 294 | 302 | ||
Series 1994-F, 8.187% 12/15/04 | 656 | 679 | ||
Series 1995-A, 6.28% 6/15/04 | 848 | 875 | ||
Series 1996-A, 6.55% 6/15/04 | 1,545 | 1,589 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency Obligations - continued | ||||
Guaranteed Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | ||||
Series 1992-A, 7.02% 9/1/04 | $ 1,565 | $ 1,618 | ||
Series 1994-A, 7.39% 6/26/06 | 3,000 | 3,230 | ||
Series 1994-B, 7.5% 1/26/06 | 322 | 348 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates Series 1996-A1, 6.726% 9/15/10 | 2,609 | 2,868 | ||
Private Export Funding Corp. secured: | ||||
5.48% 9/15/03 | 245 | 248 | ||
5.66% 9/15/11 (a) | 9,000 | 9,495 | ||
5.73% 1/15/04 | 8,000 | 8,168 | ||
5.8% 2/1/04 | 1,118 | 1,143 | ||
6.86% 4/30/04 | 417 | 433 | ||
State of Israel (guaranteed by U.S. Government through Agency for International Development): | ||||
5.89% 8/15/05 | 5,815 | 6,204 | ||
6.6% 2/15/08 | 20,670 | 22,554 | ||
6.8% 2/15/12 | 7,500 | 8,286 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 10,000 | 10,864 | ||
6.06% 8/1/10 | 10,000 | 10,651 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 2,252 | 2,507 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 540,270 | |||
U.S. Treasury Obligations - 29.7% | ||||
U.S. Treasury Bonds 11.25% 2/15/15 | 15,200 | 23,993 | ||
U.S. Treasury Notes: | ||||
2.625% 5/15/08 | 40,000 | 38,828 | ||
5% 2/15/11 | 15,000 | 15,830 | ||
5.625% 5/15/08 | 86,800 | 95,758 | ||
5.75% 11/15/05 | 19,000 | 20,599 | ||
5.75% 8/15/10 | 32,000 | 35,401 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Treasury Obligations - continued | ||||
U.S. Treasury Notes: - continued | ||||
6% 8/15/09 | $ 64,000 | $ 71,873 | ||
6.5% 10/15/06 | 70,610 | 79,229 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 381,511 | |||
TOTAL U.S. GOVERNMENT AND (Cost $929,098) | 921,781 | |||
U.S. Government Agency - Mortgage Securities - 10.1% | ||||
Fannie Mae - 8.8% | ||||
5% 8/1/33 (b) | 3,000 | 2,866 | ||
5.5% 1/1/09 to 11/1/17 | 16,855 | 17,210 | ||
5.5% 8/13/33 (b) | 52,000 | 51,350 | ||
6% 10/1/08 to 11/1/17 | 11,651 | 12,093 | ||
6.5% 4/1/16 to 12/1/32 | 20,502 | 21,362 | ||
6.5% 8/1/18 (b) | 48 | 51 | ||
7% 7/1/10 to 9/1/31 | 2,109 | 2,242 | ||
9% 2/1/13 | 445 | 491 | ||
9.5% 11/15/09 | 723 | 792 | ||
10% 1/1/20 | 16 | 18 | ||
10.25% 10/1/09 to 10/1/18 | 66 | 74 | ||
11% 8/1/10 to 1/1/16 | 1,228 | 1,380 | ||
11.25% 5/1/14 to 1/1/16 | 184 | 208 | ||
11.5% 9/1/11 to 6/15/19 | 850 | 963 | ||
12.25% 12/1/10 to 5/1/15 | 186 | 212 | ||
12.5% 3/1/12 to 7/1/16 | 626 | 715 | ||
12.75% 10/1/11 to 6/1/15 | 333 | 383 | ||
13% 7/1/13 to 7/1/15 | 247 | 283 | ||
13.25% 9/1/11 | 201 | 234 | ||
13.5% 11/1/14 to 12/1/14 | 20 | 23 | ||
14% 10/1/14 | 46 | 54 | ||
14.5% 7/1/14 | 17 | 20 | ||
15% 4/1/12 | 8 | 10 | ||
113,034 | ||||
Freddie Mac - 0.8% | ||||
6.5% 5/1/08 | 387 | 407 | ||
8.5% 6/1/14 to 9/1/17 | 544 | 583 | ||
9% 11/1/09 to 8/1/16 | 226 | 244 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) | |||
Freddie Mac - continued | ||||
9.5% 7/1/16 to 8/1/21 | $ 1,205 | $ 1,334 | ||
10% 7/1/09 to 3/1/21 | 2,374 | 2,631 | ||
10.5% 9/1/09 to 5/1/21 | 400 | 445 | ||
11% 2/1/11 to 9/1/20 | 169 | 191 | ||
11.25% 2/1/10 to 10/1/14 | 247 | 276 | ||
11.5% 10/1/15 to 8/1/19 | 226 | 255 | ||
11.75% 11/1/11 to 7/1/15 | 47 | 53 | ||
12% 10/1/09 to 11/1/19 | 548 | 622 | ||
12.25% 8/1/11 to 8/1/15 | 229 | 261 | ||
12.5% 10/1/09 to 6/1/19 | 2,474 | 2,822 | ||
12.75% 2/1/10 to 1/1/11 | 32 | 36 | ||
13% 9/1/10 to 5/1/17 | 370 | 426 | ||
13.25% 11/1/10 to 12/1/14 | 63 | 73 | ||
13.5% 11/1/10 to 10/1/14 | 106 | 122 | ||
14% 11/1/12 to 4/1/16 | 15 | 17 | ||
14.5% 12/1/10 | 4 | 4 | ||
14.75% 3/1/10 | 6 | 7 | ||
16.25% 7/1/11 | 3 | 4 | ||
10,813 | ||||
Government National Mortgage Association - 0.5% | ||||
8% 9/15/06 to 12/15/23 | 2,272 | 2,467 | ||
8.5% 6/15/16 to 2/15/17 | 21 | 23 | ||
10.5% 8/15/15 to 10/15/21 | 2,200 | 2,481 | ||
10.75% 12/15/09 to 3/15/10 | 72 | 79 | ||
11% 9/20/14 to 1/20/21 | 98 | 110 | ||
12.5% 12/15/10 | 6 | 7 | ||
13% 1/15/11 to 12/15/14 | 237 | 274 | ||
13.25% 8/15/14 | 13 | 15 | ||
13.5% 5/15/10 to 12/15/14 | 175 | 202 | ||
14% 6/15/11 | 10 | 11 | ||
16% 4/15/13 | 31 | 37 | ||
17% 12/15/11 | 3 | 3 | ||
5,709 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $128,556) | 129,556 | |||
Collateralized Mortgage Obligations - 7.7% | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency - 7.7% | ||||
Fannie Mae: | ||||
floater Series 1994-42 Class FK, 2.81% 4/25/24 (c) | $ 7,000 | $ 7,173 | ||
planned amortization class Series 1988-21 Class G, 9.5% 8/25/18 | 288 | 331 | ||
sequential pay Series 1993-238 Class C, 6.5% 12/25/08 | 11,275 | 12,009 | ||
Series 1994-12 Class PH, 6.25% 1/25/09 | 4,838 | 5,131 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
floater Series 2002-74 Class FV, 1.55% 11/25/32 (c) | 16,785 | 16,829 | ||
planned amortization class: | ||||
Series 2001-80 Class PH, 6% 12/25/27 | 4,100 | 4,140 | ||
Series 2002-55 Class PA, 5.5% 3/25/18 | 1,200 | 1,227 | ||
Series 2003-44 Class AS, 5.8667% 6/25/33 (c) | 1,785 | 1,790 | ||
Freddie Mac: | ||||
planned amortization class: | ||||
Series 1995 Class PB, 6.5% 9/20/25 | 1,439 | 1,461 | ||
Series 2113 Class QD, 6% 2/15/23 | 1,906 | 1,921 | ||
Series 2115 Class PC, 6% 5/15/11 | 550 | 556 | ||
sequential pay Series 2257 Class VA, 7% 9/15/07 | 49 | 49 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
floater Series 2526 Class FC, 1.5069% 11/15/32 (c) | 10,460 | 10,387 | ||
planned amortization class: | ||||
Series 1639 Class J, 6% 12/15/08 | 9 | 9 | ||
Series 2134 Class PC, 5.725% 4/15/11 | 995 | 1,006 | ||
sequential pay: | ||||
Series 1929 Class EZ, 7.5% 2/17/27 | 10,906 | 11,376 | ||
Series 2279 Class VE, 6.5% 11/15/06 | 2,868 | 2,910 | ||
Series 2303 Class VT, 6% 2/15/12 | 2,302 | 2,375 | ||
Series 1543 Class VK, 6.7% 1/15/23 | 10,105 | 10,577 | ||
Series 2473 Class JB, 5.5% 2/15/29 | 1,455 | 1,485 | ||
Series 2582 Class SD, 8.3931% 1/15/32 (c) | 2,608 | 2,623 | ||
Ginnie Mae guaranteed REMIC pass thru securities Series 2001-53 Class TA, 6% 12/20/30 | 2,597 | 2,656 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $98,626) | 98,021 |
Cash Equivalents - 17.2% | |||
Maturity | Value (Note 1) | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.12%, dated 7/31/03 due 8/1/03) | $ 221,035 | $ 221,028 | |
TOTAL INVESTMENT PORTFOLIO - 106.8% (Cost $1,377,308) | 1,370,386 | ||
NET OTHER ASSETS - (6.8)% | (87,066) | ||
NET ASSETS - 100% | $ 1,283,320 |
Swap Agreements | |||||
Expiration | Notional | Unrealized | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.833% and pay quarterly a floating rate based on 3-month LIBOR with Goldman Sachs | March 2013 | $ 14,200 | $ (1,269) | ||
Receive quarterly a floating rate based on 3-month LIBOR and pay quarterly a fixed rate equal to 4.814% with Goldman Sachs | Nov. 2030 | 7,500 | 1,026 | ||
$ 21,700 | $ (243) |
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $9,495,000 or 0.7% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Other Information |
Purchases and sales of long-term U.S. government and government agency obligations aggregated $3,027,819,000 and $2,925,960,000, respectively. |
Income Tax Information |
At July 31, 2003, the fund had a capital loss carryforward of approximately $25,365,000 of which $1,973,000, $3,975,000, $11,910,000 and $7,507,000 will expire on July 31, 2004, 2005, 2008 and 2009, respectively. Of the loss carryforward expiring on July 31, 2005, $702,000 was acquired in the merger and is available to offset future capital gains of the fund to the extent provided by regulations. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Intermediate Government Income Fund
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | July 31, 2003 | |
Assets | ||
Investment in securities, at value (including securities loaned of $39,200 and repurchase agreements of $221,028) (cost $1,377,308) - See accompanying schedule | $ 1,370,386 | |
Receivable for investments sold | 140 | |
Receivable for fund shares sold | 792 | |
Interest receivable | 15,471 | |
Total assets | 1,386,789 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 54,984 | |
Payable for fund shares redeemed | 7,202 | |
Distributions payable | 339 | |
Unrealized loss on swap agreements | 243 | |
Accrued management fee | 484 | |
Other payables and accrued expenses | 233 | |
Collateral on securities loaned, at value | 39,984 | |
Total liabilities | 103,469 | |
Net Assets | $ 1,283,320 | |
Net Assets consist of: | ||
Paid in capital | $ 1,315,826 | |
Undistributed net investment income | 795 | |
Accumulated undistributed net realized gain (loss) on investments | (26,136) | |
Net unrealized appreciation (depreciation) on investments | (7,165) | |
Net Assets, for 126,158 shares outstanding | $ 1,283,320 | |
Net Asset Value, offering price and redemption price per share ($1,283,320 ÷ 126,158 shares) | $ 10.17 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Intermediate Government Income Fund
Financial Statements - continued
Statement of Operations
Amounts in thousands | Year ended July 31, 2003 | |
Investment Income | ||
Interest | $ 51,020 | |
Security lending | 171 | |
Total income | 51,191 | |
Expenses | ||
Management fee | $ 5,839 | |
Transfer agent fees | 1,742 | |
Accounting and security lending fees | 316 | |
Non-interested trustees' compensation | 6 | |
Custodian fees and expenses | 74 | |
Registration fees | 82 | |
Audit | 65 | |
Legal | 5 | |
Miscellaneous | 4 | |
Total expenses before reductions | 8,133 | |
Expense reductions | (2) | 8,131 |
Net investment income (loss) | 43,060 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 50,895 | |
Swap agreements | 1,612 | |
Total net realized gain (loss) | 52,507 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (47,482) | |
Swap agreements | (345) | |
Total change in net unrealized appreciation (depreciation) | (47,827) | |
Net gain (loss) | 4,680 | |
Net increase (decrease) in net assets resulting from operations | $ 47,740 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 43,060 | $ 43,250 |
Net realized gain (loss) | 52,507 | 15,876 |
Change in net unrealized appreciation (depreciation) | (47,827) | 16,839 |
Net increase (decrease) in net assets resulting from operations | 47,740 | 75,965 |
Distributions to shareholders from net investment income | (42,381) | (44,407) |
Share transactions | 755,118 | 500,961 |
Reinvestment of distributions | 37,055 | 37,466 |
Cost of shares redeemed | (621,342) | (306,463) |
Net increase (decrease) in net assets resulting from share transactions | 170,831 | 231,964 |
Total increase (decrease) in net assets | 176,190 | 263,522 |
Net Assets | ||
Beginning of period | 1,107,130 | 843,608 |
End of period (including undistributed net investment income of $795 and undistributed net investment income of $187, respectively) | $ 1,283,320 | $ 1,107,130 |
Other Information Shares | ||
Sold | 73,202 | 50,415 |
Issued in reinvestment of distributions | 3,579 | 3,786 |
Redeemed | (60,120) | (31,051) |
Net increase (decrease) | 16,661 | 23,150 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.11 | $ 9.77 | $ 9.32 | $ 9.46 | $ 9.78 |
Income from Investment Operations | |||||
Net investment income | .329 | .457 D | .607 | .616 | .640 |
Net realized and unrealized gain (loss) | .056 | .353 D | .452 | (.151) | (.326) |
Total from investment operations | .385 | .810 | 1.059 | .465 | .314 |
Distributions from net investment income | (.325) | (.470) | (.609) | (.605) | (.634) |
Net asset value, | $ 10.17 | $ 10.11 | $ 9.77 | $ 9.32 | $ 9.46 |
Total Return A | 3.80% | 8.51% | 11.68% | 5.11% | 3.20% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .60% | .59% | .64% | .65% | .65% |
Expenses net of voluntary waivers, if any | .60% | .59% | .61% | .63% | .53% |
Expenses net of all reductions | .60% | .59% | .60% | .63% | .53% |
Net investment income | 3.18% | 4.63% D | 6.34% | 6.59% | 6.58% |
Supplemental Data | |||||
Net assets, end of period (in millions) | $ 1,283 | $ 1,107 | $ 844 | $ 728 | $ 874 |
Portfolio turnover rate | 229% | 145% | 114% | 66% | 117% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.
D Effective August 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2003
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Ginnie Mae Fund, Fidelity Government Income Fund and Fidelity Intermediate Government Income Fund (the funds) are funds of Fidelity Income Fund (the trust). 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. Each fund is authorized to issue an unlimited number of shares. 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. The following summarizes the significant accounting policies of the funds:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan) for Fidelity Ginnie Mae Fund, non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of each applicable fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year each fund intends to qualify as a regulated investment company by distributing all of their taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required. 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 and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, certain funds will treat a portion of the proceeds from shares redeemed as a distribution from realized gains for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount, financing transactions, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows for each fund:
Cost for | Unrealized | Unrealized | Net Unrealized | |
Ginnie Mae Fund | $ 6,968,425 | $ 63,368 | $ (86,259) | $ (22,891) |
Government Income Fund | 3,874,696 | 37,704 | (86,223) | (48,519) |
Intermediate Government Income Fund | 1,377,783 | 14,627 | (22,024) | (7,397) |
Undistributed | Undistributed | Capital Loss | |
Ginnie Mae Fund | $ 32,268 | $ 9,262 | $ - |
Government Income Fund | 50,202 | 12,142 | - |
Intermediate Government Income Fund | 3,185 | - | (25,365) |
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
July 31, 2003 | |||
Ordinary Income | Long-term | Total | |
Ginnie Mae Fund | $ 231,003 | $ - | $ 231,003 |
Government Income Fund | 152,613 | 9,502 | 162,115 |
Intermediate Government Income Fund | 42,381 | - | 42,381 |
July 31, 2002 | |
Ordinary Income | |
Ginnie Mae Fund | $ 215,729 |
Government Income Fund | 115,123 |
Intermediate Government Income Fund | 44,407 |
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the funds and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. Certain funds may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. Each 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. Each 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
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.
Restricted Securities. Certain funds 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 under the captions "Legend" and/or "Other Information" at the end of each applicable fund's Schedule of Investments.
Swap Agreements. Certain funds 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 net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact each applicable fund.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. 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 each applicable Schedule of Investments under the caption "Swap Agreements."
Financing Transactions. To earn additional income, certain funds may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of
Annual Report
2. Operating Policies - continued
Financing Transactions - continued
mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sales price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Joint Trading Account.
At the end of the period, Fidelity Government Income Fund had 20% or more of its total investments in repurchase agreements through a joint trading account. These repurchase agreements were with entities whose creditworthiness has been reviewed and found satisfactory by FMR. The investments in repurchase agreements through the joint trading account are summarized as follows:
Summary of Joint Trading
Dated July 31, 2003, due August 1, 2003 | 1.12% |
Number of dealers or banks | 11 |
Maximum amount with one dealer or bank | 25.3% |
Aggregate principal amount of agreements | $10,855,430 |
Aggregate maturity amount of agreements | $10,855,769 |
Aggregate market value of transferred assets | $11,082,190 |
Coupon rates of transferred assets | 0% to 11.5% |
Maturity dates of transferred assets | 8/1/03 to 10/1/42 |
4. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of each applicable fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
5. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the funds with investment management related services for which the funds pay a monthly management fee.
The management fee is the sum of an individual fund fee rate and a group fee rate. The individual fund fee rate is applied to each fund's average net assets. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, each fund's annual management fee rate expressed as a percentage of each fund's average net assets was as follows:
Individual | Group | Total | |
Ginnie Mae Fund | .30% | .13% | .43% |
Government Income Fund | .30% | .13% | .43% |
Intermediate Government Income Fund | .30% | .13% | .43% |
Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to the following annual rates expressed as a percentage of average net assets:
Ginnie Mae Fund | .11% |
Government Income Fund | .19% |
Intermediate Government Income Fund | .13% |
Accounting and Security Lending Fees. FSC maintains each fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
6. Security Lending.
Certain funds lend portfolio securities from time to time in order to earn additional income. Each applicable 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. Cash collateral
Annual Report
6. Security Lending - continued
is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on each applicable fund's Statement of Assets and Liabilities.
7. Expense Reductions.
Through arrangements with each applicable fund's custodian and transfer agent, credits realized as a result of uninvested cash balances were used to reduce each applicable fund's expenses. All of the applicable expense reductions are noted in the table below.
Custody expense | Transfer Agent | |
Ginnie Mae Fund | $ 7 | $ 6 |
Government Income Fund | 2 | 33 |
Intermediate Government Income Fund | 2 | - |
8. Other Information.
At the end of the period, Fidelity Freedom 2010 Fund was the owner of record of approximately 22% of the total outstanding shares of the Fidelity Government Income Fund. The Fidelity Freedom Funds® were the owners of record, in the aggregate, of approximately 47% of the total outstanding shares of Fidelity Government Income Fund.
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Ginnie Mae Fund, Fidelity Government Income Fund and Fidelity Intermediate Government Income Fund:
In our opinion, the accompanying statements of assets and liabilities, including the schedules 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 Ginnie Mae Fund, Fidelity Government Income Fund and Fidelity Intermediate Government Income Fund (funds of Fidelity Income Fund) at July 31, 2003 and the results of their operations, the changes in their net assets and the financial highlights for 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 Income 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 auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. Except for William O. McCoy, each of the Trustees oversees 279 funds advised by FMR or an affiliate. Mr. McCoy oversees 281 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. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members 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 funds' 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" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
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 Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Ginnie Mae (2001), Government Income (2001), and Intermediate Government Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* 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.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested 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 | |
J. Michael Cook (60) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (59) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (56) | |
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 Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). 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. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (69) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Trustees and Officers - continued
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. 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), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). 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. | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity Magellan Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Ginnie Mae, Government Income, and Intermediate Government Income. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
George Fischer (42) | |
Year of Election or Appointment: 2002 or 2003 Vice President of Government Income (2003) and Intermediate Government Income (2002). Mr. Fischer also is Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer managed a variety of Fidelity funds. | |
Thomas J. Silvia (42) | |
Year of Election or Appointment: 1997 Vice President of Ginnie Mae. Mr. Silvia also is Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Silvia managed a variety of funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Ginnie Mae, Government Income, and Intermediate Government Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (43) | |
Year of Election or Appointment: 2003 Assistant Secretary of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Ginnie Mae, Government Income, and Intermediate Government Income. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. 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 (1998-2003). | |
John H. Costello (56) | |
Year of Election or Appointment: 1986 or 1988 Assistant Treasurer of Ginnie Mae (1986), Government Income (1986), and Intermediate Government Income (1988). Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
Annual Report
Distributions
The Board of Trustees of the following funds 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.
Fund | Pay Date | Record Date | Capital Gains |
Fidelity Government Income Fund | 09/08/03 | 09/05/03 | $0.14 |
A percentage of the dividends distributed during the fiscal year for the following funds was derived from interest on U.S. Government securities which is generally exempt from state income tax:
Fidelity Government Income Fund | 38.73% |
Fidelity Intermediate Government Income Fund | 38.53% |
The funds will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
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.
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* 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
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Annual Report
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Annual Report
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Annual Report
Annual Report
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Target Timeline® 2003
Total Bond
Ultra-Short Bond
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Fidelity®
Ultra-Short Bond
Fund
Annual Report
July 31, 2003
(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. | |
Investment Changes | A summary of major shifts in the fund's investments. | |
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. | |
Auditors' Opinion | The auditors' opinion. | |
Trustees and Officers |
For a free copy of the fund's proxy voting guidelines visit www.fidelity.com/goto/proxyguidelines, call 1-800-544-8544, or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
This shareholder update and report on the performance of your fund is among the first to be produced under the new Sarbanes-Oxley Public Company Accounting and Investor Protection Act of 2002. This act requires that public companies certify, under penalty of law, the financial information they report to shareholders. It was adopted by Congress in reaction to several incidents of corporate malfeasance that brought the integrity of management of some publicly traded companies into question.
After the act was signed into law, the Securities and Exchange Commission interpreted it as applying to mutual funds as well as public companies. Thus, every mutual fund now is required to certify that the financial information provided in annual and semiannual reports to shareholders fully and fairly presents its financial position.
There is little doubt that the intent of Congress and regulators in this matter is a noble one - to improve the accuracy and accountability of financial reporting to investors by corporate America. We in no way condone any of the activities that brought about these requirements, and we welcome any and every reasonable proposal to strengthen investor protection and information disclosure.
That said, we are proud that mutual funds have always provided full and fair disclosure. Governed by the Investment Company Act of 1940 - and monitored and regulated by federal and state agencies, industry oversight associations, and independent directors - mutual funds are among the most transparent of all financial products. For example, the prices of mutual fund shares are established and published every business day, and the majority of members of the Board of Trustees that oversees our funds are not affiliated with the business of Fidelity. The disclosure standards of mutual funds actually have become models for governance and transparency across corporate America.
We are, of course, complying in full with the letter of this new requirement and hope that any future efforts by Congress to reassure investors about the honesty of corporate America will focus on practical and substantive solutions of genuine value to shareholders.
This sort of careful consideration was evident as Congress deliberated President Bush's tax cut package this spring, then enacted legislation that contains a variety of benefits for American families, investors and businesses. Although the final bill did not completely eliminate the tax that individual investors pay when they receive dividends from companies, it still will benefit American investors, and we applaud it in the spirit of compromise that marked the debate in Congress.
At Fidelity, we are committed to acting at all times in accordance with the highest standards of integrity and in the best interests of our fund shareholders. We are proud of the amount of information we provide to those who invest in our funds and pleased to continue that level of communication with you in these reports.
Best regards,
/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 fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. If Fidelity had not reimbursed certain fund expenses, the total returns and dividends would have been lower. 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. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Average annual total returns take Fidelity® Ultra-Short Bond Fund's cumulative total return and show you what would have happened if Fidelity Ultra-Short Bond Fund shares had performed at a constant rate each year. These numbers will be reported once the fund is a year old.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Ultra-Short Bond Fund on August 29, 2002, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers® 6 Month Swap Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Andrew Dudley, Portfolio Manager of Fidelity® Ultra-Short Bond Fund
Investment-grade debt performed well for most of the 12 months ending July 31, 2003, as the Lehman Brothers® Aggregate Bond Index returned 5.42%. Bonds prospered in an environment of low inflation, low interest rates and weak equity markets. The Federal Reserve Board lowered rates twice in the period, dropping the fed funds target rate to its lowest level in 45 years. At various times in the past year, investors sought the highest-quality bonds, driving Treasury prices up and yields down to 40-year lows. However, Treasury yields climbed to a 12-month high in the final six weeks of the period. For the year overall, the Lehman Brothers Treasury Index gained 4.54%. Corporate credit was the best-performing investment-grade segment, rising 10.71% according to the Lehman Brothers Credit Bond Index. Agencies were tempered by an accounting issue at a leading government-sponsored enterprise, which limited the Lehman Brothers U.S. Agency Index to a 4.29% advance. Mortgages were the weakest performers, hampered by heavy refinancing activity. The Lehman Brothers Mortgage-Backed Securities Index returned 2.56%.
Fidelity Ultra-Short Bond Fund gained 1.94% from its inception on August 29, 2002, through July 31, 2003, topping the Lehman Brothers 6 Month Swap Index, which rose 1.41%. Much of the fund's outperformance can be traced to its sizable position in asset-backed securities (ABS). In an environment of extremely low Treasury rates, investors increasingly sought out high-quality, higher-yielding alternatives such as ABS, which are backed by such cash-flowing assets as home equity, credit card and car loan payments and are structured in a way that enhances the safety of the securities. Our ability to evaluate underlying collateral and structured risks in ways that go beyond simple credit ratings provided us with an advantage in certain parts of the asset-backed market. Another key driver was the fund's modest stake in corporate bonds, which led all segments of the market. Our emphasis on higher-yielding middle-to-lower-quality investment-grade industrial, telecommunications and financial names paid off nicely, as several of these holdings rallied strongly off their lows amid a much-improved climate for riskier assets. By contrast, our stake in mortgage pass-through securities dampened results late in the period as the sudden sharp rise in interest rates hurt the prices of our premium bonds. Yield-curve positioning also detracted, albeit modestly.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2003 | As of January 31, 2003 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 26.3% | ![]() | AAA 19.7% | ||||
![]() | AA 9.8% | ![]() | AA 6.8% | ||||
![]() | A 18.9% | ![]() | A 17.7% | ||||
![]() | BBB 8.8% | ![]() | BBB 5.9% | ||||
![]() | BB and Below 0.8% | ![]() | BB and Below 0.3% | ||||
![]() | Not Rated 2.0% | ![]() | Not Rated 0.8% | ||||
![]() | 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. |
Average Years to Maturity as of July 31, 2003 | ||
6 months ago | ||
Years | 1.8 | 1.6 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2003 | ||
6 months ago | ||
Years | 0.7 | 0.4 |
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 July 31, 2003* | As of January 31, 2003** | ||||||
![]() | Corporate Bonds 11.3% | ![]() | Corporate Bonds 9.3% | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 13.3% | ![]() | CMOs and Other Mortgage Related Securities 9.7% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 2.6% | ** Foreign investments | 0.9% | ||||
* Futures and Swaps | 17.2% | ** Futures and Swaps | 14.1% |
Annual Report
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
Annual Report
Investments July 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 7.2% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 1.3% | ||||
Media - 1.3% | ||||
Clear Channel Communications, Inc. 7.25% 9/15/03 | $ 1,000,000 | $ 1,006,159 | ||
Continental Cablevision, Inc. 8.3% 5/15/06 | 450,000 | 506,511 | ||
Cox Communications, Inc. 7.5% 8/15/04 | 500,000 | 527,701 | ||
Time Warner, Inc. 7.75% 6/15/05 | 500,000 | 541,950 | ||
Walt Disney Co. 4.875% 7/2/04 | 300,000 | 308,533 | ||
2,890,854 | ||||
CONSUMER STAPLES - 0.6% | ||||
Food Products - 0.5% | ||||
Kraft Foods, Inc. 1.12% 10/27/03 (d) | 1,000,000 | 1,000,011 | ||
Tobacco - 0.1% | ||||
Philip Morris Companies, Inc. 7.5% 4/1/04 | 300,000 | 307,331 | ||
TOTAL CONSUMER STAPLES | 1,307,342 | |||
ENERGY - 0.1% | ||||
Oil & Gas - 0.1% | ||||
Canada Occidental Petroleum Ltd. yankee 7.125% 2/4/04 | 50,000 | 51,387 | ||
Pemex Project Funding Master Trust 2.61% 1/7/05 (a)(d) | 150,000 | 151,699 | ||
203,086 | ||||
FINANCIALS - 2.9% | ||||
Capital Markets - 0.1% | ||||
State Street Capital Trust II 1.79% 2/15/08 (d) | 300,000 | 300,083 | ||
Consumer Finance - 0.0% | ||||
John Deere Capital Corp. 1.6875% 9/17/04 (d) | 50,000 | 50,246 | ||
Diversified Financial Services - 1.1% | ||||
CIT Group, Inc. 2.78% 3/1/04 (d) | 250,000 | 251,883 | ||
Deutsche Telekom International Finance BV 8.25% 6/15/05 | 500,000 | 549,880 | ||
NiSource Finance Corp. 7.5% 11/15/03 | 600,000 | 608,608 | ||
Powergen US Funding LLC 4.5% 10/15/04 | 335,000 | 344,218 | ||
Sprint Capital Corp. 7.125% 1/30/06 | 500,000 | 539,920 | ||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 165,000 | 176,403 | ||
2,470,912 | ||||
Insurance - 0.1% | ||||
Travelers Property Casualty Corp. 1.3675% 2/5/04 (d)(g) | 300,000 | 300,027 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Real Estate - 1.2% | ||||
Arden Realty LP 8.875% 3/1/05 | $ 500,000 | $ 548,424 | ||
Duke Realty LP 6.875% 3/15/05 | 300,000 | 319,244 | ||
EOP Operating LP 7.375% 11/15/03 | 75,000 | 76,186 | ||
Mack-Cali Realty LP 7% 3/15/04 | 580,000 | 598,218 | ||
ProLogis 7% 10/1/03 | 600,000 | 605,684 | ||
Regency Centers LP 7.125% 7/15/05 | 400,000 | 433,686 | ||
2,581,442 | ||||
Thrifts & Mortgage Finance - 0.4% | ||||
Countrywide Home Loans, Inc.: | ||||
1.76% 6/2/06 (d) | 500,000 | 501,963 | ||
5.25% 6/15/04 | 250,000 | 258,259 | ||
760,222 | ||||
TOTAL FINANCIALS | 6,462,932 | |||
INDUSTRIALS - 0.8% | ||||
Aerospace & Defense - 0.1% | ||||
Raytheon Co. 5.7% 11/1/03 | 250,000 | 251,635 | ||
Air Freight & Logistics - 0.1% | ||||
FedEx Corp. 6.625% 2/12/04 | 200,000 | 205,274 | ||
Industrial Conglomerates - 0.4% | ||||
Tyco International Group SA yankee: | ||||
4.95% 8/1/03 | 100,000 | 100,000 | ||
6.375% 6/15/05 | 800,000 | 824,000 | ||
924,000 | ||||
Road & Rail - 0.2% | ||||
Union Pacific Corp. 6.34% 11/25/03 | 400,000 | 405,392 | ||
TOTAL INDUSTRIALS | 1,786,301 | |||
MATERIALS - 0.1% | ||||
Paper & Forest Products - 0.1% | ||||
Boise Cascade Corp.: | ||||
7.35% 10/11/04 | 270,000 | 279,837 | ||
7.9% 12/15/03 | 100,000 | 101,439 | ||
381,276 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - 1.0% | ||||
Diversified Telecommunication Services - 0.7% | ||||
British Telecommunications PLC 7.875% 12/15/05 | $ 500,000 | $ 559,583 | ||
Telefonica Europe BV 7.35% 9/15/05 | 500,000 | 551,353 | ||
TELUS Corp. yankee 7.5% 6/1/07 | 500,000 | 546,749 | ||
1,657,685 | ||||
Wireless Telecommunication Services - 0.3% | ||||
AT&T Wireless Services, Inc. 7.35% 3/1/06 | 500,000 | 554,988 | ||
TOTAL TELECOMMUNICATION SERVICES | 2,212,673 | |||
UTILITIES - 0.4% | ||||
Electric Utilities - 0.4% | ||||
Cleveland Electric Illuminating Co./Toledo Edison Co. 7.67% 7/1/04 | 400,000 | 420,178 | ||
Progress Energy, Inc. 6.55% 3/1/04 | 605,000 | 621,734 | ||
1,041,912 | ||||
TOTAL NONCONVERTIBLE BONDS (Cost $16,178,113) | 16,286,376 | |||
U.S. Government Agency Obligations - 0.2% | ||||
Freddie Mac 0% 10/27/03 (c) | 500,000 | 498,756 | ||
U.S. Government Agency - Mortgage Securities - 6.4% | ||||
Fannie Mae - 6.4% | ||||
6.5% 8/1/18 (b) | 2,745,000 | 2,883,108 | ||
6.5% 3/1/26 to 12/1/32 | 3,747,026 | 3,855,524 | ||
6.5% 8/1/33 (b) | 3,000,000 | 3,088,125 | ||
7% 8/1/17 | 2,361,424 | 2,510,999 | ||
7% 8/1/33 (b) | 2,000,000 | 2,098,750 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $14,573,169) | 14,436,506 | |||
Asset-Backed Securities - 22.3% | ||||
ACE Securities Corp.: | ||||
Series 2002-HE2 Class M1, 1.95% 8/25/32 (d) | 50,000 | 50,156 | ||
Series 2003-FM1 Class M2, 2.95% 11/25/32 (d) | 145,000 | 145,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
ACE Securities Corp.: - continued | ||||
Series 2003-TC1 Class A2, 1.4969% 7/25/33 (d) | $ 155,000 | $ 155,000 | ||
AmeriCredit Automobile Receivables Trust: | ||||
Series 1999-D Class A3, 7.02% 12/12/05 | 335,717 | 340,776 | ||
Series 2000-D Class A4, 1.3275% 9/12/07 (d) | 573,182 | 573,785 | ||
Series 2001-C Class A3, 1.2675% 4/12/06 (d) | 360,557 | 360,501 | ||
Series 2001-D Class A3, 1.4175% 9/12/06 (d) | 725,210 | 725,925 | ||
Series 2002-A Class A3, 1.3175% 10/12/06 (d) | 350,000 | 349,953 | ||
Series 2003-AM Class A4B, 1.1175% 11/6/09 (d) | 600,000 | 601,560 | ||
Series 2003-BX Class A4B, 1.4975% 1/6/10 (d) | 140,000 | 140,000 | ||
Ameriquest Mortgage Securities, Inc.: | ||||
Series 2002-AR1 Class A2, 1.42% 9/25/32 (d) | 343,859 | 343,786 | ||
Series 2003-1: | ||||
Class A2, 1.51% 2/25/33 (d) | 259,309 | 259,309 | ||
Class M1, 2% 2/25/33 (d) | 100,000 | 100,000 | ||
Series 2003-3 Class M1, 1.9% 3/25/33 (d) | 75,000 | 75,340 | ||
Series 2003-6: | ||||
Class AV3, 1.42% 8/25/33 (d) | 729,939 | 729,882 | ||
Class S, 5% 11/25/05 (f) | 7,000,000 | 424,922 | ||
Series 2003-AR1 Class M1, 2.2569% 1/25/33 (d) | 500,000 | 508,047 | ||
Amortizing Residential Collateral Trust: | ||||
Series 2002-BC6 Class M1, 1.85% 8/25/32 (d) | 100,000 | 98,762 | ||
Series 2002-BC7 Class M1, 1.9% 10/25/32 (d) | 100,000 | 99,034 | ||
AQ Finance NIMS Trust: | ||||
Series 2002-N5A Class NOTE, 1.53% 10/25/09 (a)(d) | 49,792 | 49,792 | ||
Series 2003-N6A Class NOTE, 1.4% 5/25/10 (a)(d) | 411,015 | 411,015 | ||
Asset Backed Securities Corp. Series 2002-HE2 | 500,000 | 490,240 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2003-HE2: | ||||
Class A2, 1.4869% 4/15/33 (d) | 312,914 | 312,376 | ||
Class M1, 2.0069% 4/15/33 (d) | 1,000,000 | 1,002,379 | ||
Series 2003-HE4 Class M2, 3.11% 4/15/33 (b)(d) | 285,000 | 285,000 | ||
Series 2003-HE5 Class A2A, 1.47% 8/15/33 (b)(d) | 500,000 | 500,000 | ||
Associates Automobile Receivables Trust Series 2000-1 Class B, 7.83% 8/15/07 | 285,000 | 299,317 | ||
Bank One Issuance Trust: | ||||
Series 2002-B2 Class B2, 1.4469% 5/15/08 (d) | 100,000 | 100,254 | ||
Series 2002-B3 Class B, 1.4669% 8/15/08 (d) | 500,000 | 501,660 | ||
Capital Auto Receivables Asset Trust Series 2003-1 Class B1B, 1.5769% 6/15/10 (a)(d) | 400,000 | 401,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Capital One Auto Finance Trust Series 2003-A | $ 425,000 | $ 424,867 | ||
Capital One Master Trust: | ||||
Series 2001-1 Class B, 1.6169% 12/15/10 (d) | 500,000 | 487,500 | ||
Series 2001-4 Class B, 1.4769% 4/16/07 (d) | 500,000 | 498,785 | ||
Series 2001-8A Class B, 1.6569% 8/17/09 (d) | 405,000 | 399,874 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2002-B1 Class B1, 1.7869% 7/15/08 (d) | 800,000 | 792,219 | ||
Series 2003-B1 Class B1, 2.2769% 2/17/09 (d) | 655,000 | 659,913 | ||
CDC Mortgage Capital Trust: | ||||
Series 2001-HE1 Class A, 1.44% 1/25/32 (d) | 412,934 | 411,890 | ||
Series 2002-HE3: | ||||
Class M1, 2.2% 3/25/33 (d) | 299,999 | 303,822 | ||
Class M2, 3.35% 3/25/33 (d) | 489,999 | 495,429 | ||
Series 2003-HE1 Class M2, 3.05% 8/25/33 (d) | 215,000 | 215,309 | ||
Series 2003-HE2 Class A, 1.45% 6/25/33 (d) | 703,765 | 704,223 | ||
Series 2003-HE3: | ||||
Class M1, 1.81% 11/25/33 (b)(d) | 105,000 | 105,000 | ||
Class M2, 2.86% 11/25/33 (b)(d) | 80,000 | 80,000 | ||
CDC Mortgage Capital, Inc. NIMS Trust Series 2002-HE2N Class NOTE, 10% 1/25/33 (a) | 61,289 | 61,289 | ||
Chase Credit Card Owner Trust: | ||||
Series 2001-6 Class B, 1.5869% 3/16/09 (d) | 200,000 | 201,476 | ||
Series 2002-6 Class B, 1.4569% 1/15/08 (d) | 150,000 | 150,367 | ||
CIT Home Equity Loan Trust Series 2003-1 Class AIO, 5% 3/1/04 (f) | 2,029,500 | 56,445 | ||
Countrywide Home Loans, Inc. Series 2002-6 Class AV1, 1.53% 5/25/33 (d) | 379,462 | 379,908 | ||
Fannie Mae guaranteed REMIC pass thru certificates Series 2002-T15 Class S1, 5.25% 4/25/05 (f) | 904,691 | 59,598 | ||
First Security Auto Owner Trust Series 2000-1 Class A4, 7.4% 10/17/05 | 243,832 | 247,417 | ||
First USA Credit Card Master Trust: | ||||
Series 1997-2 Class B, 1.4313% 1/17/07 (d) | 150,000 | 150,145 | ||
Series 2001-2 Class B, 1.46% 11/20/06 (d) | 100,000 | 100,109 | ||
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 270,000 | 276,844 | ||
Ford Credit Auto Owner Trust Series 2003-B Class B2, 1.5369% 10/15/07 (d) | 650,000 | 653,258 | ||
GE Business Loan Trust Series 2003-1 Class A, 1.5369% 4/15/31 (a)(d) | 343,513 | 343,513 | ||
GS Mortgage Securities Corp. Series 2003-FM1 | 750,000 | 751,291 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
GSAMP Trust Series 2002-NC1 Class A2, 1.42% 7/25/32 (d) | $ 666,314 | $ 665,969 | ||
Home Equity Asset Trust: | ||||
Class M1, Series 2003-3 1.96% 8/25/33 (d) | 330,000 | 328,565 | ||
Series 2002-3 Class A5, 1.54% 2/25/33 (d) | 83,130 | 83,754 | ||
Series 2002-4 Class A3, 1.58% 3/25/33 (d) | 741,720 | 744,152 | ||
Series 2002-5: | ||||
Class A3, 1.62% 5/25/33 (d) | 268,398 | 269,453 | ||
Class M1, 2.3% 5/25/33 (d) | 200,000 | 203,541 | ||
Series 2003-1: | ||||
Class A2, 1.57% 6/25/33 (d) | 471,082 | 472,210 | ||
Class M1, 2.1% 6/25/33 (d) | 300,000 | 300,685 | ||
Series 2003-2: | ||||
Class A2, 1.48% 8/25/33 (d) | 62,346 | 62,404 | ||
Class M1, 1.98% 8/25/33 (d) | 80,000 | 80,508 | ||
Series 2003-3 Class A2, 1.46% 8/25/33 (d) | 363,025 | 362,622 | ||
Series 2003-4: | ||||
Class M1, 1.9% 10/25/33 (d) | 170,000 | 170,000 | ||
Class M2, 3% 10/25/33 (d) | 200,000 | 200,000 | ||
Home Equity Asset Trust NIMS Trust Series 2002-4N Class A, 8% 5/27/33 (a) | 135,383 | 131,321 | ||
Household Credit Card Master Trust I Series 2002-1 Class B, 1.7569% 7/15/08 (d) | 300,000 | 299,344 | ||
Household Home Equity Loan Trust Series 2002-3 | 233,656 | 233,714 | ||
Household Mortgage Loan Trust: | ||||
Series 2003-HC1 Class A, 1.45% 2/20/33 (d) | 677,261 | 677,261 | ||
Series 2003-HC1, 1.75% 2/20/33 (d) | 357,981 | 357,981 | ||
Household Private Label Credit Card Master Note Trust I: | ||||
Series 2002-2 Class A, 1.2769% 1/18/11 (d) | 1,000,000 | 1,001,102 | ||
Series 2002-3 Class B, 2.3569% 9/15/09 (d) | 50,000 | 50,080 | ||
Ikon Receivables Funding LLC Series 2003-1 Class A3A, 1.3469% 12/17/07 (d) | 500,000 | 500,000 | ||
Indymac Mortgage pass thru trust Series 1998-A | 906,408 | 908,510 | ||
Keycorp Student Loan Trust Series 1999-A Class A2, 1.33% 12/27/09 (d) | 440,136 | 438,549 | ||
Long Beach Asset Holdings Corp. NIMS Trust | 165,801 | 165,801 | ||
Long Beach Mortgage Loan Trust: | ||||
Series 2001-4 Class 2M1, 2.05% 3/25/32 (d) | 765,000 | 770,626 | ||
Series 2003-1: | ||||
Class A2, 1.5% 3/25/33 (d) | 277,714 | 278,310 | ||
Class M1, 2.02% 3/25/33 (d) | 300,000 | 300,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Long Beach Mortgage Loan Trust: - continued | ||||
Series 2003-2 Class M1, 1.92% 6/25/33 (d) | $ 500,000 | $ 499,688 | ||
Series 2003-3: | ||||
Class A, 1.42% 7/25/33 (d) | 892,748 | 893,299 | ||
Class M1, 1.85% 7/25/33 (d) | 340,000 | 339,681 | ||
MASTR ABS NIMS Trust: | ||||
Series 2002-OPT1 Class NOTE, 1.65% 11/26/07 (a)(d) | 107,771 | 107,867 | ||
Series 2003-OPT1 Class NOTE, 1.48% 2/26/08 (a)(d) | 325,436 | 325,436 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2001-B1 Class B1, 1.4819% 10/15/08 (d) | 1,250,000 | 1,251,584 | ||
Series 2001-B2 Class B2, 1.4669% 1/15/09 (d) | 1,000,000 | 1,003,344 | ||
Series 2002-B2 Class B2, 1.4869% 10/15/09 (d) | 1,034,000 | 1,035,171 | ||
Series 2002-B4 Class B4, 1.6069% 3/15/10 (d) | 200,000 | 201,746 | ||
MBNA Master Credit Card Trust II: | ||||
Series 1996-J Class B, 1.4669% 2/15/06 (d) | 200,000 | 200,060 | ||
Series 1997-J Class B, 1.4069% 2/15/07 (d) | 500,000 | 500,459 | ||
Series 1998-E Class B, 1.4356% 9/15/10 (d) | 200,000 | 200,566 | ||
Series 1998-G Class B, 1.5069% 2/17/09 (d) | 500,000 | 500,940 | ||
Series 1999-C Class B, 1.67% 5/17/04 (a)(d) | 1,000,000 | 999,210 | ||
Merrill Lynch Mortgage Investments, Inc.: | ||||
Series 2002-HE1N Class N1, 1.7% 11/25/09 (a)(d) | 178,771 | 179,273 | ||
Series 2003-A Class 2A1, 1.49% 3/25/28 (d) | 537,040 | 536,818 | ||
Series 2003-B Class A1, 1.44% 4/25/28 (d) | 489,716 | 490,022 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 126,419 | 126,470 | ||
Series 2003-HE1 Class M2, 3% 6/27/33 (d) | 225,000 | 225,483 | ||
Series 2003-NC6 Class M2, 3.05% 6/25/33 (d) | 630,000 | 630,000 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-AM1: | ||||
Class M1, 1.95% 2/25/32 (d) | 800,000 | 804,031 | ||
Class M2, 2.5% 2/25/32 (d) | 500,000 | 498,521 | ||
Series 2001-NC4 Class M1, 2.1% 1/25/32 (d) | 140,000 | 141,350 | ||
Series 2002-AM3: | ||||
Class A3, 1.59% 2/25/33 (d) | 253,351 | 254,218 | ||
Class M1, 2.05% 2/25/33 (d) | 150,000 | 151,137 | ||
Series 2002-NC5N Class NOTE, 9.5% 9/25/32 (a) | 123,309 | 123,309 | ||
New Century Home Equity Loan Trust: | ||||
Series 2000-NC1 Class M3, 3.2% 4/25/30 (d) | 460,000 | 440,450 | ||
Series 2003-2: | ||||
Class A2, 1.53% 1/25/33 (d) | 303,681 | 304,501 | ||
Class AIO, 5.5% 3/25/05 (f) | 13,302,840 | 921,844 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
NovaStar CAPS Trust Series 2002-C1 Class A, 7.15% 9/25/31 (a) | $ 44,264 | $ 44,264 | ||
Providian Gateway Master Trust Series 2002-B Class A, 1.8069% 6/15/09 (a)(d) | 400,000 | 403,520 | ||
Residential Finance LP/Residential Finance Development Corp.: | ||||
Series 2002-A: | ||||
Class B4, 2.9106% 10/10/34 (a)(d) | 99,376 | 99,378 | ||
Class B5, 3.4606% 10/10/34 (a)(d) | 99,376 | 99,376 | ||
Class B6, 3.9606% 10/10/34 (a)(d) | 99,376 | 99,376 | ||
Series 2003-A: | ||||
Class B4, 2.9106% 3/10/35 (a)(d) | 99,536 | 99,536 | ||
Class B5, 3.4606% 3/10/35 (a)(d) | 99,536 | 99,536 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-HE1 Class A, 1.5% 4/25/33 (d) | 205,180 | 205,180 | ||
Sears Credit Account Master Trust II: | ||||
Series 1995-5 Class A, 6.05% 1/15/08 | 437,500 | 443,435 | ||
Series 1998-2 Class A, 5.25% 10/16/08 | 312,500 | 320,186 | ||
Series 2000-1 Class A, 7.25% 11/15/07 | 166,667 | 168,098 | ||
Series 2001-2 Class B, 1.3969% 6/16/08 (d) | 300,000 | 299,391 | ||
Series 2002-4: | ||||
Class A, 1.2369% 8/18/09 (d) | 800,000 | 799,194 | ||
Class B, 1.5319% 8/18/09 (d) | 1,080,000 | 1,077,842 | ||
Series 2002-5 Class B, 2.3569% 11/17/09 (d) | 500,000 | 501,141 | ||
Structured Asset Securities Corp.: | ||||
Series 2000-BC3 Class M1, 1.7% 9/25/30 (d) | 1,000,000 | 1,000,623 | ||
Series 2002-BC7 Class M2, 2% 10/25/32 (d) | 300,000 | 298,530 | ||
Triad Auto Receivables Owner Trust Series 2002-A | 500,000 | 502,730 | ||
WFS Financial Owner Trust Series 1999-A Class CTFS, 5.95% 5/20/06 | 147,154 | 147,909 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $49,984,815) | 50,097,447 | |||
Collateralized Mortgage Obligations - 7.6% | ||||
Private Sponsor - 0.8% | ||||
Countrywide Home Loans sequential pay Series 2002-5 Class 2A1, 6% 4/25/17 | 645,441 | 654,144 | ||
GSR Mortgage Loan Trust sequential pay Series 2002-6F Class 1A9, 6% 7/25/32 | 55,293 | 55,243 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
Private Sponsor - continued | ||||
Norwest Asset Securities Corp.: | ||||
sequential pay Series 1998-33 Class A6, 6.25% 1/25/29 | $ 315,494 | $ 316,930 | ||
Series 1998-27 Class A1, 6.25% 11/25/13 | 63,817 | 64,112 | ||
Series 1999-4 Class A5, 6.5% 3/26/29 | 118,428 | 119,335 | ||
Residential Accredit Loans, Inc. floater Series 1998-QS9 Class A8, 1.9% 7/25/28 (d) | 48,340 | 48,335 | ||
Residential Asset Mortgage Products, Inc. Series 2003-RP1 Class A, 1.6% 4/25/34 (d) | 536,982 | 536,982 | ||
Residential Funding Mortgage Securities I, Inc. floater Series 2002-S15 Class A3, 1.7% 9/25/32 (d) | 64,805 | 64,914 | ||
TOTAL PRIVATE SPONSOR | 1,859,995 | |||
U.S. Government Agency - 6.8% | ||||
Fannie Mae: | ||||
floater Series 2002-89 Class F, 1.4% 1/25/33 (d) | 596,978 | 597,279 | ||
planned amortization class: | ||||
Series 1993-168 Class PK, 6.75% 8/25/22 | 500,000 | 508,551 | ||
Series 1994-81 Class PJ, 8% 7/25/23 | 435,000 | 455,516 | ||
sequential pay Series 1997-M2 Class C, 7.4161% 10/17/16 (d) | 268,415 | 273,164 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
floater: | ||||
Series 2002-11 Class QF, 1.6% 3/25/32 (d) | 643,152 | 645,379 | ||
Series 2002-36 Class FT, 1.6% 6/25/32 (d) | 527,863 | 523,206 | ||
Series 2002-64 Class FE, 1.4513% 10/18/32 (d) | 325,804 | 321,987 | ||
Series 2002-74 Class FV, 1.55% 11/25/32 (d) | 341,925 | 342,817 | ||
Series 2003-11: | ||||
Class DF, 1.55% 2/25/33 (d) | 690,123 | 690,554 | ||
Class EF, 1.55% 2/25/33 (d) | 678,555 | 678,979 | ||
Series 2003-19: | ||||
Class FD, 2.45% 3/25/33 (d) | 1,648 | 1,648 | ||
Class FX, 2.45% 3/25/33 (d) | 20,389 | 20,393 | ||
planned amortization class: | ||||
Series 2001-51 Class QY, 5.25% 3/25/11 | 57,150 | 57,079 | ||
Series 2001-62 Class PG, 6.5% 10/25/30 | 500,000 | 511,114 | ||
Series 2001-81 Class QD, 6.5% 7/25/27 | 1,500,000 | 1,515,045 | ||
Series 2002-52 Class PA, 6% 4/25/31 | 126,211 | 129,658 | ||
sequential pay Series 2001-46: | ||||
Class A, 6.5% 2/25/29 | 9,269 | 9,348 | ||
Class AB, 6.5% 4/25/28 | 10,875 | 10,878 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | ||||
Series 2002-33 Class AT, 6% 7/25/29 | $ 77,980 | $ 78,909 | ||
Series 2002-38 Class QB, 5.75% 7/25/13 | 622,238 | 629,434 | ||
Series 2002-50 Class LE, 7% 12/25/29 | 226,456 | 234,381 | ||
Series 2003-44 Class AS, 5.8667% 6/25/33 (d) | 277,988 | 278,666 | ||
Freddie Mac Series 2088 Class PD, 4.875% 7/15/26 | 131,599 | 132,681 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed sequential pay: | ||||
Series 2053 Class VB, 6.5% 5/15/12 | 266,967 | 267,808 | ||
Series 2333 Class UE, 6.5% 4/15/28 | 4,172 | 4,182 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
floater: | ||||
Series 2526 Class FC, 1.5069% 11/15/32 (d) | 174,329 | 173,109 | ||
Series 2538 Class FB, 1.5069% 12/15/32 (d) | 633,025 | 626,453 | ||
Series 2551 Class FH, 1.5569% 1/15/33 (d) | 445,519 | 445,519 | ||
planned amortization class: | ||||
Series 1732 Class H, 6.5% 11/15/22 | 792,998 | 808,850 | ||
Series 2357 Class QX, 5.75% 11/15/24 | 16,921 | 16,907 | ||
Series 2363 Class BH, 6.5% 7/15/27 | 17,987 | 18,021 | ||
Series 2398 Class DK, 6.5% 1/15/31 | 1,000,000 | 1,031,327 | ||
Series 2399 Class OD, 6.5% 11/15/26 | 127,061 | 127,973 | ||
Series 2421 Class PC, 6.5% 6/15/26 | 300,000 | 304,705 | ||
Series 2424 Class QD, 6.5% 10/15/25 | 200,000 | 202,729 | ||
sequential pay: | ||||
Series 2303 Class VT, 6% 2/15/12 | 298,823 | 308,330 | ||
Series 2447 Class LG, 5.5% 12/15/13 | 179,983 | 183,025 | ||
Series 2464 Class AE, 6.5% 8/15/28 | 47,223 | 47,494 | ||
Series 2489 Class MA, 5% 12/15/12 | 625,209 | 631,306 | ||
Series 1803 Class A, 6% 12/15/08 | 776,725 | 800,608 | ||
Series H004 Class A1, 1.698% 12/15/07 (d) | 183,261 | 182,948 | ||
Ginnie Mae guaranteed REMIC pass thru securities floater Series 2001-21 Class FB, 1.5031% 1/16/27 (d) | 344,578 | 345,250 | ||
TOTAL U.S. GOVERNMENT AGENCY | 15,173,210 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $17,140,049) | 17,033,205 | |||
Commercial Mortgage Securities - 6.6% | ||||
Principal | Value | |||
Banc America Large Loan, Inc. floater Series 2002-FL2A Class A2, 1.4375% 9/8/14 (a)(d) | $ 200,000 | $ 200,000 | ||
Bayview Commercial Asset Trust floater Series 2003-1 Class A, 1.68% 8/25/33 (a)(d) | 511,013 | 511,013 | ||
Bear Stearns Commercial Mortgage Securities, Inc. floater: | ||||
Series 2003-BA1A Class A1, 1.39% 4/14/15 (a)(d) | 700,000 | 700,000 | ||
Series 2003-WEST Class A1, 1.72% 1/3/15 (a)(d) | 391,308 | 391,308 | ||
Calwest Industrial Trust floater Series 2002-CALW Class AFL, 1.4869% 2/15/12 (a)(d) | 800,000 | 801,138 | ||
COMM floater: | ||||
Series 2000-FL3A Class C, 1.8669% 11/15/12 (a)(d) | 400,000 | 390,000 | ||
Series 2001-FL5A: | ||||
Class A2, 1.6569% 11/15/13 (a)(d) | 127,689 | 127,760 | ||
Class B, 2.0069% 11/15/13 (a)(d) | 700,000 | 702,196 | ||
Series 2002-FL6: | ||||
Class K4M, 3.1069% 6/14/14 (a)(d) | 100,000 | 99,592 | ||
Class L4M, 3.4069% 6/14/14 (a)(d) | 100,000 | 99,857 | ||
Class M4M, 3.8569% 6/14/14 (a)(d) | 100,000 | 100,016 | ||
Series 2002-FL7: | ||||
Class A2, 1.4569% 11/15/14 (a)(d) | 185,000 | 184,943 | ||
Class H, 3.3569% 11/15/14 (a)(d) | 150,000 | 148,031 | ||
CS First Boston Mortgage Securities Corp. floater Series 2001-TFLA: | ||||
Class A2, 1.7069% 12/15/11 (a)(d) | 483,763 | 483,379 | ||
Class B, 2.0069% 12/15/11 (a)(d) | 345,000 | 344,263 | ||
GGP Mall Properties Trust floater Series 2001-C1A Class A1, 1.7069% 11/15/11 (a)(d) | 375,490 | 375,300 | ||
GMAC Commercial Mortgage Securities, Inc. Series 2001-WTCA Class A2, 1.4806% 9/9/15 (d) | 500,000 | 489,375 | ||
Greenwich Capital Commercial Funding Corp. Series 2003-FL1 Class MCH, 4.3675% 7/5/18 (a)(d) | 155,250 | 155,201 | ||
GS Mortgage Securities Corp. II Series 2000-GSFL Class A, 1.3869% 8/15/12 (a)(d) | 787,846 | 786,693 | ||
GS Mortgage Trust II floater Series 2001-FL4A: | ||||
Class A, 1.3669% 12/15/10 (a)(d) | 582,415 | 581,988 | ||
Class B, 1.4669% 12/15/10 (a)(d) | 360,538 | 359,862 | ||
KSL Resorts Series 2003-1A: | ||||
Class A, 1.6569% 5/15/13 (a)(d) | 200,000 | 200,000 | ||
Class B, 1.8069% 5/15/13 (a)(d) | 200,000 | 200,000 | ||
Class K, 3.7569% 5/15/13 (a)(d) | 200,000 | 200,000 | ||
Class L, 3.9569% 5/15/13 (a)(d) | 200,000 | 200,000 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Lehman Brothers Floating Rate Commercial Mortgage Trust: | ||||
floater: | ||||
Series 2001-LLFA Class A, 1.41% 8/16/13 (a)(d) | $ 850,561 | $ 850,531 | ||
Series 2003-LLFA Class C, 1.81% 12/16/14 (a)(d) | 110,000 | 110,000 | ||
Series 2001-LLFA Class C, 1.46% 8/16/13 (a)(d) | 300,000 | 299,985 | ||
Series 2003-C4A Class H, 4.3513% 7/11/15 (a)(d) | 1,000,000 | 1,000,000 | ||
Series 2003-LLFA Class A2, 1.5% 12/16/14 (a)(d) | 490,000 | 490,000 | ||
Morgan Stanley Dean Witter Capital I Trust floater Series 2001-XLF Class A2, 1.6675% 10/7/13 (a)(d) | 890,335 | 890,560 | ||
Salomon Brothers Mortgage Securities VII, Inc. floater: | ||||
Series 2001-CDCA: | ||||
Class EGM, 2.8069% 2/15/13 (a)(d) | 150,000 | 149,995 | ||
Class GGM, 3.3569% 2/15/13 (a)(d) | 150,000 | 149,985 | ||
Series 2003-CDCA: | ||||
Class HBST, 2.7% 2/15/15 (a)(d) | 80,000 | 80,000 | ||
Class HEXB, 3% 2/15/15 (a)(d) | 30,000 | 30,000 | ||
Class HFAM, 2.8% 2/15/15 (a)(d) | 20,000 | 20,000 | ||
Class JBST, 2.9069% 2/15/15 (a)(d) | 60,000 | 60,000 | ||
Class JEXB, 3.2% 2/15/15 (a)(d) | 50,000 | 50,000 | ||
Class JFAM, 3% 2/15/15 (a)(d) | 40,000 | 40,000 | ||
Class KBST, 3.25% 2/15/15 (a)(d) | 35,000 | 35,000 | ||
Class KEXB, 3.6% 2/15/15 (a)(d) | 40,000 | 40,000 | ||
Class KFAM, 3.35% 2/15/15 (a)(d) | 40,000 | 40,000 | ||
Class LFAM, 3.9% 2/15/15 (a)(d) | 60,000 | 60,000 | ||
San Francisco Center Grantor Trust Series 1997-1A: | ||||
Class A1, 1.55% 7/1/05 (a)(d) | 480,000 | 479,325 | ||
Class A2, 1.65% 7/1/05 (a)(d) | 110,000 | 109,123 | ||
SDG Macerich Properties LP floater Series 2000-1 Class A3, 1.4469% 5/15/09 (a)(d) | 500,000 | 499,609 | ||
Tl Columbus Asscs LLC/Richmnd floater Series 1999-C1A Class A, 1.5069% 8/15/09 (a)(d) | 500,000 | 499,531 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $14,817,612) | 14,815,559 |
Fixed-Income Funds - 48.5% | |||
Shares | Value | ||
Fidelity Ultra-Short Central Fund (e) | 1,099,359 | 109,265,331 | |
Cash Equivalents - 5.4% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.12%, dated 7/31/03 due 8/1/03) | $ 12,152,380 | $ 12,152,000 | |
TOTAL INVESTMENT PORTFOLIO - 104.2% (Cost $234,443,637) | 234,585,180 | ||
NET OTHER ASSETS - (4.2)% | (9,382,309) | ||
NET ASSETS - 100% | $ 225,202,871 |
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
35 Eurodollar 90 Day Index Contracts | June 2004 | $ 34,855,598 | $ (21,848) | ||
26 Eurodollar 90 Day Index Contracts | Sept. 2004 | 25,890,956 | (40,781) | ||
37 Eurodollar 90 Day Index Contracts | Sept. 2003 | 36,850,460 | 42,703 | ||
37 Eurodollar 90 Day Index Contracts | Dec. 2003 | 36,833,822 | 47,316 | ||
37 Eurodollar 90 Day Index Contracts | March 2004 | 36,815,800 | 41,750 | ||
TOTAL EURODOLLAR CONTRACTS | 171,246,636 | 69,140 | |||
Sold | |||||
Eurodollar Contracts | |||||
3 Eurodollar 90 Day Index Contracts | Dec. 2004 | $ 2,979,082 | $ (218) | ||
3 Eurodollar 90 Day Index Contracts | March 2005 | 2,976,970 | 969 | ||
2 Eurodollar 90 Day Index Contracts | June 2005 | 1,983,513 | 1,713 | ||
1 Eurodollar 90 Day Index Contracts | Sept. 2005 | 991,681 | 1,694 | ||
TOTAL EURODOLLAR CONTRACTS | 8,931,246 | 4,158 | |||
$ 180,177,882 | $ 73,298 | ||||
Swap Agreements | |||||
Notional | Unrealized | ||||
Credit Default Swap | |||||
Receive quarterly notional amount multiplied by 1.12% and pay Morgan Stanley, Inc. upon default of Comcast Cable Communications, Inc., par value of the notional amount of Comcast Cable Communications, Inc. 6.75% 1/30/11 | June 2006 | $ 400,000 | $ 3,195 |
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $18,848,165 or 8.4% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $498,756. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Restricted securities - Investment in securities not registered under the Securities Act of 1933. |
Additional information on each holding is as follows: |
Security | Acquisition | Acquisition |
Travelers Property Casualty Corp. 1.3675% 2/5/04 | 1/31/03 | $ 299,551 |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $255,721,906 and $39,526,821, respectively, of which long-term U.S. government and government agency obligations aggregated $55,140,078 and $26,271,772, respectively. |
The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $300,027 or 0.1% of net assets. |
Income Tax Information |
The fund hereby designates approximately $55,806 as capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $12,152,000) (cost $234,443,637) - See accompanying schedule | $ 234,585,180 | |
Cash | 924 | |
Receivable for investments sold | 503,327 | |
Receivable for fund shares sold | 866,692 | |
Interest receivable | 636,235 | |
Redemption fees receivable | 195 | |
Unrealized gain on swap agreements | 3,195 | |
Receivable from investment adviser for expense reductions | 18,440 | |
Total assets | 236,614,188 | |
Liabilities | ||
Payable for investments purchased | $ 908,975 | |
Delayed delivery | 9,123,846 | |
Payable for fund shares redeemed | 1,150,246 | |
Distributions payable | 22,156 | |
Accrued management fee | 82,904 | |
Payable for daily variation on futures contracts | 65,700 | |
Other payables and accrued expenses | 57,490 | |
Total liabilities | 11,411,317 | |
Net Assets | $ 225,202,871 | |
Net Assets consist of: | ||
Paid in capital | $ 225,127,475 | |
Distributions in excess of net investment income | (69,342) | |
Accumulated undistributed net realized gain (loss) on investments | (73,298) | |
Net unrealized appreciation (depreciation) on investments | 218,036 | |
Net Assets, for 22,469,212 shares outstanding | $ 225,202,871 | |
Net Asset Value, offering price and redemption price per share ($225,202,871 ÷ 22,469,212 shares) | $ 10.02 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
August 29, 2002 (commencement of operations) to July 31, 2003 | ||
Investment Income | ||
Interest | $ 2,333,923 | |
Expenses | ||
Management fee | $ 491,638 | |
Transfer agent fees | 146,085 | |
Accounting fees and expenses | 56,790 | |
Non-interested trustees' compensation | 387 | |
Custodian fees and expenses | 4,705 | |
Registration fees | 56,794 | |
Audit | 43,114 | |
Legal | 105 | |
Miscellaneous | 17 | |
Total expenses before reductions | 799,635 | |
Expense reductions | (174,218) | 625,417 |
Net investment income (loss) | 1,708,506 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 42,218 | |
Futures contracts | 19,713 | |
Total net realized gain (loss) | 61,931 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 141,543 | |
Futures contracts | 73,298 | |
Swap agreements | 3,195 | |
Total change in net unrealized appreciation (depreciation) | 218,036 | |
Net gain (loss) | 279,967 | |
Net increase (decrease) in net assets resulting from operations | $ 1,988,473 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
August 29, 2002 | |
Increase (Decrease) in Net Assets | |
Operations | |
Net investment income (loss) | $ 1,708,506 |
Net realized gain (loss) | 61,931 |
Change in net unrealized appreciation (depreciation) | 218,036 |
Net increase (decrease) in net assets resulting from operations | 1,988,473 |
Distributions to shareholders from net investment income | (1,913,077) |
Share transactions | 330,589,127 |
Reinvestment of distributions | 1,643,470 |
Cost of shares redeemed | (107,155,542) |
Net increase (decrease) in net assets resulting from share transactions | 225,077,055 |
Redemption fees | 50,420 |
Total increase (decrease) in net assets | 225,202,871 |
Net Assets | |
Beginning of period | - |
End of period (including distributions in excess of net investment income of $69,342) | $ 225,202,871 |
Other Information Shares | |
Sold | 32,991,854 |
Issued in reinvestment of distributions | 163,959 |
Redeemed | (10,686,601) |
Net increase (decrease) | 22,469,212 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Period ended July 31, | 2003 E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.00 |
Income from Investment Operations | |
Net investment income (loss) D | .137 |
Net realized and unrealized gain (loss) | .052 |
Total from investment operations | .189 |
Distributions from net investment income | (.173) |
Redemption fees added to paid in capital | .004 |
Net asset value, end of period | $ 10.02 |
Total Return B, C | 1.94% |
Ratios to Average Net Assets F | |
Expenses before expense reductions | .70% A |
Expenses net of voluntary waivers, if any | .55% A |
Expenses net of all reductions | .55% A |
Net investment income (loss) | 1.50% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 225,203 |
Portfolio turnover rate | 39% A |
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 For the period August 29, 2002 (commencement of operations) to July 31, 2003.
F Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the fund 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 any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2003
1. Significant Accounting Policies.
Fidelity Ultra-Short 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 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. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result,
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
no provision for income taxes is required. 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 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 and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, financing transactions and market discount.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 471,891 | | |
Unrealized depreciation | (322,943) | |
Net unrealized appreciation (depreciation) | 148,948 | |
Undistributed ordinary income | 113,232 | |
Cost for federal income tax purposes | $ 234,436,232 |
The tax character of distributions paid was as follows:
July 31, 2003 | |
Ordinary Income | $ 1,857,271 |
Long-Term Capital Gains | 55,806 |
Total | $ 1,913,077 |
Short-Term Trading (Redemption) Fees. Shares purchased and held in the fund less than 60 days are subject to a short-term trading fee equal to .25% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (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. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized
Annual Report
2. Operating Policies - continued
Annual Report
Repurchase Agreements - continued
by commercial paper obligations and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
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, or if the issuer does not issue the securities due to political, economic, or other factors.
Futures Contracts. The fund may use futures contracts to manage its exposure to the bond market. Buying futures tends to increase the fund's exposure to the underlying instrument, while selling futures tends to decrease the fund's exposure to the underlying instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption Futures Contracts. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counter-parties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.
Notes to Financial Statements - continued
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 under the captions "Legend" and/or "Other Information" at the end of the fund's Schedule of Investments.
Annual Report
2. Operating Policies - continued
Annual Report
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
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 the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. 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."
Notes to Financial Statements - continued
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sales price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
Annual Report
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. 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 .30% of the fund's average net assets and a group fee rate that averaged .13% 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 annualized management fee rate was .43% of the fund's average net assets.
Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .13% of average net assets.
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $974,409 for the period.
5. Expense Reductions.
FMR agreed to reimburse the fund to the extent operating expenses exceeded .55% of average net assets. Some expenses, for example interest expense, are excluded from this reimbursement. During the period, this reimbursement reduced the fund's expenses by $173,913.
In addition, through arrangements with the fund's custodian, 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 custody expenses by $305.
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Ultra-Short 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 Ultra-Short Bond Fund (a fund of Fidelity Income Fund) at July 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the period 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 Ultra-Short Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at July 31, 2003 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members 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 William O. McCoy, each of the Trustees oversees 279 funds advised by FMR or an affiliate. Mr. McCoy oversees 281 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. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members 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" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
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 Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Ultra-Short Bond (2002). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). |
* 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.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested 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 | |
J. Michael Cook (60) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (59) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (56) | |
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 Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). 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. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (69) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Trustees and Officers - continued
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. 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), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). 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. | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 2002 Vice President of Ultra-Short Bond. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Ultra-Short Bond. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Andrew Dudley (38) | |
Year of Election or Appointment: 2002 Vice President of Ultra-Short Bond and other funds advised by FMR. Prior to joining Fidelity in 1996 as a portfolio manager, Mr. Dudley served as a quantitative analyst and portfolio manager for Putnam Investments. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 2002 Secretary of Ultra-Short Bond. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (43) | |
Year of Election or Appointment: 2003 Assistant Secretary of Ultra-Short Bond. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Ultra-Short Bond. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Ultra-Short Bond. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Ultra-Short Bond. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Ultra-Short Bond. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. 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 (1998-2003). | |
John H. Costello (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ultra-Short Bond. Mr. Costello also serves as Assistant Treasurer of Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ultra-Short Bond. Mr. Knox also serves as Assistant Treasurer of Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ultra-Short Bond. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ultra-Short Bond. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). |
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
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
By PC
Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.
(computer_graphic)Fidelity's Web Site
www.fidelity.com
* 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 Visit Fidelity
For directions and hours,
please call 1-800-544-9797.
Arizona
7001 West Ray Road
Chandler, AZ
7373 N. Scottsdale Road
Scottsdale, AZ
California
815 East Birch Street
Brea, CA
1411 Chapin Avenue
Burlingame, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
601 Larkspur Landing Circle
Larkspur, CA
10100 Santa Monica Blvd.
Los Angeles, CA
27101 Puerta Real
Mission Viejo, CA
73-575 El Paseo
Palm Desert, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
8 Montgomery Street
San Francisco, CA
21701 Hawthorne Boulevard
Torrance, CA
2001 North Main Street
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
Colorado
1625 Broadway
Denver, CO
9185 East Westview Road
Littleton, CO
Connecticut
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
Delaware
222 Delaware Avenue
Wilmington, DE
Florida
4400 N. Federal Highway
Boca Raton, FL
121 Alhambra Plaza
Coral Gables, FL
2948 N. Federal Highway
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
3501 PGA Boulevard
West Palm Beach, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
Georgia
3445 Peachtree Road, N.E.
Atlanta, GA
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
1000 Abernathy Road
Atlanta, GA
Illinois
One North LaSalle Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
Indiana
4729 East 82nd Street
Indianapolis, IN
Kansas
5400 College Boulevard
Overland Park, KS
Maine
Three Canal Plaza
Portland, ME
Maryland
7401 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
Massachusetts
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
405 Cochituate Road
Framingham, MA
416 Belmont Street
Worcester, MA
Annual Report
Michigan
280 Old N. Woodward Ave.
Birmingham, MI
43420 Grand River Avenue
Novi, MI
29155 Northwestern Hwy.
Southfield, MI
Minnesota
7600 France Avenue South
Edina, MN
Missouri
8885 Ladue Road
Ladue, MO
New Jersey
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
3518 Route 1 North
Princeton, NJ
New York
1055 Franklin Avenue
Garden City, NY
37 West Jericho Turnpike
Huntington Station, NY
1271 Avenue of the Americas
New York, NY
61 Broadway
New York, NY
350 Park Avenue
New York, NY
North Carolina
4611 Sharon Road
Charlotte, NC
Ohio
3805 Edwards Road
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
Oregon
16850 SW 72nd Avenue
Tigard, OR
Pennsylvania
600 West DeKalb Pike
King of Prussia, PA
1735 Market Street
Philadelphia, PA
12001 Perry Highway
Wexford, PA
Rhode Island
47 Providence Place
Providence, RI
Tennessee
6150 Poplar Avenue
Memphis, TN
Texas
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
12532 Memorial Drive
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
6005 West Park Boulevard
Plano, TX 75093
Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC
Annual Report
Utah
215 South State Street
Salt Lake City, UT
Virginia
1861 International Drive
McLean, VA
Washington
411 108th Avenue, N.E.
Bellevue, WA
1518 6th Avenue
Seattle, WA
Washington, DC
1900 K Street, N.W.
Washington, DC
Wisconsin
595 North Barker Road
Brookfield, WI
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
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
Fidelity's Taxable Bond Funds
Capital & Income
Floating Rate High Income
Ginnie Mae
Government Income
High Income
Inflation-Protected Bond
Intermediate Bond
Intermediate Government Income
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Target Timeline® 2003
Total Bond
Ultra-Short Bond
The Fidelity Telephone Connection
Mutual Fund 24-Hour Service
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST®) (automated graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
ULB-UANN-0903
1.789713.100
Item 2. Code of Ethics
As of the end of the period, July 31, 2003, the Fidelity Income Fund 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 Fidelity Income Fund has determined that Marie L. Knowles and Donald J. Kirk are each audit committee financial experts, as defined in Item 3 of Form N-CSR. Ms. Knowles and Mr. Kirk are each independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Reserved
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Reserved
Item 9. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Fidelity Income Fund's (the "Trust") 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 Trust's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
Item 10. 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. |
(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/Maria Dwyer |
Maria Dwyer | |
President and Treasurer | |
Date: | September 24, 2003 |
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/Maria Dwyer |
Maria Dwyer | |
President and Treasurer | |
Date: | September 24, 2003 |
By: | /s/Timothy F. Hayes |
Timothy F. Hayes | |
Chief Financial Officer | |
Date: | September 24, 2003 |