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, 2004 |
Item 1. Reports to Stockholders
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor
Total Bond
Fund - Class A, Class T, Class B
and Class C
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Class A, Class T, Class B,
and Class C are classes of
Fidelity Total Bond Fund
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR 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.
Commencing with the fiscal quarter ending October 31, 2004, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. The fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the fund's portfolio holdings, view the fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
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 Advisor fund, including charges and expenses, contact your investment professional 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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
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 class' 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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Life of | |
Class A (incl. 4.75% sales charge) B | 0.64% | 3.12% | |
Class T (incl. 3.50% sales charge) C | 1.95% | 3.87% | |
Class B (incl. contingent deferred sales charge) D | 0.56% | 3.76% | |
Class C (incl. contingent deferred sales charge) E | 4.55% | 5.90% |
A From October 15, 2002.
B Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
C Class T shares bear a 0.25% 12b-1 fee. The initial offering of Class T shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
D Class B shares bear a 0.90% 12b-1 fee. The initial offering of Class B shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower. Class B shares' contingent deferred sales charges included in past one year and life of fund total return figures are 5% and 4%, respectively.
E Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower. Class C shares' contingent deferred sales charges included in the past one year and life of fund total return figures are 1% and 0%, respectively.
Annual Report
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Total Bond Fund - Class T on October 15, 2002, when the fund started, and the current 3.50% sales charge was paid. 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 Advisor Total Bond Fund
Investment-grade debt had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
The fund's Class A, Class T, Class B and Class C shares rose 5.66%, 5.64%, 5.56% and 5.55%, respectively, during the past year, versus 5.47% for the Lehman Brothers U.S. Universal Index. Sector allocation contributed a lot, as I took advantage of the fund's flexibility to access value across the entire bond market. Of particular note, my positioning in the below-investment-grade high-yield and emerging-markets sectors - which combined represented only a small portion of the fund's net assets - paid off in spades. The fund was rewarded for overweighting high-yield securities, which handily outpaced most fixed-income alternatives amid a positive environment for riskier assets. We had a better tactical result, however, on the more-volatile emerging-markets front, thanks to some timely shifts into and out of the sector. Within the investment-grade universe, I continued to shy away from weak government bonds - particularly Treasuries - while favoring higher-yielding spread sectors, notably mortgage securities, which outperformed throughout the period. Favorable issue selection within corporates also helped, as did effective yield-curve positioning. Conversely, there are always things I could have done better - including having larger over- and underweightings - but during a period in which so much went right for the fund, it's difficult to find anything that had a meaningful negative impact.
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
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.50 | $ 1.00 |
HypotheticalA | $ 1,000.00 | $ 1,005.30 | $ 1.00 |
Class T(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.40 | $ 1.14 |
HypotheticalA | $ 1,000.00 | $ 1,005.17 | $ 1.13 |
Beginning | Ending | Expenses Paid | |
Class B(dagger) | |||
Actual | $ 1,000.00 | $ 1,017.60 | $ 1.97 |
HypotheticalA | $ 1,000.00 | $ 1,004.35 | $ 1.95 |
Class C(dagger) | |||
Actual | $ 1,000.00 | $ 1,017.40 | $ 2.09 |
HypotheticalA | $ 1,000.00 | $ 1,004.22 | $ 2.08 |
Fidelity Total Bond | |||
Actual | $ 1,000.00 | $ 1,006.10 | $ 3.24 |
HypotheticalA | $ 1,000.00 | $ 1,021.73 | $ 3.27 |
Institutional Class(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.70 | $ .82 |
HypotheticalA | $ 1,000.00 | $ 1,005.48 | $ .82 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Class A | .80% |
Class T | .90% |
Class B | 1.55% |
Class C | 1.65% |
Fidelity Total Bond | .65% |
Institutional Class | .65% |
8 Calculated by multiplying by 46/366 to reflect the period 6/16/2004 to July 31, 2004.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) as of July 31, 2004 | |||||||
As of July 31, 2004 | As of January 31, 2004 | ||||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | AAA 5.4% | ![]() | AAA 3.8% | ||||
![]() | AA 3.2% | ![]() | AA 3.4% | ||||
![]() | A 10.0% | ![]() | A 6.2% | ||||
![]() | BBB 15.9% | ![]() | BBB 11.1% | ||||
![]() | BB and Below 9.3% | ![]() | BB and Below 8.5% | ||||
![]() | Not Rated 0.8% | ![]() | Not Rated 1.3% | ||||
![]() | Equities 0.0% | ![]() | Equities 0.1% | ||||
![]() | Short-Term Investments | ![]() | Short-Term Investments |
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, 2004 | ||
6 months ago | ||
Years | 5.8 | 5.1 |
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, 2004 | ||
6 months ago | ||
Years | 4.7 | 4.5 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Corporate Bonds 29.0% | ![]() | Corporate Bonds 23.2% | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 6.2% | ![]() | CMOs and Other Mortgage Related Securities 4.2% | ||||
![]() | Stocks 0.0% | ![]() | Stocks 0.1% | ||||
![]() | Other Investments 3.1% | ![]() | Other Investments 1.4% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 10.5% | ** Foreign investments | 6.5% | ||||
* Futures and Swaps | 5.4% | ** Futures and Swaps | 1.8% |
The information in the above table 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, 2004
Showing Percentage of Net Assets
Nonconvertible Bonds - 28.5% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 4.4% | ||||
Auto Components - 0.4% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.75% 1/15/08 | $ 200,000 | $ 203,395 | ||
7.2% 9/1/09 | 1,000,000 | 1,098,733 | ||
EaglePicher, Inc. 9.75% 9/1/13 | 20,000 | 21,500 | ||
Visteon Corp. 7% 3/10/14 | 80,000 | 75,900 | ||
1,399,528 | ||||
Automobiles - 0.1% | ||||
General Motors Corp. 7.2% 1/15/11 | 500,000 | 522,651 | ||
Hotels, Restaurants & Leisure - 1.0% | ||||
Argosy Gaming Co. 7% 1/15/14 (f) | 80,000 | 79,800 | ||
Bally Total Fitness Holding Corp.: | ||||
9.875% 10/15/07 | 15,000 | 12,975 | ||
10.5% 7/15/11 | 120,000 | 116,100 | ||
Friendly Ice Cream Corp. 8.375% 6/15/12 | 70,000 | 66,500 | ||
Gaylord Entertainment Co. 8% 11/15/13 | 160,000 | 164,800 | ||
Herbst Gaming, Inc. 8.125% 6/1/12 (f) | 70,000 | 68,950 | ||
HMH Properties, Inc. 7.875% 8/1/08 | 213,000 | 219,390 | ||
Host Marriott LP: | ||||
7.125% 11/1/13 | 35,000 | 34,781 | ||
8.375% 2/15/06 | 200,000 | 212,000 | ||
Mandalay Resort Group 6.375% 12/15/11 | 150,000 | 153,375 | ||
MGM MIRAGE: | ||||
6% 10/1/09 | 20,000 | 19,850 | ||
8.375% 2/1/11 | 40,000 | 42,800 | ||
Mohegan Tribal Gaming Authority: | ||||
7.125% 8/15/14 (f) | 40,000 | 40,500 | ||
8.375% 7/1/11 | 35,000 | 39,550 | ||
Morton's Restaurant Group, Inc. 7.5% 7/1/10 | 65,000 | 61,100 | ||
MTR Gaming Group, Inc. 9.75% 4/1/10 | 135,000 | 145,800 | ||
NCL Corp. Ltd. 10.625% 7/15/14 (f) | 80,000 | 80,800 | ||
Park Place Entertainment Corp. 7.875% 12/15/05 | 50,000 | 52,625 | ||
Penn National Gaming, Inc.: | ||||
6.875% 12/1/11 (f) | 80,000 | 79,200 | ||
8.875% 3/15/10 | 100,000 | 109,250 | ||
Premier Entertainment Biloxi LLC 10.75% 2/1/12 (f) | 20,000 | 21,100 | ||
Resorts International Hotel & Casino, Inc. 11.5% 3/15/09 | 225,000 | 253,125 | ||
Seneca Gaming Corp. 7.25% 5/1/12 (f) | 50,000 | 49,813 | ||
Six Flags, Inc.: | ||||
9.5% 2/1/09 | 280,000 | 270,200 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Six Flags, Inc.: - continued | ||||
9.625% 6/1/14 | $ 100,000 | $ 92,250 | ||
Speedway Motorsports, Inc. 6.75% 6/1/13 (f) | 100,000 | 99,500 | ||
Station Casinos, Inc.: | ||||
6% 4/1/12 | 70,000 | 68,775 | ||
6.5% 2/1/14 | 40,000 | 38,900 | ||
6.875% 3/1/16 | 100,000 | 97,000 | ||
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | 325,000 | 349,375 | ||
Town Sports International, Inc. 9.625% 4/15/11 | 20,000 | 19,350 | ||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 100,000 | 114,500 | ||
Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (f) | 9,000 | 9,540 | ||
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | 160,000 | 169,600 | ||
Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp. 12% 11/1/10 | 167,000 | 206,663 | ||
3,659,837 | ||||
Household Durables - 0.1% | ||||
D.R. Horton, Inc. 8.5% 4/15/12 | 30,000 | 33,450 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.5% 1/15/14 | 100,000 | 94,000 | ||
8.875% 4/1/12 | 10,000 | 10,850 | ||
Sealy Mattress Co. 8.25% 6/15/14 (f) | 50,000 | 50,000 | ||
WCI Communities, Inc. 9.125% 5/1/12 | 35,000 | 37,625 | ||
William Lyon Homes, Inc. 10.75% 4/1/13 | 40,000 | 44,800 | ||
270,725 | ||||
Internet & Catalog Retail - 0.1% | ||||
USA Interactive 7% 1/15/13 | 300,000 | 328,500 | ||
Media - 2.5% | ||||
AMC Entertainment, Inc. 8% 3/1/14 (f) | 290,000 | 266,800 | ||
AOL Time Warner, Inc. 7.625% 4/15/31 | 1,000,000 | 1,100,158 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 8.2% 7/15/09 | 1,000,000 | 1,157,109 | ||
Cablevision Systems Corp.: | ||||
5.66% 4/1/09 (f)(h) | 40,000 | 40,400 | ||
8% 4/15/12 (f) | 180,000 | 176,400 | ||
Carmike Cinemas, Inc. 7.5% 2/15/14 (f) | 60,000 | 57,000 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp. 8.375% 4/30/14 (f) | $ 70,000 | $ 67,550 | ||
Cinemark, Inc. 0% 3/15/14 (d) | 100,000 | 66,250 | ||
Comcast Corp. 5.85% 1/15/10 | 500,000 | 525,084 | ||
Cox Communications, Inc.: | ||||
4.625% 6/1/13 | 90,000 | 83,770 | ||
7.125% 10/1/12 | 355,000 | 391,496 | ||
CSC Holdings, Inc.: | ||||
6.75% 4/15/12 (f) | 40,000 | 38,400 | ||
7.875% 2/15/18 | 50,000 | 48,000 | ||
Dex Media, Inc.: | ||||
0% 11/15/13 (d)(f) | 100,000 | 69,000 | ||
8% 11/15/13 (f) | 10,000 | 10,050 | ||
EchoStar DBS Corp.: | ||||
6.375% 10/1/11 | 150,000 | 147,000 | ||
9.125% 1/15/09 | 72,000 | 79,020 | ||
Granite Broadcasting Corp. 9.75% 12/1/10 | 40,000 | 36,400 | ||
Houghton Mifflin Co. 9.875% 2/1/13 | 70,000 | 71,750 | ||
Innova S. de R.L. 9.375% 9/19/13 | 160,000 | 170,000 | ||
Liberty Media Corp. 8.25% 2/1/30 | 1,100,000 | 1,237,470 | ||
LodgeNet Entertainment Corp. 9.5% 6/15/13 | 130,000 | 142,025 | ||
Loews Cineplex Entertainment Corp. 9% 8/1/14 (f) | 100,000 | 100,000 | ||
Medianews Group, Inc.: | ||||
6.375% 4/1/14 | 200,000 | 186,000 | ||
6.875% 10/1/13 | 250,000 | 242,500 | ||
PanAmSat Corp. 9% 8/15/14 (f)(g) | 130,000 | 130,000 | ||
PEI Holdings, Inc. 11% 3/15/10 | 11,000 | 12,760 | ||
PRIMEDIA, Inc.: | ||||
7.625% 4/1/08 | 280,000 | 274,400 | ||
8.875% 5/15/11 | 25,000 | 24,563 | ||
Radio One, Inc. 8.875% 7/1/11 | 100,000 | 109,500 | ||
Spanish Broadcasting System, Inc. 9.625% 11/1/09 | 45,000 | 47,419 | ||
The Reader's Digest Association, Inc. 6.5% 3/1/11 | 70,000 | 69,300 | ||
TV Azteca SA de CV: | ||||
euro 10.5% 2/15/07 (Reg. S) | 210,000 | 215,250 | ||
yankee 10.5% 2/15/07 | 5,000 | 5,125 | ||
Viacom, Inc. 7.7% 7/30/10 | 1,205,000 | 1,382,343 | ||
Walt Disney Co. 6.375% 3/1/12 | 700,000 | 755,504 | ||
9,535,796 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Multiline Retail - 0.1% | ||||
Barneys, Inc. 9% 4/1/08 | $ 20,000 | $ 20,600 | ||
The May Department Stores Co. 3.95% 7/15/07 (f) | 175,000 | 174,998 | ||
195,598 | ||||
Specialty Retail - 0.1% | ||||
Asbury Automotive Group, Inc.: | ||||
8% 3/15/14 | 60,000 | 56,100 | ||
9% 6/15/12 | 15,000 | 15,150 | ||
Boise Cascade Corp. 7.5% 2/1/08 | 40,000 | 44,269 | ||
General Nutrition Centers, Inc. 8.5% 12/1/10 (f) | 20,000 | 20,150 | ||
Hollywood Entertainment Corp. 9.625% 3/15/11 | 50,000 | 56,250 | ||
Nebraska Book Co., Inc. 8.625% 3/15/12 | 90,000 | 89,100 | ||
Sonic Automotive, Inc. 8.625% 8/15/13 | 50,000 | 51,375 | ||
Toys 'R' US, Inc. 7.875% 4/15/13 | 20,000 | 20,350 | ||
United Auto Group, Inc. 9.625% 3/15/12 | 50,000 | 54,750 | ||
407,494 | ||||
Textiles Apparel & Luxury Goods - 0.0% | ||||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 10,000 | 9,500 | ||
11.625% 1/15/08 | 10,000 | 10,000 | ||
12.25% 12/15/12 | 65,000 | 65,650 | ||
85,150 | ||||
TOTAL CONSUMER DISCRETIONARY | 16,405,279 | |||
CONSUMER STAPLES - 1.2% | ||||
Food & Staples Retailing - 0.7% | ||||
Jean Coutu Group, Inc.: | ||||
7.625% 8/1/12 (f) | 30,000 | 30,188 | ||
8.5% 8/1/14 (f) | 60,000 | 59,475 | ||
Pathmark Stores, Inc. 8.75% 2/1/12 | 200,000 | 204,000 | ||
Rite Aid Corp.: | ||||
6% 12/15/05 (f) | 20,000 | 20,000 | ||
7.625% 4/15/05 | 15,000 | 15,300 | ||
Safeway, Inc. 6.5% 3/1/11 | 2,000,000 | 2,136,780 | ||
Stater Brothers Holdings, Inc. 8.125% 6/15/12 (f) | 80,000 | 81,800 | ||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | 45,000 | 42,750 | ||
9.125% 12/15/11 | 10,000 | 8,725 | ||
2,599,018 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Food Products - 0.1% | ||||
Corn Products International, Inc. 8.25% 7/15/07 | $ 5,000 | $ 5,450 | ||
Del Monte Corp. 9.25% 5/15/11 | 50,000 | 54,625 | ||
Doane Pet Care Co.: | ||||
9.75% 5/15/07 | 50,000 | 47,500 | ||
10.75% 3/1/10 | 200,000 | 214,000 | ||
Kraft Foods, Inc. 5.25% 6/1/07 | 20,000 | 20,861 | ||
Pierre Foods, Inc. 9.875% 7/15/12 (f) | 40,000 | 40,500 | ||
United Agriculture Products, Inc. 8.25% 12/15/11 (f) | 30,000 | 33,000 | ||
415,936 | ||||
Household Products - 0.0% | ||||
Fort James Corp. 6.875% 9/15/07 | 150,000 | 157,125 | ||
Personal Products - 0.0% | ||||
Elizabeth Arden, Inc. 7.75% 1/15/14 | 20,000 | 20,450 | ||
Tobacco - 0.4% | ||||
Altria Group, Inc. 7% 11/4/13 | 1,240,000 | 1,279,996 | ||
TOTAL CONSUMER STAPLES | 4,472,525 | |||
ENERGY - 1.1% | ||||
Energy Equipment & Services - 0.1% | ||||
Cooper Cameron Corp. 2.65% 4/15/07 | 340,000 | 331,286 | ||
Grant Prideco, Inc. 9% 12/15/09 | 10,000 | 10,875 | ||
Hanover Compressor Co.: | ||||
8.625% 12/15/10 | 20,000 | 21,100 | ||
9% 6/1/14 | 50,000 | 52,625 | ||
Universal Compression, Inc. 7.25% 5/15/10 | 40,000 | 41,650 | ||
457,536 | ||||
Oil & Gas - 1.0% | ||||
Amerada Hess Corp.: | ||||
6.65% 8/15/11 | 70,000 | 75,068 | ||
7.125% 3/15/33 | 185,000 | 188,515 | ||
7.375% 10/1/09 | 160,000 | 175,207 | ||
Anadarko Petroleum Corp. 5% 10/1/12 | 400,000 | 397,594 | ||
Chesapeake Energy Corp.: | ||||
6.875% 1/15/16 | 50,000 | 49,250 | ||
7.75% 1/15/15 | 30,000 | 31,800 | ||
8.375% 11/1/08 | 50,000 | 54,500 | ||
El Paso Energy Corp.: | ||||
7.375% 12/15/12 | 5,000 | 4,450 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
ENERGY - continued | ||||
Oil & Gas - continued | ||||
El Paso Energy Corp.: - continued | ||||
7.75% 1/15/32 | $ 15,000 | $ 12,225 | ||
8.05% 10/15/30 | 95,000 | 78,850 | ||
El Paso Production Holding Co. 7.75% 6/1/13 | 140,000 | 133,000 | ||
EnCana Corp. 6.5% 8/15/34 | 155,000 | 155,339 | ||
EXCO Resources, Inc. 7.25% 1/15/11 | 30,000 | 30,750 | ||
General Maritime Corp. 10% 3/15/13 | 310,000 | 344,875 | ||
Giant Industries, Inc. 8% 5/15/14 | 130,000 | 132,769 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12 | 40,000 | 46,800 | ||
OAO Gazprom 9.625% 3/1/13 | 220,000 | 230,725 | ||
Overseas Shipholding Group, Inc.: | ||||
7.5% 2/15/24 | 55,000 | 51,425 | ||
8.25% 3/15/13 | 40,000 | 42,400 | ||
Pecom Energia SA: | ||||
8.125% 7/15/10 (Reg. S) | 75,000 | 73,500 | ||
9% 1/30/07 (f) | 100,000 | 103,500 | ||
9% 5/1/09 (Reg. S) | 95,000 | 96,544 | ||
Range Resources Corp. 7.375% 7/15/13 (f) | 40,000 | 40,500 | ||
Ship Finance International Ltd. 8.5% 12/15/13 | 330,000 | 316,800 | ||
Teekay Shipping Corp. 8.875% 7/15/11 | 30,000 | 33,000 | ||
The Coastal Corp.: | ||||
6.375% 2/1/09 | 5,000 | 4,475 | ||
6.5% 5/15/06 | 65,000 | 64,350 | ||
6.5% 6/1/08 | 100,000 | 91,625 | ||
7.5% 8/15/06 | 50,000 | 50,000 | ||
7.75% 6/15/10 | 200,000 | 185,000 | ||
Williams Companies, Inc.: | ||||
7.125% 9/1/11 | 5,000 | 5,200 | ||
7.625% 7/15/19 | 30,000 | 30,225 | ||
7.875% 9/1/21 | 35,000 | 35,219 | ||
8.125% 3/15/12 | 30,000 | 32,625 | ||
8.625% 6/1/10 | 30,000 | 33,675 | ||
8.75% 3/15/32 | 165,000 | 173,250 | ||
YPF SA yankee 9.125% 2/24/09 | 235,000 | 255,563 | ||
3,860,593 | ||||
TOTAL ENERGY | 4,318,129 | |||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - 11.8% | ||||
Capital Markets - 1.6% | ||||
Amvescap PLC 5.9% 1/15/07 | $ 25,000 | $ 26,463 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (h) | 100,000 | 96,751 | ||
4.25% 9/4/12 (h) | 205,000 | 205,399 | ||
BCP Caylux Holdings Luxembourg SCA 9.625% 6/15/14 (f) | 170,000 | 177,438 | ||
Credit Suisse First Boston (USA), Inc. 4.7% 6/1/09 | 440,000 | 445,051 | ||
E*TRADE Financial Corp. 8% 6/15/11 (f) | 130,000 | 129,675 | ||
Equinox Holdings Ltd. 9% 12/15/09 (f) | 20,000 | 19,950 | ||
Franklin Resources, Inc. 3.7% 4/15/08 | 1,135,000 | 1,124,891 | ||
Goldman Sachs Group, Inc.: | ||||
5.7% 9/1/12 | 1,100,000 | 1,127,431 | ||
6.6% 1/15/12 | 500,000 | 543,678 | ||
Legg Mason, Inc. 6.75% 7/2/08 | 30,000 | 32,716 | ||
Morgan Stanley: | ||||
4.75% 4/1/14 | 720,000 | 672,543 | ||
6.6% 4/1/12 | 1,100,000 | 1,194,670 | ||
5,796,656 | ||||
Commercial Banks - 1.4% | ||||
Bank of America Corp. 7.4% 1/15/11 | 1,000,000 | 1,139,934 | ||
Corporacion Andina de Fomento 5.2% 5/21/13 | 35,000 | 34,234 | ||
Export-Import Bank of Korea: | ||||
4.125% 2/10/09 (f) | 140,000 | 136,863 | ||
5.25% 2/10/14 (f) | 515,000 | 501,244 | ||
Korea Development Bank: | ||||
3.875% 3/2/09 | 600,000 | 581,222 | ||
4.75% 7/20/09 | 320,000 | 319,700 | ||
5.75% 9/10/13 | 350,000 | 354,777 | ||
National Westminster Bank PLC yankee 7.375% 10/1/09 | 1,500,000 | 1,709,823 | ||
Wachovia Corp. 4.875% 2/15/14 | 600,000 | 578,924 | ||
5,356,721 | ||||
Consumer Finance - 1.9% | ||||
American General Finance Corp.: | ||||
4% 3/15/11 | 655,000 | 627,888 | ||
4.625% 5/15/09 | 1,200,000 | 1,210,505 | ||
AmeriCredit Corp. 9.25% 5/1/09 | 150,000 | 160,500 | ||
Capital One Bank: | ||||
4.875% 5/15/08 | 1,075,000 | 1,094,931 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Bank: - continued | ||||
6.5% 6/13/13 | $ 1,090,000 | $ 1,138,642 | ||
Ford Motor Credit Co.: | ||||
7% 10/1/13 | 2,000,000 | 2,035,712 | ||
7.875% 6/15/10 | 250,000 | 272,936 | ||
General Motors Acceptance Corp. 6.875% 9/15/11 | 525,000 | 538,948 | ||
Household Finance Corp.: | ||||
4.75% 5/15/09 | 100,000 | 101,381 | ||
6.375% 11/27/12 | 30,000 | 32,208 | ||
6.75% 5/15/11 | 40,000 | 44,065 | ||
7,257,716 | ||||
Diversified Financial Services - 5.1% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 40,000 | 39,700 | ||
6.875% 5/1/29 | 170,000 | 147,050 | ||
8.25% 7/15/10 | 40,000 | 42,700 | ||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 50,000 | 44,500 | ||
6.977% 11/23/22 | 11,499 | 10,119 | ||
7.377% 5/23/19 | 51,886 | 35,801 | ||
7.379% 5/23/16 | 53,179 | 36,693 | ||
7.8% 4/1/08 | 65,000 | 58,500 | ||
Ameritech Capital Funding Corp. euro 6.25% 5/18/09 | 35,000 | 37,370 | ||
Arch Western Finance LLC 6.75% 7/1/13 (f) | 100,000 | 101,750 | ||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 30,000 | 32,100 | ||
Cadbury Schweppes U.S. Finance LLC: | ||||
3.875% 10/1/08 (f) | 90,000 | 88,823 | ||
5.125% 10/1/13 (f) | 1,060,000 | 1,045,091 | ||
CCO Holdings LLC/CCO Holdings Capital Corp. 8.75% 11/15/13 | 70,000 | 66,850 | ||
Cellu Tissue Holdings, Inc. 9.75% 3/15/10 (f) | 50,000 | 49,750 | ||
Charter Communications Holding II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 | 115,000 | 115,863 | ||
CMS Energy X-TRAS pass thru trust certificates 7% 1/15/05 | 10,000 | 10,075 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.748% 9/15/18 | 3,872 | 3,059 | ||
6.9% 7/2/18 | 4,746 | 3,749 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Continental Airlines, Inc. pass thru trust certificates: - continued | ||||
7.73% 9/15/12 | $ 4,680 | $ 3,463 | ||
8.321% 11/1/06 | 5,000 | 4,550 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 15,000 | 8,850 | ||
7.57% 11/18/10 | 5,000 | 4,521 | ||
7.779% 11/18/05 | 50,000 | 30,000 | ||
7.779% 1/2/12 | 25,045 | 10,769 | ||
7.92% 5/18/12 | 135,000 | 79,075 | ||
Deutsche Telekom International Finance BV: | ||||
5.25% 7/22/13 | 85,000 | 84,185 | ||
8.5% 6/15/10 | 305,000 | 359,734 | ||
8.75% 6/15/30 | 895,000 | 1,111,783 | ||
El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11 | 10,000 | 10,800 | ||
EnCana Holdings Finance Corp. 5.8% 5/1/14 | 240,000 | 246,517 | ||
Entercom Radio LLC/Entercom Capital, Inc. 7.625% 3/1/14 | 50,000 | 52,500 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 | 355,000 | 395,825 | ||
Global Cash Access LLC/Global Cash Access Finance Corp. 8.75% 3/15/12 (f) | 30,000 | 31,425 | ||
Hurricane Finance BV 9.625% 2/12/10 (f) | 75,000 | 79,875 | ||
Hutchison Whampoa International (03/13) Ltd. | 190,000 | 191,899 | ||
Hutchison Whampoa International (03/33) Ltd.: | ||||
6.25% 1/24/14 (f) | 1,720,000 | 1,692,752 | ||
7.45% 11/24/33 (f) | 300,000 | 291,443 | ||
Inmarsat Finance PLC 7.625% 6/30/12 (f) | 70,000 | 66,850 | ||
Ispat Inland ULC 9.75% 4/1/14 (f) | 70,000 | 72,275 | ||
J.P. Morgan Chase & Co. 4.875% 3/15/14 | 1,475,000 | 1,411,177 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (f) | 85,000 | 73,525 | ||
Mizuho Financial Group Cayman Ltd. 5.79% 4/15/14 (f) | 1,400,000 | 1,396,688 | ||
Mobile Telesystems Finance SA: | ||||
9.75% 1/30/08 (f) | 310,000 | 321,625 | ||
9.75% 1/30/08 (Reg. S) | 75,000 | 77,813 | ||
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc. 7.375% 9/1/10 | 40,000 | 40,800 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
MSW Energy Holdings LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 | $ 10,000 | $ 10,700 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | 120,000 | 124,500 | ||
Nexstar Finance, Inc. 7% 1/15/14 | 130,000 | 123,825 | ||
NiSource Finance Corp. 7.875% 11/15/10 | 125,000 | 144,769 | ||
Northern Telecom Capital Corp. 7.875% 6/15/26 | 25,000 | 23,500 | ||
Northwest Airlines, Inc. pass thru trust certificates: | ||||
7.068% 7/2/17 | 8,102 | 6,644 | ||
7.67% 1/2/15 | 8,505 | 6,889 | ||
Pemex Project Funding Master Trust: | ||||
6.125% 8/15/08 | 250,000 | 258,750 | ||
7.375% 12/15/14 | 500,000 | 523,750 | ||
Petronas Capital Ltd. 7% 5/22/12 (f) | 5,000 | 5,531 | ||
Qwest Capital Funding, Inc.: | ||||
7% 8/3/09 | 50,000 | 44,250 | ||
7.25% 2/15/11 | 35,000 | 30,275 | ||
7.625% 8/3/21 | 20,000 | 15,800 | ||
Sensus Metering Systems, Inc. 8.625% 12/15/13 (f) | 20,000 | 19,700 | ||
Sprint Capital Corp.: | ||||
6.125% 11/15/08 | 500,000 | 529,658 | ||
8.375% 3/15/12 | 1,100,000 | 1,288,800 | ||
Telecom Italia Capital 4% 11/15/08 (f) | 500,000 | 494,147 | ||
TRW Automotive Acquisition Corp. 9.375% 2/15/13 | 87,000 | 99,615 | ||
Tyco International Group SA yankee: | ||||
6.375% 6/15/05 | 5,000 | 5,149 | ||
6.375% 2/15/06 | 20,000 | 20,994 | ||
6.75% 2/15/11 | 1,070,000 | 1,173,261 | ||
6.875% 1/15/29 | 1,000,000 | 1,063,401 | ||
Tyumen Oil Co. 11% 11/6/07 | 175,000 | 191,625 | ||
U.S. West Capital Funding, Inc. 6.375% 7/15/08 | 125,000 | 110,000 | ||
UGS Corp. 10% 6/1/12 (f) | 30,000 | 31,800 | ||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 | 385,000 | 444,675 | ||
Verizon Global Funding Corp.: | ||||
7.25% 12/1/10 | 1,030,000 | 1,159,828 | ||
7.375% 9/1/12 | 465,000 | 529,462 | ||
Western Financial Bank 9.625% 5/15/12 | 15,000 | 16,500 | ||
WH Holdings Ltd./WH Capital Corp. 9.5% 4/1/11 | 30,000 | 31,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Williams Companies, Inc. Credit Linked Certificate Trust 6.75% 4/15/09 (f) | $ 215,000 | $ 216,613 | ||
Xerox Capital Trust I 8% 2/1/27 | 130,000 | 117,325 | ||
18,983,498 | ||||
Insurance - 0.2% | ||||
Aegon NV 4.75% 6/1/13 | 500,000 | 480,439 | ||
Assurant, Inc. 5.625% 2/15/14 | 210,000 | 209,066 | ||
Travelers Property Casualty Corp.: | ||||
5% 3/15/13 | 25,000 | 24,306 | ||
6.375% 3/15/33 | 35,000 | 34,566 | ||
748,377 | ||||
Real Estate - 1.0% | ||||
American Real Estate Partners/American Real Estate Finance Corp. 8.125% 6/1/12 (f) | 85,000 | 87,125 | ||
Boston Properties, Inc. 6.25% 1/15/13 | 100,000 | 105,658 | ||
Camden Property Trust 5.875% 11/30/12 | 200,000 | 204,443 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 200,000 | 210,057 | ||
CB Richard Ellis Services, Inc. 9.75% 5/15/10 | 10,000 | 11,000 | ||
Dominion Resources, Inc. 5.125% 12/15/09 | 500,000 | 508,971 | ||
EOP Operating LP: | ||||
4.75% 3/15/14 | 600,000 | 559,758 | ||
7% 7/15/11 | 500,000 | 549,728 | ||
Gables Realty LP 5.75% 7/15/07 | 585,000 | 614,215 | ||
Healthcare Realty Trust, Inc. 5.125% 4/1/14 | 435,000 | 409,388 | ||
MeriStar Hospitality Corp. 8.75% 8/15/07 | 50,000 | 51,000 | ||
MeriStar Hospitality Operating Partnership LP/MeriStar Hospitality Finance Corp. II 10.5% 6/15/09 | 200,000 | 216,000 | ||
Omega Healthcare Investors, Inc. 7% 4/1/14 (f) | 70,000 | 65,625 | ||
Senior Housing Properties Trust 7.875% 4/15/15 | 20,000 | 20,850 | ||
3,613,818 | ||||
Thrifts & Mortgage Finance - 0.6% | ||||
Countrywide Home Loans, Inc. 4% 3/22/11 | 720,000 | 678,966 | ||
Independence Community Bank Corp. 3.75% 4/1/14 (h) | 275,000 | 263,160 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Thrifts & Mortgage Finance - continued | ||||
Washington Mutual, Inc.: | ||||
4.375% 1/15/08 | $ 1,200,000 | $ 1,217,696 | ||
4.625% 4/1/14 | 100,000 | 92,302 | ||
2,252,124 | ||||
TOTAL FINANCIALS | 44,008,910 | |||
HEALTH CARE - 0.4% | ||||
Health Care Equipment & Supplies - 0.1% | ||||
Fisher Scientific International, Inc. 8% 9/1/13 | 125,000 | 135,625 | ||
Medical Device Manufacturing, Inc. 10% 7/15/12 (f) | 50,000 | 51,500 | ||
187,125 | ||||
Health Care Providers & Services - 0.3% | ||||
AmeriPath, Inc. 10.5% 4/1/13 | 150,000 | 153,000 | ||
Beverly Enterprises, Inc. 7.875% 6/15/14 (f) | 70,000 | 70,525 | ||
Concentra Operating Corp.: | ||||
9.125% 6/1/12 (f) | 10,000 | 10,700 | ||
9.5% 8/15/10 | 110,000 | 119,350 | ||
Fountain View, Inc. 9.25% 8/19/08 (e) | 110,000 | 110,000 | ||
HealthSouth Corp. 8.5% 2/1/08 | 85,000 | 84,044 | ||
IASIS Healthcare LLC/IASIS Capital Corp. 8.75% 6/15/14 (f) | 100,000 | 103,500 | ||
Mariner Health Care, Inc. 8.25% 12/15/13 (f) | 30,000 | 32,025 | ||
National Nephrology Associates, Inc. 9% 11/1/11 (f) | 20,000 | 23,076 | ||
PacifiCare Health Systems, Inc. 10.75% 6/1/09 | 82,000 | 93,070 | ||
Psychiatric Solutions, Inc. 10.625% 6/15/13 | 105,000 | 117,600 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 75,000 | 66,938 | ||
6.5% 6/1/12 | 15,000 | 13,275 | ||
7.375% 2/1/13 | 75,000 | 69,375 | ||
1,066,478 | ||||
Pharmaceuticals - 0.0% | ||||
Biovail Corp. yankee 7.875% 4/1/10 | 105,000 | 103,163 | ||
Leiner Health Products, Inc. 11% 6/1/12 (f) | 20,000 | 20,550 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
HEALTH CARE - continued | ||||
Pharmaceuticals - continued | ||||
VWR International, Inc.: | ||||
6.875% 4/15/12 (f) | $ 30,000 | $ 30,038 | ||
8% 4/15/14 (f) | 30,000 | 30,638 | ||
184,389 | ||||
TOTAL HEALTH CARE | 1,437,992 | |||
INDUSTRIALS - 1.0% | ||||
Aerospace & Defense - 0.7% | ||||
BE Aerospace, Inc.: | ||||
8.5% 10/1/10 | 100,000 | 107,500 | ||
9.5% 11/1/08 | 55,000 | 55,550 | ||
Bombardier, Inc. 6.3% 5/1/14 (f) | 590,000 | 509,261 | ||
Orbital Sciences Corp. 9% 7/15/11 | 135,000 | 147,150 | ||
Raytheon Co. 5.5% 11/15/12 | 1,550,000 | 1,586,020 | ||
2,405,481 | ||||
Airlines - 0.0% | ||||
AMR Corp. 9% 8/1/12 | 85,000 | 61,200 | ||
Delta Air Lines, Inc. 7.9% 12/15/09 | 50,000 | 19,500 | ||
Northwest Airlines, Inc.: | ||||
7.875% 3/15/08 | 25,000 | 17,125 | ||
9.875% 3/15/07 | 60,000 | 44,100 | ||
141,925 | ||||
Building Products - 0.0% | ||||
Jacuzzi Brands, Inc. 9.625% 7/1/10 | 20,000 | 21,600 | ||
Commercial Services & Supplies - 0.1% | ||||
Allied Waste North America, Inc.: | ||||
5.75% 2/15/11 | 70,000 | 65,975 | ||
7.875% 4/15/13 | 20,000 | 20,850 | ||
10% 8/1/09 | 60,000 | 63,450 | ||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 140,000 | 144,375 | ||
Cenveo Corp. 7.875% 12/1/13 | 60,000 | 54,450 | ||
349,100 | ||||
Electrical Equipment - 0.0% | ||||
General Cable Corp. 9.5% 11/15/10 | 20,000 | 21,650 | ||
Industrial Conglomerates - 0.0% | ||||
North American Energy Partners, Inc. 8.75% 12/1/11 (f) | 20,000 | 19,900 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Machinery - 0.1% | ||||
Cummins, Inc.: | ||||
5.65% 3/1/98 | $ 15,000 | $ 9,975 | ||
9.5% 12/1/10 (h) | 20,000 | 22,900 | ||
Dresser, Inc. 9.375% 4/15/11 | 15,000 | 16,200 | ||
Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09 | 93,000 | 98,580 | ||
Invensys PLC 9.875% 3/15/11 (f) | 150,000 | 150,750 | ||
Navistar International Corp. 7.5% 6/15/11 | 30,000 | 31,200 | ||
Terex Corp. 7.375% 1/15/14 | 100,000 | 99,750 | ||
429,355 | ||||
Marine - 0.0% | ||||
Horizon Lines LLC/Holdings Corp. 9% 11/1/12 (f) | 40,000 | 41,400 | ||
OMI Corp. 7.625% 12/1/13 | 95,000 | 93,100 | ||
134,500 | ||||
Road & Rail - 0.1% | ||||
CSX Corp. 7.45% 5/1/07 | 100,000 | 109,573 | ||
Kansas City Southern Railway Co. 7.5% 6/15/09 | 100,000 | 100,250 | ||
Quality Distribution LLC/QD Capital Corp. 9% 11/15/10 (f) | 40,000 | 38,800 | ||
TFM SA de CV yankee 11.75% 6/15/09 | 140,000 | 139,300 | ||
387,923 | ||||
TOTAL INDUSTRIALS | 3,911,434 | |||
INFORMATION TECHNOLOGY - 0.8% | ||||
Communications Equipment - 0.5% | ||||
Motorola, Inc.: | ||||
6.5% 11/15/28 | 300,000 | 297,610 | ||
7.625% 11/15/10 | 200,000 | 227,678 | ||
8% 11/1/11 | 1,200,000 | 1,392,922 | ||
Nortel Networks Corp. 6.125% 2/15/06 | 50,000 | 50,000 | ||
Northern Telecom Ltd. yankee 6.875% 9/1/23 | 30,000 | 27,000 | ||
1,995,210 | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Celestica, Inc. 7.875% 7/1/11 | 100,000 | 102,000 | ||
PerkinElmer, Inc. 8.875% 1/15/13 | 20,000 | 22,050 | ||
124,050 | ||||
IT Services - 0.1% | ||||
Iron Mountain, Inc. 6.625% 1/1/16 | 270,000 | 249,750 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INFORMATION TECHNOLOGY - continued | ||||
Office Electronics - 0.1% | ||||
Xerox Corp.: | ||||
7.125% 6/15/10 | $ 20,000 | $ 20,550 | ||
7.2% 4/1/16 | 165,000 | 162,113 | ||
7.625% 6/15/13 | 60,000 | 61,650 | ||
244,313 | ||||
Semiconductors & Semiconductor Equipment - 0.1% | ||||
AMI Semiconductor, Inc. 10.75% 2/1/13 | 28,000 | 32,690 | ||
Amkor Technology, Inc.: | ||||
7.125% 3/15/11 | 90,000 | 76,950 | ||
7.75% 5/15/13 | 30,000 | 25,650 | ||
Freescale Semiconductor, Inc. 7.125% 7/15/14 (f) | 60,000 | 60,300 | ||
Viasystems, Inc. 10.5% 1/15/11 (f) | 50,000 | 48,500 | ||
244,090 | ||||
TOTAL INFORMATION TECHNOLOGY | 2,857,413 | |||
MATERIALS - 2.2% | ||||
Chemicals - 0.5% | ||||
Berry Plastics Corp. 10.75% 7/15/12 | 80,000 | 89,000 | ||
Equistar Chemicals LP: | ||||
6.5% 2/15/06 | 75,000 | 75,750 | ||
7.55% 2/15/26 | 100,000 | 85,500 | ||
Equistar Chemicals LP/Equistar Funding Corp. 10.625% 5/1/11 | 145,000 | 159,863 | ||
Georgia Gulf Corp. 7.125% 12/15/13 (f) | 180,000 | 185,400 | ||
Huntsman International LLC 9.875% 3/1/09 | 115,000 | 124,488 | ||
JohnsonDiversey Holdings, Inc. 0% 5/15/13 (d) | 55,000 | 42,625 | ||
Koppers, Inc. 9.875% 10/15/13 | 50,000 | 55,250 | ||
Lyondell Chemical Co.: | ||||
9.625% 5/1/07 | 200,000 | 209,000 | ||
10.875% 5/1/09 | 55,000 | 57,338 | ||
Millennium America, Inc.: | ||||
9.25% 6/15/08 | 220,000 | 233,200 | ||
9.25% 6/15/08 (f) | 10,000 | 10,600 | ||
Nalco Co.: | ||||
7.75% 11/15/11 (f) | 130,000 | 135,525 | ||
8.875% 11/15/13 (f) | 250,000 | 261,250 | ||
OMNOVA Solutions, Inc. 11.25% 6/1/10 | 20,000 | 21,700 | ||
Pliant Corp. 0% 6/15/09 (d) | 60,000 | 51,900 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Chemicals - continued | ||||
Resolution Performance Products LLC/RPP Capital Corp.: | ||||
9.5% 4/15/10 | $ 70,000 | $ 71,750 | ||
13.5% 11/15/10 | 35,000 | 33,950 | ||
Solutia, Inc. 7.375% 10/15/27 (c) | 20,000 | 12,400 | ||
1,916,489 | ||||
Construction Materials - 0.1% | ||||
Texas Industries, Inc. 10.25% 6/15/11 | 200,000 | 222,500 | ||
Containers & Packaging - 0.5% | ||||
Anchor Glass Container Corp. 11% 2/15/13 | 215,000 | 245,100 | ||
BWAY Corp. 10% 10/15/10 | 105,000 | 110,775 | ||
Crown Cork & Seal, Inc. 8% 4/15/23 | 105,000 | 95,288 | ||
Crown European Holdings SA 9.5% 3/1/11 | 35,000 | 38,500 | ||
Graphic Packaging International, Inc.: | ||||
8.5% 8/15/11 | 220,000 | 237,600 | ||
9.5% 8/15/13 | 345,000 | 377,775 | ||
Jefferson Smurfit Corp. U.S.: | ||||
7.5% 6/1/13 | 30,000 | 29,700 | ||
8.25% 10/1/12 | 210,000 | 222,600 | ||
Owens-Brockway Glass Container, Inc.: | ||||
8.25% 5/15/13 | 15,000 | 15,750 | ||
8.875% 2/15/09 | 50,000 | 54,125 | ||
Owens-Illinois, Inc.: | ||||
7.15% 5/15/05 | 60,000 | 61,575 | ||
7.35% 5/15/08 | 50,000 | 50,500 | ||
7.5% 5/15/10 | 95,000 | 96,425 | ||
7.8% 5/15/18 | 45,000 | 42,750 | ||
8.1% 5/15/07 | 110,000 | 114,950 | ||
Sealed Air Corp.: | ||||
5.625% 7/15/13 (f) | 25,000 | 24,904 | ||
6.875% 7/15/33 (f) | 55,000 | 56,149 | ||
Silgan Holdings, Inc. 6.75% 11/15/13 | 100,000 | 98,500 | ||
1,972,966 | ||||
Metals & Mining - 0.3% | ||||
California Steel Industries, Inc. 6.125% 3/15/14 | 40,000 | 37,550 | ||
Corporacion Nacional del Cobre (Codelco): | ||||
5.5% 10/15/13 (f) | 165,000 | 166,086 | ||
6.375% 11/30/12 (f) | 335,000 | 360,210 | ||
CSN Islands VIII Corp. 9.75% 12/16/13 (f) | 75,000 | 71,531 | ||
Foundation Pennsylvania Coal Co. 7.25% 8/1/14 (f) | 50,000 | 50,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Freeport-McMoRan Copper & Gold, Inc.: | ||||
6.875% 2/1/14 | $ 75,000 | $ 70,219 | ||
10.125% 2/1/10 | 155,000 | 173,600 | ||
International Steel Group, Inc. 6.5% 4/15/14 (f) | 70,000 | 66,150 | ||
Massey Energy Co. 6.625% 11/15/10 | 40,000 | 40,400 | ||
Peabody Energy Corp. 6.875% 3/15/13 | 20,000 | 20,700 | ||
Phelps Dodge Corp. 8.75% 6/1/11 | 40,000 | 47,984 | ||
Wise Metals Group LLC/Alloys Finance 10.25% 5/15/12 (f) | 60,000 | 61,350 | ||
1,166,280 | ||||
Paper & Forest Products - 0.8% | ||||
Boise Cascade Corp. 8% 2/24/06 | 25,000 | 26,668 | ||
Buckeye Cellulose Corp. 9.25% 9/15/08 | 100,000 | 99,500 | ||
Buckeye Technologies, Inc. 8.5% 10/1/13 | 200,000 | 206,000 | ||
Georgia-Pacific Corp.: | ||||
7.375% 12/1/25 | 15,000 | 14,681 | ||
7.5% 5/15/06 | 50,000 | 53,000 | ||
7.75% 11/15/29 | 10,000 | 9,900 | ||
8% 1/15/24 | 130,000 | 136,013 | ||
8.125% 5/15/11 | 5,000 | 5,606 | ||
International Paper Co.: | ||||
4.25% 1/15/09 | 95,000 | 93,787 | ||
5.5% 1/15/14 | 235,000 | 233,286 | ||
Millar Western Forest Products Ltd. 7.75% 11/15/13 | 220,000 | 224,400 | ||
Norske Skog Canada Ltd. 7.375% 3/1/14 | 40,000 | 40,000 | ||
Riverside Forest Products Ltd. 7.875% 3/1/14 (f) | 40,000 | 41,200 | ||
Solo Cup Co. 8.5% 2/15/14 (f) | 145,000 | 134,850 | ||
Stone Container Corp.: | ||||
8.375% 7/1/12 | 200,000 | 209,000 | ||
9.75% 2/1/11 | 30,000 | 33,150 | ||
Weyerhaeuser Co.: | ||||
5.25% 12/15/09 | 1,000,000 | 1,024,844 | ||
7.375% 3/15/32 | 260,000 | 286,974 | ||
2,872,859 | ||||
TOTAL MATERIALS | 8,151,094 | |||
TELECOMMUNICATION SERVICES - 3.3% | ||||
Diversified Telecommunication Services - 1.8% | ||||
BellSouth Corp. 6.55% 6/15/34 | 1,800,000 | 1,817,555 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
British Telecommunications PLC: | ||||
8.375% 12/15/10 | $ 190,000 | $ 223,933 | ||
8.875% 12/15/30 | 145,000 | 182,590 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 | 30,000 | 26,400 | ||
Empresa Brasil de Telecomm SA 11% 12/15/08 (f) | 255,000 | 279,863 | ||
France Telecom SA 8.75% 3/1/11 | 815,000 | 950,916 | ||
Koninklijke KPN NV yankee 8% 10/1/10 | 500,000 | 581,609 | ||
KT Corp. 5.875% 6/24/14 (f) | 280,000 | 281,837 | ||
Level 3 Communications, Inc. 10.5% 12/1/08 | 255,000 | 188,700 | ||
MCI, Inc.: | ||||
5.908% 5/1/07 | 36,000 | 34,830 | ||
6.688% 5/1/09 | 36,000 | 33,210 | ||
NTL Cable PLC 8.75% 4/15/14 (f) | 120,000 | 124,200 | ||
Primus Telecommunications Group, Inc. 8% 1/15/14 | 90,000 | 64,800 | ||
Qwest Communications International, Inc.: | ||||
4.75% 2/15/09 (f)(h) | 40,000 | 38,000 | ||
7.5% 2/15/14 (f) | 160,000 | 149,200 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (f) | 220,000 | 252,450 | ||
14% 12/15/10 (f)(h) | 20,000 | 23,400 | ||
14.5% 12/15/14 (f)(h) | 210,000 | 251,475 | ||
Telefonica de Argentina SA 9.125% 11/7/10 | 55,000 | 54,313 | ||
Telefonica Europe BV 7.75% 9/15/10 | 700,000 | 808,804 | ||
Telenet Group Holding NV 0% 6/15/14 (d)(f) | 80,000 | 51,800 | ||
TELUS Corp. yankee 7.5% 6/1/07 | 180,000 | 196,475 | ||
U.S. West Communications 6.875% 9/15/33 | 165,000 | 136,125 | ||
6,752,485 | ||||
Wireless Telecommunication Services - 1.5% | ||||
America Movil SA de CV: | ||||
4.125% 3/1/09 (f) | 285,000 | 271,518 | ||
5.5% 3/1/14 (f) | 255,000 | 238,645 | ||
American Tower Corp. 7.5% 5/1/12 (f) | 105,000 | 103,163 | ||
AT&T Wireless Services, Inc.: | ||||
7.875% 3/1/11 | 455,000 | 522,951 | ||
8.75% 3/1/31 | 1,485,000 | 1,848,396 | ||
Centennial Communications Corp./Centennial Cellular Operating Co. LLC/Centennial Puerto Rico Operations Corp. 8.125% 2/1/14 (f) | 60,000 | 55,500 | ||
Cingular Wireless LLC 7.125% 12/15/31 | 1,500,000 | 1,593,024 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
Crown Castle International Corp.: | ||||
7.5% 12/1/13 | $ 50,000 | $ 49,875 | ||
9.375% 8/1/11 | 65,000 | 73,288 | ||
DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 | 50,000 | 56,063 | ||
Globe Telecom, Inc. 9.75% 4/15/12 | 55,000 | 59,950 | ||
Millicom International Cellular SA 10% 12/1/13 (f) | 80,000 | 79,800 | ||
Nextel Communications, Inc.: | ||||
7.375% 8/1/15 | 150,000 | 157,125 | ||
9.5% 2/1/11 | 60,000 | 67,650 | ||
Nextel Partners, Inc. 8.125% 7/1/11 | 85,000 | 88,825 | ||
Rogers Wireless, Inc.: | ||||
6.375% 3/1/14 | 140,000 | 130,025 | ||
9.625% 5/1/11 | 56,000 | 62,720 | ||
Rural Cellular Corp. 8.25% 3/15/12 (f) | 60,000 | 61,500 | ||
Telemig Cellular SA/Amazonia Cellular SA 8.75% 1/20/09 (f) | 85,000 | 80,538 | ||
UbiquiTel Operating Co. 9.875% 3/1/11 | 50,000 | 50,000 | ||
Western Wireless Corp. 9.25% 7/15/13 | 80,000 | 81,600 | ||
5,732,156 | ||||
TOTAL TELECOMMUNICATION SERVICES | 12,484,641 | |||
UTILITIES - 2.3% | ||||
Electric Utilities - 1.7% | ||||
AES Gener SA 7.5% 3/25/14 (f) | 70,000 | 67,200 | ||
Allegheny Energy Supply Co. LLC: | ||||
7.8% 3/15/11 | 170,000 | 167,450 | ||
8.25% 4/15/12 (f) | 90,000 | 89,881 | ||
10.25% 11/15/07 (f) | 26,657 | 28,790 | ||
10.25% 11/15/07 (f)(h) | 3,339 | 3,381 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 (f) | 280,000 | 279,053 | ||
CMS Energy Corp.: | ||||
8.5% 4/15/11 | 45,000 | 47,363 | ||
9.875% 10/15/07 | 245,000 | 267,050 | ||
DTE Energy Co.: | ||||
6.375% 4/15/33 | 250,000 | 240,440 | ||
7.05% 6/1/11 | 50,000 | 54,784 | ||
Duke Capital LLC 6.75% 2/15/32 | 1,400,000 | 1,402,491 | ||
Edison International 6.875% 9/15/04 | 15,000 | 15,000 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
FirstEnergy Corp.: | ||||
6.45% 11/15/11 | $ 45,000 | $ 47,598 | ||
7.375% 11/15/31 | 330,000 | 356,597 | ||
Illinois Power Co. 11.5% 12/15/10 | 55,000 | 65,450 | ||
Nevada Power Co. 6.5% 4/15/12 (f) | 50,000 | 49,125 | ||
Oncor Electric Delivery Co.: | ||||
6.375% 5/1/12 | 45,000 | 48,669 | ||
6.375% 1/15/15 | 1,000,000 | 1,073,236 | ||
Pacific Gas & Electric Co.: | ||||
4.2% 3/1/11 | 100,000 | 96,544 | ||
4.8% 3/1/14 | 135,000 | 129,918 | ||
6.05% 3/1/34 | 490,000 | 472,044 | ||
Progress Energy, Inc. 7.1% 3/1/11 | 1,000,000 | 1,102,509 | ||
Southern California Edison Co.: | ||||
4.65% 4/1/15 | 35,000 | 33,120 | ||
5% 1/15/14 | 30,000 | 29,631 | ||
TECO Energy, Inc. 7% 5/1/12 | 80,000 | 80,300 | ||
6,247,624 | ||||
Gas Utilities - 0.1% | ||||
ANR Pipeline, Inc. 9.625% 11/1/21 | 100,000 | 113,500 | ||
El Paso Energy Corp. 6.75% 5/15/09 | 25,000 | 23,156 | ||
Sonat, Inc.: | ||||
6.625% 2/1/08 | 20,000 | 18,650 | ||
6.75% 10/1/07 | 15,000 | 14,269 | ||
6.875% 6/1/05 | 85,000 | 85,531 | ||
255,106 | ||||
Multi-Utilities & Unregulated Power - 0.5% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 85,000 | 85,106 | ||
8.5% 11/1/07 | 40,000 | 40,950 | ||
8.75% 6/15/08 | 2,000 | 2,100 | ||
8.75% 5/15/13 (f) | 30,000 | 32,738 | ||
8.875% 2/15/11 | 282,000 | 298,568 | ||
9% 5/15/15 (f) | 30,000 | 32,700 | ||
9.375% 9/15/10 | 7,000 | 7,595 | ||
9.5% 6/1/09 | 19,000 | 20,710 | ||
10% 12/12/05 (f) | 5,919 | 6,037 | ||
Constellation Energy Group, Inc. 7.6% 4/1/32 | 1,000,000 | 1,120,016 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Multi-Utilities & Unregulated Power - continued | ||||
Dominion Resources, Inc. 8.125% 6/15/10 | $ 145,000 | $ 168,844 | ||
NRG Energy, Inc. 8% 12/15/13 (f) | 220,000 | 223,300 | ||
2,038,664 | ||||
TOTAL UTILITIES | 8,541,394 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $106,650,403) | 106,588,811 | |||
U.S. Government and Government Agency Obligations - 18.0% | ||||
U.S. Government Agency Obligations - 5.0% | ||||
Fannie Mae: | ||||
4.375% 7/17/13 | 2,205,000 | 2,088,283 | ||
4.625% 10/15/13 | 3,000,000 | 2,929,911 | ||
5.5% 7/18/12 | 500,000 | 506,561 | ||
6.25% 3/22/12 | 300,000 | 306,883 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 8,000,000 | 7,921,344 | ||
5.125% 8/20/12 | 2,418,000 | 2,420,844 | ||
5.25% 11/5/12 | 280,000 | 278,119 | ||
5.875% 3/21/11 | 2,095,000 | 2,226,369 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 18,678,314 | |||
U.S. Treasury Obligations - 13.0% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 945,000 | 1,053,859 | ||
6.375% 8/15/27 | 210,000 | 240,196 | ||
8% 11/15/21 | 6,000,000 | 7,955,862 | ||
9% 11/15/18 | 200,000 | 282,242 | ||
9.875% 11/15/15 | 3,000,000 | 4,361,250 | ||
U.S. Treasury Notes: | ||||
1.625% 2/28/06 | 6,000,000 | 5,923,596 | ||
2.375% 8/15/06 | 9,591,000 | 9,529,560 | ||
4% 11/15/12 | 9,840,000 | 9,627,830 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
U.S. Treasury Obligations - continued | ||||
U.S. Treasury Notes: - continued | ||||
5% 8/15/11 | $ 4,482,000 | $ 4,718,354 | ||
6.5% 2/15/10 | 4,500,000 | 5,093,613 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 48,786,362 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $68,399,874) | 67,464,676 | |||
U.S. Government Agency - Mortgage Securities - 33.8% | ||||
Fannie Mae - 33.7% | ||||
4% 8/1/19 (g) | 5,895,592 | 5,656,084 | ||
4.5% 5/1/18 to 9/1/33 | 20,633,906 | 20,069,157 | ||
4.5% 8/1/19 (g) | 4,000,000 | 3,933,750 | ||
5% 8/1/34 (g) | 42,609,899 | 41,557,945 | ||
5.5% 11/1/16 to 10/1/17 | 535,424 | 551,271 | ||
5.5% 8/1/34 (g) | 5,997,798 | 6,016,541 | ||
6.5% 5/1/08 to 2/1/33 | 7,143,018 | 7,550,964 | ||
6.5% 8/1/19 (g) | 5,755,122 | 6,080,646 | ||
7% 5/1/18 to 12/1/33 (g) | 32,622,591 | 34,537,337 | ||
TOTAL FANNIE MAE | 125,953,695 | |||
Government National Mortgage Association - 0.1% | ||||
7% 7/15/31 to 12/15/32 | 384,649 | 408,788 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $126,730,435) | 126,362,483 | |||
Asset-Backed Securities - 2.8% | ||||
ACE Securities Corp.: | ||||
Series 2003-FM1 Class M2, 3.3% 11/25/32 (h) | 40,000 | 40,732 | ||
Series 2004-HE1: | ||||
Class M1, 1.95% 2/25/34 (h) | 125,000 | 125,013 | ||
Class M2, 2.55% 2/25/34 (h) | 125,000 | 125,028 | ||
American Express Credit Account Trust Series 2004-C Class C, 1.88% 2/15/12 (f)(h) | 1,800,000 | 1,801,125 | ||
AmeriCredit Automobile Receivables Trust Series 2004-1 Class D, 5.07% 7/6/10 | 290,000 | 291,373 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Ameriquest Mortgage Securities, Inc. Series 2004-R2: | ||||
Class M1, 1.88% 4/25/34 (h) | $ 65,000 | $ 64,998 | ||
Class M2, 1.93% 4/25/34 (h) | 50,000 | 49,998 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2003-HE2 Class A2, 1.76% 4/15/33 (h) | 46,566 | 46,631 | ||
Series 2003-HE7 Class A3, 1.74% 12/15/33 (h) | 183,830 | 184,253 | ||
Bank One Issuance Trust Series 2002-C1 Class C1, 2.34% 12/15/09 (h) | 425,000 | 430,659 | ||
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 1.9119% 2/28/44 (h) | 470,031 | 471,243 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2003-B2 Class B2, 3.5% 2/17/09 | 60,000 | 60,329 | ||
Series 2003-B1 Class B1, 2.55% 2/17/09 (h) | 120,000 | 121,862 | ||
Series 2003-B4 Class B4, 2.18% 7/15/11 (h) | 90,000 | 91,626 | ||
CDC Mortgage Capital Trust Series 2003-HE2 Class M2, 3.35% 10/25/33 (h) | 30,000 | 30,888 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.73% 2/15/11 (h) | 230,000 | 231,436 | ||
Chase Credit Card Owner Trust Series 2004-1 Class B, 1.58% 5/15/09 (h) | 220,000 | 219,987 | ||
Citibank Credit Card Issuance Trust: | ||||
Series 2000-C2 Class C2, 2.25% 10/15/07 (h) | 1,000,000 | 1,002,635 | ||
Series 2002-B1 Class B1, 1.9% 6/25/09 (h) | 475,000 | 476,309 | ||
Series 2003-C1 Class C1, 2.24% 4/7/10 (h) | 305,000 | 311,971 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2004-2 Class M1, 1.95% 5/25/34 (h) | 275,000 | 274,991 | ||
Series 2004-3 Class M1, 1.95% 6/25/34 (h) | 75,000 | 75,077 | ||
First Franklin Mortgage Loan Trust Series 2004-FF2: | ||||
Class M3, 2% 3/25/34 (h) | 25,000 | 24,999 | ||
Class M4, 2.35% 3/25/34 (h) | 25,000 | 24,999 | ||
Class M6, 2.7% 3/25/34 (h) | 25,000 | 24,786 | ||
Fremont Home Loan Trust Series 2004-A: | ||||
Class M1, 2% 1/25/34 (h) | 225,000 | 224,993 | ||
Class M2, 2.6% 1/25/34 (h) | 275,000 | 274,991 | ||
GSAMP Trust Series 2004-FM2 Class M1, 1.95% 1/25/34 (h) | 250,000 | 249,990 | ||
Home Equity Asset Trust: | ||||
Series 2003-2: | ||||
Class A2, 1.83% 8/25/33 (h) | 10,662 | 10,693 | ||
Class M1, 2.33% 8/25/33 (h) | 25,000 | 25,325 | ||
Series 2003-4: | ||||
Class M1, 2.25% 10/25/33 (h) | 40,000 | 40,385 | ||
Class M2, 3.35% 10/25/33 (h) | 45,000 | 45,854 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Home Equity Asset Trust: - continued | ||||
Series 2004-3: | ||||
Class M2, 2.65% 8/25/34 (h) | $ 120,000 | $ 119,996 | ||
Class M3, 2.9% 8/25/34 (h) | 50,000 | 49,998 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-4N Class A, 8% 5/27/33 (f) | 23,154 | 23,212 | ||
Series 2003-2N Class A, 8% 9/27/33 (f) | 11,828 | 11,887 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (f) | 12,903 | 12,967 | ||
Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (f) | 200,000 | 179,000 | ||
Long Beach Mortgage Loan Trust Series 2003-3 Class M2, 3.3% 7/25/33 (h) | 45,000 | 46,184 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2003-B2 Class B2, 1.77% 10/15/10 (h) | 80,000 | 80,441 | ||
Series 2003-B3 Class B3, 1.755% 1/18/11 (h) | 285,000 | 285,715 | ||
Series 2003-B5 Class B5, 1.75% 2/15/11 (h) | 240,000 | 241,731 | ||
Meritage Mortgage Loan Trust Series 2004-1: | ||||
Class M1, 1.95% 7/25/34 (h) | 100,000 | 99,997 | ||
Class M2, 2% 7/25/34 (h) | 25,000 | 24,999 | ||
Class M3, 2.4% 7/25/34 (h) | 50,000 | 49,998 | ||
Class M4, 2.55% 7/25/34 (h) | 25,000 | 24,999 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-HE3 Class M1, 2.55% 12/27/32 (h) | 90,000 | 91,496 | ||
Series 2003-HE1 Class M2, 3.35% 5/25/33 (h) | 55,000 | 56,018 | ||
Series 2003-NC8 Class M1, 2.15% 9/25/33 (h) | 35,000 | 35,170 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4 Class M1, 2.45% 1/25/32 (h) | 40,000 | 40,635 | ||
Series 2002-NC1 Class M1, 2.25% 2/25/32 (f)(h) | 170,000 | 171,652 | ||
Series 2002-NC3 Class M1, 2.17% 8/25/32 (h) | 75,000 | 75,687 | ||
Series 2003-NC2 Class M2, 3.45% 2/25/33 (h) | 40,000 | 40,967 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (f) | 22,776 | 22,854 | ||
National Collegiate Funding LLC Series 2004-GT1 Class IO1, 7.87% 6/24/10 (f)(i) | 455,000 | 185,595 | ||
New Century Home Equity Loan Trust Series 2003-2 Class A2, 1.88% 1/25/33 (h) | 36,596 | 36,666 | ||
NovaStar Home Equity Loan Series 2004-1: | ||||
Class M1, 1.9% 6/25/34 (h) | 75,000 | 75,070 | ||
Class M4, 2.425% 6/25/34 (h) | 125,000 | 125,185 | ||
Sears Credit Account Master Trust II Series 2002-4 Class A, 1.51% 8/18/09 (h) | 100,000 | 100,120 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
SLM Private Credit Student Loan Trust Series 2004-A Class C, 2.47% 6/15/33 (h) | $ 260,000 | $ 261,270 | ||
WFS Financial 2004-3 Owner Trust Series 2004 3 Class D, 4.07% 2/17/12 | 365,000 | 365,000 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $10,381,179) | 10,409,688 | |||
Collateralized Mortgage Obligations - 3.5% | ||||
Private Sponsor - 3.1% | ||||
Bank of America Mortgage Securities, Inc.: | ||||
Series 2003-K: | ||||
Class 1A1, 3.3875% 12/25/33 (h) | 299,399 | 299,591 | ||
Class 2A1, 4.2187% 12/25/33 (h) | 386,959 | 382,492 | ||
Series 2003-L Class 2A1, 4.0362% 1/25/34 (h) | 2,209,348 | 2,191,998 | ||
Series 2004-B: | ||||
Class 1A1, 3.4463% 3/25/34 (h) | 1,004,893 | 1,001,164 | ||
Class 2A2, 4.16% 3/25/34 (h) | 249,195 | 247,747 | ||
Series 2004-C Class 1A1, 3.4381% 4/25/34 (h) | 592,642 | 586,067 | ||
Series 2004-D: | ||||
Class 1A1, 3.6061% 5/25/34 (h) | 636,390 | 629,454 | ||
Class 2A2, 4.2274% 5/25/34 (h) | 687,289 | 677,006 | ||
Series 2004-G Class 2A7, 4.6636% 8/25/34 (h) | 800,000 | 799,996 | ||
CS First Boston Mortgage Securities Corp. floater: | ||||
Series 2004-AR3 Class 6A2, 1.82% 3/25/34 (h) | 251,005 | 251,593 | ||
Series 2004-AR6 Class 9A2, 1.82% 7/25/34 (h) | 384,503 | 384,503 | ||
Granite Mortgages PLC floater Series 2004-2 Class 1C, 2.0681% 6/20/44 (h) | 235,000 | 235,000 | ||
Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34 | 94,850 | 98,133 | ||
Master Seasoned Securitization Trust Series 2004 1 Class 1A1, 6.343% 10/25/17 (g) | 620,000 | 640,150 | ||
Merrill Lynch Mortgage Investors, Inc.: | ||||
Series 2003-E Class XA1, 1% 10/25/28 (h)(i) | 2,049,661 | 30,042 | ||
Series 2003-G Class XA1, 1% 1/25/29 (i) | 2,887,874 | 49,861 | ||
Series 2003-H Class XA1, 1% 1/25/29 (f)(i) | 2,319,771 | 36,784 | ||
Merrill Lynch Trust XXIX Series 29 Class A, 5/1/13 (j) | 45,549 | 41,459 | ||
Residential Asset Mortgage Products, Inc. sequential pay: | ||||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 928,335 | 961,842 | ||
Series 2004-SL2 Class A1, 6.5% 11/25/16 | 117,206 | 121,217 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
Private Sponsor - continued | ||||
Residential Finance LP/Residential Finance Development Corp. floater: | ||||
Series 2003-CB1: | ||||
Class B3, 2.8131% 6/10/35 (f)(h) | $ 44,204 | $ 44,872 | ||
Class B4, 3.0131% 6/10/35 (f)(h) | 39,292 | 39,880 | ||
Class B5, 3.6131% 6/10/35 (f)(h) | 29,469 | 30,006 | ||
Class B6, 4.1131% 6/10/35 (f)(h) | 14,735 | 14,997 | ||
Series 2004-B: | ||||
Class B4, 2.4631% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Class B5, 2.9131% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Class B6, 3.3631% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Resix Finance Ltd. floater: | ||||
Series 2004-A Class B8, 6.5631% 2/10/36 (f)(h) | 828,248 | 828,244 | ||
Series 2004-B Class B8, 6.1131% 2/10/36 (f)(h) | 199,542 | 199,542 | ||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (f)(i) | 5,597,713 | 59,913 | ||
Washington Mutual Mortgage Securities Corp. sequential pay: | ||||
Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 95,330 | 100,677 | ||
Series 2004-RA2 Class 2A, 7% 7/25/33 | 250,105 | 259,025 | ||
TOTAL PRIVATE SPONSOR | 11,542,568 | |||
U.S. Government Agency - 0.4% | ||||
Fannie Mae sequential pay Series 1999-10 Class MZ, 6.5% 9/17/38 | 731,648 | 769,117 | ||
Fannie Mae guaranteed REMIC pass thru certificates planned amortization class Series 2001-53 Class OH, 6.5% 6/25/30 | 5,768 | 5,798 | ||
Freddie Mac planned amortization class Series 2355 Class CD, 6.5% 6/15/30 | 7,732 | 7,790 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
sequential pay Series 2750 Class ZT, 5% 2/15/34 | 372,668 | 301,099 | ||
Series 2749 Class MZ, 5% 2/15/24 | 59,468 | 59,458 | ||
Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.8704% 10/16/23 (h) | 25,000 | 26,402 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class Series 2003-75 Class LI, 5.5% 10/20/21 (i) | $ 5,845,087 | $ 168,640 | ||
sequential pay Series 2003-59 Class D, 3.654% 10/16/27 | 115,000 | 106,832 | ||
TOTAL U.S. GOVERNMENT AGENCY | 1,445,136 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $13,072,698) | 12,987,704 | |||
Commercial Mortgage Securities - 1.6% | ||||
Banc of America Large Loan, Inc. floater Series 2003-BBA2: | ||||
Class C, 1.85% 11/15/15 (f)(h) | 50,000 | 50,246 | ||
Class D, 1.93% 11/15/15 (f)(h) | 80,000 | 80,462 | ||
Class F, 2.28% 11/15/15 (f)(h) | 60,000 | 60,502 | ||
Class H, 2.78% 11/15/15 (f)(h) | 50,000 | 50,372 | ||
Class J, 3.33% 11/15/15 (f)(h) | 55,000 | 55,864 | ||
Class K, 2.8103% 11/15/15 (f)(h) | 50,000 | 50,510 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2004-1 Class A, 1.66% 4/25/34 (f)(h) | 390,139 | 389,895 | ||
Series 2004-2 Class M1, 1.82% 8/25/34 (f)(h) | 399,063 | 399,063 | ||
Series 2004-1 Class IO, 1.25% 4/25/34 (f)(i) | 4,175,558 | 279,893 | ||
Bear Stearns Commercial Mortgage Securities, Inc.: | ||||
floater: | ||||
Series 2003-BA1A Class A1, 1.4913% 4/14/15 (f)(h) | 292,813 | 292,789 | ||
Series 2004-ESA Class A2, 1.67% 5/14/16 (f)(h) | 350,000 | 350,174 | ||
sequential pay Series 2004-ESA Class A3, 4.741% 5/14/16 (f) | 180,000 | 182,054 | ||
Series 2004-ESA: | ||||
Class B, 4.888% 5/14/16 (f) | 325,000 | 327,184 | ||
Class C, 4.937% 5/14/16 (f) | 205,000 | 206,548 | ||
Class D, 4.986% 5/14/16 (f) | 75,000 | 75,471 | ||
Class E, 5.064% 5/14/16 (f) | 230,000 | 231,150 | ||
Class F, 5.182% 5/14/16 (f) | 55,000 | 55,516 | ||
COMM floater Series 2002-FL7: | ||||
Class A2, 1.73% 11/15/14 (f)(h) | 47,937 | 47,942 | ||
Class D, 1.95% 11/15/14 (f)(h) | 125,000 | 125,233 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
CS First Boston Mortgage Securities Corp. Series 2003-TFLA Class G, 1.9433% 4/15/13 (f)(h) | $ 105,000 | $ 100,801 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-22 Class B, 3.963% 5/16/32 | 60,000 | 57,958 | ||
Series 2003-36 Class C, 4.254% 2/16/31 | 55,000 | 53,478 | ||
Series 2003-47 Class C, 4.227% 10/16/27 | 105,000 | 102,157 | ||
Series 2003-47 Class XA, 0.2454% 6/16/43 (h)(i) | 6,632,656 | 336,813 | ||
GS Mortgage Securities Corp. II sequential pay: | ||||
Series 2001-LIBA Class A2, 6.615% 2/14/16 (f) | 315,000 | 341,622 | ||
Series 2003-C1 Class A2A, 3.59% 1/10/40 | 65,000 | 64,404 | ||
Host Marriot Pool Trust sequential pay Series 1999-HMTA Class D, 7.97% 8/3/15 (f) | 110,000 | 123,170 | ||
Trizechahn Office Properties Trust Series 2001-TZHA: | ||||
Class C3, 6.522% 3/15/13 (f) | 25,000 | 26,785 | ||
Class C4, 6.893% 5/15/16 (f) | 500,000 | 557,006 | ||
Class E3, 7.253% 3/15/13 (f) | 235,000 | 248,367 | ||
Wachovia Bank Commercial Mortgage Trust sequential pay Series 2003-C8 Class A3, 4.445% 11/15/35 | 785,000 | 773,322 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $6,308,252) | 6,096,751 | |||
Foreign Government and Government Agency Obligations - 3.0% | ||||
Argentine Republic 1.2138% 8/3/12 (h) | 105,000 | 70,872 | ||
Bogota Distrito Capital 9.5% 12/12/06 (Reg. S) | 95,000 | 103,550 | ||
Brazilian Federative Republic: | ||||
Brady: | ||||
capitalization bond 8% 4/15/14 | 1,149,315 | 1,083,948 | ||
new money bond L 7.6875% 4/15/09 (Reg.) (h) | 14,707 | 13,714 | ||
new money bond L, 2.11% 4/15/09 (Bearer) (h) | 44,120 | 41,141 | ||
par Z-L 6% 4/15/24 | 265,000 | 214,650 | ||
11% 8/17/40 | 385,000 | 378,070 | ||
11.25% 7/26/07 | 125,000 | 137,750 | ||
11.5% 3/12/08 | 95,000 | 104,500 | ||
12% 4/15/10 | 55,000 | 60,638 | ||
12.25% 3/6/30 | 70,000 | 75,600 | ||
12.75% 1/15/20 | 45,000 | 49,950 | ||
Central Bank of Nigeria promissory note 5.092% 1/5/10 | 76,333 | 69,825 | ||
Chilean Republic: | ||||
5.625% 7/23/07 | 100,000 | 104,875 | ||
7.125% 1/11/12 | 1,250,000 | 1,404,688 | ||
Foreign Government and Government Agency | ||||
Principal | Value | |||
City of Kiev 8.75% 8/8/08 | $ 200,000 | $ 203,000 | ||
Colombian Republic: | ||||
9.75% 4/23/09 | 200,000 | 220,500 | ||
10.75% 1/15/13 | 160,000 | 179,200 | ||
11.75% 2/25/20 | 95,000 | 109,131 | ||
Dominican Republic: | ||||
Brady 2% 8/30/09 (h) | 142,083 | 94,841 | ||
9.5% 9/27/06 (Reg. S) | 15,000 | 11,325 | ||
Ecuador Republic: | ||||
12% 11/15/12 (Reg. S) | 235,000 | 221,488 | ||
euro par 4.75% 2/28/25 (e) | 5,000 | 2,931 | ||
Hong Kong Gov Spl Admin Reg 5.125% 8/1/14 (f) | 1,185,000 | 1,177,589 | ||
Jamaican Government 10.625% 6/20/17 | 10,000 | 9,625 | ||
Lebanese Republic 10.125% 8/6/08 | 55,000 | 60,775 | ||
Panamanian Republic: | ||||
9.625% 2/8/11 | 25,000 | 28,000 | ||
10.75% 5/15/20 | 60,000 | 69,600 | ||
Peruvian Republic 9.125% 2/21/12 | 135,000 | 141,750 | ||
Philippine Republic: | ||||
Brady principal collateralized interest reduction bond 6.5% 12/1/17 | 45,000 | 43,875 | ||
8.375% 2/15/11 | 445,000 | 449,450 | ||
8.875% 3/17/15 | 40,000 | 40,300 | ||
9.875% 1/15/19 | 145,000 | 150,075 | ||
Quebec Province 7.5% 9/15/29 | 100,000 | 122,711 | ||
Russian Federation: | ||||
5% 3/31/30 (Reg. S) (e) | 1,192,000 | 1,093,660 | ||
8.25% 3/31/10 (Reg. S) | 165,000 | 177,169 | ||
euro 10% 6/26/07 | 105,000 | 117,994 | ||
South African Republic 6.5% 6/2/14 | 255,000 | 261,375 | ||
State of Israel 4.625% 6/15/13 | 20,000 | 18,725 | ||
Turkish Republic: | ||||
10.5% 1/13/08 | 170,000 | 187,850 | ||
11% 1/14/13 | 100,000 | 115,250 | ||
11.75% 6/15/10 | 255,000 | 298,988 | ||
12.375% 6/15/09 | 90,000 | 107,213 | ||
United Mexican States: | ||||
4.625% 10/8/08 | 160,000 | 159,360 | ||
7.5% 1/14/12 | 100,000 | 110,000 | ||
Uruguay Republic 7.25% 2/15/11 | 70,000 | 61,338 | ||
Venezuelan Republic: | ||||
Discount A, 2.1325% 3/31/20 (h) | 250,000 | 213,125 | ||
Foreign Government and Government Agency | ||||
Principal | Value | |||
Venezuelan Republic: - continued | ||||
5.375% 8/7/10 | $ 35,000 | $ 28,963 | ||
9.25% 9/15/27 | 150,000 | 133,125 | ||
10.75% 9/19/13 | 380,000 | 394,250 | ||
13.625% 8/15/18 | 65,000 | 73,938 | ||
euro Brady: | ||||
debt conversion bond 2.75% 12/18/07 (h) | 249,990 | 241,397 | ||
par W-B 6.75% 3/31/20 | 250,000 | 228,750 | ||
Vietnamese Socialist Republic Brady par 3.75% 3/12/28 (e) | 90,000 | 61,650 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $11,084,149) | 11,334,057 | |||
Common Stocks - 0.0% | ||||
Shares | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Multiline Retail - 0.0% | ||||
Barneys, Inc. warrants 4/1/08 (a) | 20 | 1,200 | ||
CONSUMER STAPLES - 0.0% | ||||
Personal Products - 0.0% | ||||
Revlon, Inc. Class A (a) | 18,648 | 42,890 | ||
TOTAL COMMON STOCKS (Cost $36,503) | 44,090 | |||
Nonconvertible Preferred Stocks - 0.0% | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Media - 0.0% | ||||
PRIMEDIA, Inc.: | ||||
Series D, 10.00% | 425 | 39,950 | ||
Series H, 8.625% | 1,000 | 84,000 | ||
123,950 | ||||
TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $133,738) | 123,950 | |||
Sovereign Loan Participations - 0.1% | ||||
Principal | Value | |||
Indonesian Republic loan participation: | ||||
Credit Suisse First Boston 2.0625% 3/28/13 (h) | $ 124,405 | $ 106,988 | ||
Deutsche Bank: | ||||
2.0625% 3/28/13 (h) | 14,643 | 12,593 | ||
2.5625% 3/21/05 (h) | 15,000 | 14,588 | ||
Salomon Brothers 2.5625% 3/21/05 (h) | 15,000 | 14,588 | ||
TOTAL SOVEREIGN LOAN PARTICIPATIONS (Cost $147,490) | 148,757 | |||
Fixed-Income Funds - 9.1% | ||||
Shares | ||||
Fidelity Ultra-Short Central Fund (b) | 341,900 | 34,039,564 | ||
Cash Equivalents - 15.8% | ||||
Maturity | ||||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 59,230,746 | 59,224,000 | ||
TOTAL INVESTMENT PORTFOLIO - 116.2% (Cost $436,168,709) | 434,824,531 | |||
NET OTHER ASSETS - (16.2)% | (60,573,776) | |||
NET ASSETS - 100% | $ 374,250,755 |
Swap Agreements | |||||
Expiration | Notional | Value | |||
Credit Default Swap | |||||
Receive quarterly notional amount multilpied by .43% and pay Bank of America upon default event of Apache Corp., par value of the notional amount of Apache Corp. 6.25% 4/15/12 | Sept. 2014 | $ 400,000 | $ (181) | ||
Receive quarterly notional amount multiplied by .35% and pay Goldman Sachs upon default event of Devon Energy Corp., par value of the notional amount of Devon Energy Corp. 7.95% 4/15/32 | June 2006 | 200,000 | 8 | ||
Receive quarterly notional amount multiplied by .53% and pay Deutsche Bank upon default event of SBC Communications, Inc., par value of the notional amount of SBC Communications, Inc. 6.25% 3/15/11 | March 2009 | 300,000 | 1,452 | ||
Receive quarterly notional amount multiplied by .53% and pay Lehman Brothers, Inc., upon default event of SBC Communications, Inc., par value of the notional amount of SBC Communications, Inc. 6.25% 3/15/11 | March 2009 | 200,000 | 594 | ||
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. 1.12% 7/25/35 | August 2007 | 25,000 | 316 | ||
TOTAL CREDIT DEFAULT SWAP | 1,125,000 | 2,189 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.857% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2008 | 3,000,000 | (25,221) | ||
Receive quarterly a fixed rate equal to 4.135% and pay quarterly a floating rate based on 3-month LIBOR with Merrill Lynch, Inc. | June 2006 | 8,000,000 | 36,964 | ||
Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | July 2014 | 1,135,000 | (1,932) | ||
TOTAL INTEREST RATE SWAP | 12,135,000 | 9,811 | |||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Total Return Swap | |||||
Receive monthly a return equal to Lehman Brothers CMBS AAA 8.5+ and pay monthly a floating rate based on 1-month LIBOR minus 65 basis points with Lehman Brothers, Inc. | Oct. 2004 | $ 1,000,000 | $ 15,634 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 50 basis points with Lehman Brothers, Inc. | August 2004 | 630,000 | 6,082 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 50 basis points with Lehman Brothers, Inc. | Sept. 2004 | 600,000 | 5,793 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 55 basis points with Deutsche Bank | Dec. 2004 | 500,000 | 5,069 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 72 basis points with Bank of America | Jan. 2005 | 1,000,000 | 445 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage-Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 70 basis points with Bank of America | Dec. 2004 | 1,000,000 | 26,163 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage-Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 80 basis points with Bank of America | Nov. 2004 | 2,000,000 | 28,594 | ||
TOTAL TOTAL RETURN SWAP | 6,730,000 | 87,780 | |||
$ 19,990,000 | $ 99,780 |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(f) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $25,398,709 or 6.8% of net assets. |
(g) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(j) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(k) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$59,224,000 due 8/2/04 at 1.37% | |
Bank of America, National Association | $ 9,951,645 |
Banc of America Securities LLC | 21,905,332 |
Bear Stearns & Co. Inc. | 2,487,911 |
BNP Paribas Securities Corp. | 2,487,911 |
Goldman, Sachs & Co. | 2,487,911 |
Morgan Stanley & Co. Incorporated | 19,903,290 |
$ 59,224,000 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.5% |
Cayman Islands | 1.3% |
United Kingdom | 1.3% |
Netherlands | 1.0% |
Others (individually less than 1%) | 6.9% |
100.0% |
Income Tax Information |
The fund hereby designates approximately $346,000 as a 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, 2004 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $59,224,000) (cost $436,168,709) - See accompanying schedule | $ 434,824,531 | |
Cash | 274,348 | |
Receivable for investments sold | 355,713 | |
Receivable for fund shares sold | 292,929 | |
Dividends receivable | 1,063 | |
Interest receivable | 3,569,415 | |
Swap agreements, at value | 99,780 | |
Prepaid expenses | 239 | |
Receivable from investment adviser for expense reductions | 31,093 | |
Total assets | 439,449,111 | |
Liabilities | ||
Payable for investments purchased | $ 648,329 | |
Delayed delivery | 64,162,395 | |
Payable for fund shares redeemed | 105,811 | |
Distributions payable | 36,647 | |
Accrued management fee | 131,425 | |
Distribution fees payable | 228 | |
Other affiliated payables | 67,193 | |
Other payables and accrued expenses | 46,328 | |
Total liabilities | 65,198,356 | |
Net Assets | $ 374,250,755 | |
Net Assets consist of: | ||
Paid in capital | $ 374,446,491 | |
Undistributed net investment income | 79,241 | |
Accumulated undistributed net realized gain (loss) on investments | 969,421 | |
Net unrealized appreciation (depreciation) on investments | (1,244,398) | |
Net Assets | $ 374,250,755 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2004 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 10.46 | |
Maximum offering price per share (100/95.25 of $10.46) | $ 10.98 | |
Class T: | $ 10.46 | |
Maximum offering price per share (100/96.50 of $10.46) | $ 10.84 | |
Class B: | $ 10.46 | |
Class C: | $ 10.46 | |
Fidelity Total Bond: | $ 10.46 | |
Institutional Class: | $ 10.46 |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2004 | ||
Investment Income | ||
Dividends | $ 19,783 | |
Interest | 10,504,723 | |
Total income | 10,524,506 | |
Expenses | ||
Management fee | $ 1,152,050 | |
Transfer agent fees | 535,569 | |
Distribution fees | 337 | |
Accounting fees and expenses | 114,560 | |
Non-interested trustees' compensation | 1,181 | |
Custodian fees and expenses | 23,733 | |
Registration fees | 140,491 | |
Audit | 38,827 | |
Legal | 4,405 | |
Miscellaneous | 16,445 | |
Total expenses before reductions | 2,027,598 | |
Expense reductions | (275,019) | 1,752,579 |
Net investment income (loss) | 8,771,927 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 1,044,604 | |
Swap agreements | (106,905) | |
Total net realized gain (loss) | 937,699 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 744,733 | |
Swap agreements | 101,024 | |
Delayed delivery commitments | (138,750) | |
Total change in net unrealized appreciation (depreciation) | 707,007 | |
Net gain (loss) | 1,644,706 | |
Net increase (decrease) in net assets resulting from operations | $ 10,416,633 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | October 15, 2002 | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 8,771,927 | $ 1,155,369 |
Net realized gain (loss) | 937,699 | 1,196,805 |
Change in net unrealized appreciation (depreciation) | 707,007 | (1,951,405) |
Net increase (decrease) in net assets resulting | 10,416,633 | 400,769 |
Distributions to shareholders from net investment income | (8,644,971) | (1,105,904) |
Distributions to shareholders from net realized gain | (461,703) | - |
Total distributions | (9,106,674) | (1,105,904) |
Share transactions - net increase (decrease) | 292,125,223 | 81,520,708 |
Total increase (decrease) in net assets | 293,435,182 | 80,815,573 |
Net Assets | ||
Beginning of period | 80,815,573 | - |
End of period (including undistributed net investment income of $79,241 and undistributed net investment income of $48,177, respectively) | $ 374,250,755 | $ 80,815,573 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .046 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .191 |
Distributions from net investment income | (.041) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.85% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | .87%A |
Expenses net of voluntary waivers, if any | .80%A |
Expenses net of all reductions | .80%A |
Net investment income (loss) | 3.51%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .045 |
Net realized and unrealized gain (loss) | .144 |
Total from investment operations | .189 |
Distributions from net investment income | (.039) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.84% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | .96%A |
Expenses net of voluntary waivers, if any | .90%A |
Expenses net of all reductions | .90%A |
Net investment income (loss) | 3.41%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .036 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .181 |
Distributions from net investment income | (.031) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.76% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 1.62%A |
Expenses net of voluntary waivers, if any | 1.55%A |
Expenses net of all reductions | 1.55%A |
Net investment income (loss) | 2.76%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 104 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .035 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .180 |
Distributions from net investment income | (.030) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.74% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 1.74%A |
Expenses net of voluntary waivers, if any | 1.65%A |
Expenses net of all reductions | 1.65%A |
Net investment income (loss) | 2.66%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 142 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Total Bond
Years ended July 31, | 2004 | 2003F |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 10.28 | $ 10.00 |
Income from Investment Operations | ||
Net investment income (loss)D | .340 | .232 |
Net realized and unrealized gain (loss) | .237 | .269E |
Total from investment operations | .577 | .501 |
Distributions from net investment income | (.337) | (.221) |
Distributions from net realized gain | (.060) | - |
Total distributions | (.397) | (.221) |
Net asset value, end of period | $ 10.46 | $ 10.28 |
Total ReturnB,C | 5.68% | 5.01% |
Ratios to Average Net AssetsG | ||
Expenses before expense reductions | .75% | 1.01%A |
Expenses net of voluntary waivers, if any | .65% | .65%A |
Expenses net of all reductions | .65% | .65%A |
Net investment income (loss) | 3.25% | 2.83%A |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 373,699 | $ 80,816 |
Portfolio turnover rate | 251% | 423%A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E 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 class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Year ended July 31, | 2004E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)D | .048 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .193 |
Distributions from net investment income | (.043) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C | 1.87% |
Ratios to Average Net AssetsF | |
Expenses before expense reductions | .71%A |
Expenses net of voluntary waivers, if any | .65%A |
Expenses net of all reductions | .65%A |
Net investment income (loss) | 3.66%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2004
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 fund offers Class A, Class T, Class B, Class C, Fidelity Total Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
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, including restricted 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 valuation models. Equity securities, including restricted 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 prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, 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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from net investment income and realized gain for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swap agreements, market discount, non-taxable dividends, financing transactions and losses deferred due to wash sales.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 2,516,785 | |
Unrealized depreciation | (3,578,968) | |
Net unrealized appreciation (depreciation) | (1,062,183) | |
Undistributed ordinary income | 1,657,054 | |
Undistributed long-term capital gain | 169,658 | |
Cost for federal income tax purposes | $ 435,886,714 |
The tax character of distributions paid was as follows:
July 31, 2004 | July 31, 2003 | |
Ordinary Income | $ 9,106,674 | $ 1,105,904 |
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 by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - 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 at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Total return swaps are agreements to exchange the return generated by one instrument for the return generated by another instrument, for example, the agreement to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the index exceeds the offsetting interest obligation, the fund will receive a payment from the counterparty. To the extent it is less, the fund will make a payment to the counterparty. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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. Periodic payments and premiums received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
Annual Report
2. Operating Policies - continued
Swap Agreements - continued
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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
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 may 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 sale 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. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $190,553,218 and $50,166,230, respectively.
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
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 20 | $ 20 |
Class T | 0% | .25% | 32 | 32 |
Class B | .65% | .25% | 115 | 115 |
Class C | .75% | .25% | 170 | 129 |
$ 337 | $ 296 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, no sales charges were retained by FDC.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the fund, except for Fidelity Total Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, , is the transfer agent for Fidelity Total Bond shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of shareholder
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
Amount | % of | |
Class A | $ 20 | .16 |
Class T | 20 | .16 |
Class B | 20 | .16 |
Class C | 29 | .17 |
Fidelity Total Bond | 535,460 | .20 |
Institutional Class | 20 | .16 |
$ 535,569 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month.
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 $440,328 for the period.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
6. Expense Reductions.
FMR agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | .80% | $ 9 |
Class T | .90% | 8 |
Class B | 1.55% | 8 |
Class C | 1.65% | 15 |
Fidelity Total Bond | .65% | 273,223 |
Institutional Class | .65% | 8 |
$ 273,271 |
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 $1,748.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2004A | 2003B |
From net investment income | ||
Class A | $ 394 | $ - |
Class T | 382 | - |
Class B | 301 | - |
Class C | 386 | - |
Fidelity Total Bond | 8,643,095 | 1,105,904 |
Institutional Class | 413 | - |
Total | $ 8,644,971 | $ 1,105,904 |
From net realized gain | ||
Fidelity Total Bond | $ 461,703 | $ - |
A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Distributions for Fidelity Total Bond are for the period October 15, 2002 (commencement of operations) to July 31, 2003.
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2004A | 2003B | 2004A | 2003B |
Class A | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 38 | - | 394 | - |
Net increase (decrease) | 9,737 | - | $ 100,394 | $ - |
Class T | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 37 | - | 382 | - |
Net increase (decrease) | 9,736 | - | $ 100,382 | $ - |
Class B | ||||
Shares sold | 9,950 | - | $ 102,625 | $ - |
Reinvestment of distributions | 29 | - | 301 | - |
Net increase (decrease) | 9,979 | - | $ 102,926 | $ - |
Class C | ||||
Shares sold | 13,566 | - | $ 140,062 | $ - |
Reinvestment of distributions | 37 | - | 386 | - |
Net increase (decrease) | 13,603 | - | $ 140,448 | $ - |
Fidelity Total Bond | ||||
Shares sold | 34,227,901 | 14,730,271 | $ 358,024,636 | $ 153,496,596 |
Reinvestment of distributions | 845,761 | 98,006 | 8,865,286 | 1,022,553 |
Shares redeemed | (7,201,869) | (6,966,063) | (75,309,262) | (72,998,441) |
Net increase (decrease) | 27,871,793 | 7,862,214 | $ 291,580,660 | $ 81,520,708 |
Institutional Class | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 40 | - | 413 | - |
Net increase (decrease) | 9,739 | - | $ 100,413 | $ - |
A Share transactions for Class A, Class T, Class B, Class C, and Institutional Class are for the period June 16, 2004 (commencement of sales of shares) to July 31, 2004.
B Share transactions for Fidelity Total Bond are for the period October 15, 2002 (commencement of operations) to July 31, 2003.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Total Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Total Bond Fund (a fund of Fidelity Income Fund) at July 31, 2004 and the results of its operations, the changes in its 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 Total Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 293 funds advised by FMR or an affiliate. Mr. McCoy oversees 295 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 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
Year of Election or Appointment: 2001 Senior Vice President of the fund (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 (50) | |
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 (52) | |
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998 and retired as Chairman May 1999, and 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. He is also a member of the Executive Committee and Chairman of the Policy Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 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 Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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 (43) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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. | |
Kevin E. Grant (44) | |
Year of Election or Appointment: 2002 Vice President of the fund. Mr. Grant also serves as 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 (55) | |
Year of Election or Appointment: 2002 Secretary of the fund. 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 (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of the fund. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the fund. 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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of the fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the fund. 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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of the fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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 Advisor Total Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Class A | 9/07/04 | 9/03/04 | $0.02 |
Class T | 9/07/04 | 9/03/04 | $0.02 |
Class B | 9/07/04 | 9/03/04 | $0.02 |
Class C | 9/07/04 | 9/03/04 | $0.02 |
A total of 16.67% 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 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | 7,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.496 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
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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 Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income, 2005, 2010, 2015, 2020, 2025, 2030, 2035, 2040 FundsSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
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ATB-UANN-0904
1.804574.100
(Fidelity Investment logo)(registered trademark)
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82 Devonshire St., Boston, MA 02109
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(Fidelity Investment logo)(registered trademark)
Fidelity Advisor
Total Bond
Fund - Institutional Class
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Institutional Class is a class of Fidelity Total Bond Fund
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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.
Commencing with the fiscal quarter ending October 31, 2004, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. The fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the fund's portfolio holdings, view the fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
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 Advisor fund, including charges and expenses, contact your investment professional 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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
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 class' 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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Life of | |
Institutional Class B | 5.68% | 5.97% |
A From October 15, 2002.
B The initial offering of Institutional Class shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Total Bond, the original retail class of the fund, which does not bear a 12b-1 fee.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Total Bond Fund - Institutional Class on October 15, 2002, when the fund started. The chart shows how the value of your investment would have 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 Advisor Total Bond Fund
Investment-grade debt had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
The fund's Institutional Class shares rose 5.68% during the past year, versus 5.47% for the Lehman Brothers U.S. Universal Index. Sector allocation contributed a lot, as I took advantage of the fund's flexibility to access value across the entire bond market. Of particular note, my positioning in the below-investment-grade high-yield and emerging-markets sectors - which combined represented only a small portion of the fund's net assets - paid off in spades. The fund was rewarded for overweighting high-yield securities, which handily outpaced most fixed-income alternatives amid a positive environment for riskier assets. We had a better tactical result, however, on the more-volatile emerging-markets front, thanks to some timely shifts into and out of the sector. Within the investment-grade universe, I continued to shy away from weak government bonds - particularly Treasuries - while favoring higher-yielding spread sectors, notably mortgage securities, which outperformed throughout the period. Favorable issue selection within corporates also helped, as did effective yield-curve positioning. Conversely, there are always things I could have done better - including having larger over- and underweightings - but during a period in which so much went right for the fund, it's difficult to find anything that had a meaningful negative impact.
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
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.50 | $ 1.00 |
HypotheticalA | $ 1,000.00 | $ 1,005.30 | $ 1.00 |
Class T(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.40 | $ 1.14 |
HypotheticalA | $ 1,000.00 | $ 1,005.17 | $ 1.13 |
Beginning | Ending | Expenses Paid | |
Class B(dagger) | |||
Actual | $ 1,000.00 | $ 1,017.60 | $ 1.97 |
HypotheticalA | $ 1,000.00 | $ 1,004.35 | $ 1.95 |
Class C(dagger) | |||
Actual | $ 1,000.00 | $ 1,017.40 | $ 2.09 |
HypotheticalA | $ 1,000.00 | $ 1,004.22 | $ 2.08 |
Fidelity Total Bond | |||
Actual | $ 1,000.00 | $ 1,006.10 | $ 3.24 |
HypotheticalA | $ 1,000.00 | $ 1,021.73 | $ 3.27 |
Institutional Class(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.70 | $ .82 |
HypotheticalA | $ 1,000.00 | $ 1,005.48 | $ .82 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Class A | .80% |
Class T | .90% |
Class B | 1.55% |
Class C | 1.65% |
Fidelity Total Bond | .65% |
Institutional Class | .65% |
8 Calculated by multiplying by 46/366 to reflect the period 6/16/2004 to July 31, 2004.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) as of July 31, 2004 | |||||||
As of July 31, 2004 | As of January 31, 2004 | ||||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | AAA 5.4% | ![]() | AAA 3.8% | ||||
![]() | AA 3.2% | ![]() | AA 3.4% | ||||
![]() | A 10.0% | ![]() | A 6.2% | ||||
![]() | BBB 15.9% | ![]() | BBB 11.1% | ||||
![]() | BB and Below 9.3% | ![]() | BB and Below 8.5% | ||||
![]() | Not Rated 0.8% | ![]() | Not Rated 1.3% | ||||
![]() | Equities 0.0% | ![]() | Equities 0.1% | ||||
![]() | Short-Term Investments | ![]() | Short-Term Investments |
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, 2004 | ||
6 months ago | ||
Years | 5.8 | 5.1 |
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, 2004 | ||
6 months ago | ||
Years | 4.7 | 4.5 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Corporate Bonds 29.0% | ![]() | Corporate Bonds 23.2% | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 6.2% | ![]() | CMOs and Other Mortgage Related Securities 4.2% | ||||
![]() | Stocks 0.0% | ![]() | Stocks 0.1% | ||||
![]() | Other Investments 3.1% | ![]() | Other Investments 1.4% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 10.5% | ** Foreign investments | 6.5% | ||||
* Futures and Swaps | 5.4% | ** Futures and Swaps | 1.8% |
The information in the above table 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, 2004
Showing Percentage of Net Assets
Nonconvertible Bonds - 28.5% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 4.4% | ||||
Auto Components - 0.4% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.75% 1/15/08 | $ 200,000 | $ 203,395 | ||
7.2% 9/1/09 | 1,000,000 | 1,098,733 | ||
EaglePicher, Inc. 9.75% 9/1/13 | 20,000 | 21,500 | ||
Visteon Corp. 7% 3/10/14 | 80,000 | 75,900 | ||
1,399,528 | ||||
Automobiles - 0.1% | ||||
General Motors Corp. 7.2% 1/15/11 | 500,000 | 522,651 | ||
Hotels, Restaurants & Leisure - 1.0% | ||||
Argosy Gaming Co. 7% 1/15/14 (f) | 80,000 | 79,800 | ||
Bally Total Fitness Holding Corp.: | ||||
9.875% 10/15/07 | 15,000 | 12,975 | ||
10.5% 7/15/11 | 120,000 | 116,100 | ||
Friendly Ice Cream Corp. 8.375% 6/15/12 | 70,000 | 66,500 | ||
Gaylord Entertainment Co. 8% 11/15/13 | 160,000 | 164,800 | ||
Herbst Gaming, Inc. 8.125% 6/1/12 (f) | 70,000 | 68,950 | ||
HMH Properties, Inc. 7.875% 8/1/08 | 213,000 | 219,390 | ||
Host Marriott LP: | ||||
7.125% 11/1/13 | 35,000 | 34,781 | ||
8.375% 2/15/06 | 200,000 | 212,000 | ||
Mandalay Resort Group 6.375% 12/15/11 | 150,000 | 153,375 | ||
MGM MIRAGE: | ||||
6% 10/1/09 | 20,000 | 19,850 | ||
8.375% 2/1/11 | 40,000 | 42,800 | ||
Mohegan Tribal Gaming Authority: | ||||
7.125% 8/15/14 (f) | 40,000 | 40,500 | ||
8.375% 7/1/11 | 35,000 | 39,550 | ||
Morton's Restaurant Group, Inc. 7.5% 7/1/10 | 65,000 | 61,100 | ||
MTR Gaming Group, Inc. 9.75% 4/1/10 | 135,000 | 145,800 | ||
NCL Corp. Ltd. 10.625% 7/15/14 (f) | 80,000 | 80,800 | ||
Park Place Entertainment Corp. 7.875% 12/15/05 | 50,000 | 52,625 | ||
Penn National Gaming, Inc.: | ||||
6.875% 12/1/11 (f) | 80,000 | 79,200 | ||
8.875% 3/15/10 | 100,000 | 109,250 | ||
Premier Entertainment Biloxi LLC 10.75% 2/1/12 (f) | 20,000 | 21,100 | ||
Resorts International Hotel & Casino, Inc. 11.5% 3/15/09 | 225,000 | 253,125 | ||
Seneca Gaming Corp. 7.25% 5/1/12 (f) | 50,000 | 49,813 | ||
Six Flags, Inc.: | ||||
9.5% 2/1/09 | 280,000 | 270,200 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Six Flags, Inc.: - continued | ||||
9.625% 6/1/14 | $ 100,000 | $ 92,250 | ||
Speedway Motorsports, Inc. 6.75% 6/1/13 (f) | 100,000 | 99,500 | ||
Station Casinos, Inc.: | ||||
6% 4/1/12 | 70,000 | 68,775 | ||
6.5% 2/1/14 | 40,000 | 38,900 | ||
6.875% 3/1/16 | 100,000 | 97,000 | ||
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | 325,000 | 349,375 | ||
Town Sports International, Inc. 9.625% 4/15/11 | 20,000 | 19,350 | ||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 100,000 | 114,500 | ||
Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (f) | 9,000 | 9,540 | ||
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | 160,000 | 169,600 | ||
Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp. 12% 11/1/10 | 167,000 | 206,663 | ||
3,659,837 | ||||
Household Durables - 0.1% | ||||
D.R. Horton, Inc. 8.5% 4/15/12 | 30,000 | 33,450 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.5% 1/15/14 | 100,000 | 94,000 | ||
8.875% 4/1/12 | 10,000 | 10,850 | ||
Sealy Mattress Co. 8.25% 6/15/14 (f) | 50,000 | 50,000 | ||
WCI Communities, Inc. 9.125% 5/1/12 | 35,000 | 37,625 | ||
William Lyon Homes, Inc. 10.75% 4/1/13 | 40,000 | 44,800 | ||
270,725 | ||||
Internet & Catalog Retail - 0.1% | ||||
USA Interactive 7% 1/15/13 | 300,000 | 328,500 | ||
Media - 2.5% | ||||
AMC Entertainment, Inc. 8% 3/1/14 (f) | 290,000 | 266,800 | ||
AOL Time Warner, Inc. 7.625% 4/15/31 | 1,000,000 | 1,100,158 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 8.2% 7/15/09 | 1,000,000 | 1,157,109 | ||
Cablevision Systems Corp.: | ||||
5.66% 4/1/09 (f)(h) | 40,000 | 40,400 | ||
8% 4/15/12 (f) | 180,000 | 176,400 | ||
Carmike Cinemas, Inc. 7.5% 2/15/14 (f) | 60,000 | 57,000 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp. 8.375% 4/30/14 (f) | $ 70,000 | $ 67,550 | ||
Cinemark, Inc. 0% 3/15/14 (d) | 100,000 | 66,250 | ||
Comcast Corp. 5.85% 1/15/10 | 500,000 | 525,084 | ||
Cox Communications, Inc.: | ||||
4.625% 6/1/13 | 90,000 | 83,770 | ||
7.125% 10/1/12 | 355,000 | 391,496 | ||
CSC Holdings, Inc.: | ||||
6.75% 4/15/12 (f) | 40,000 | 38,400 | ||
7.875% 2/15/18 | 50,000 | 48,000 | ||
Dex Media, Inc.: | ||||
0% 11/15/13 (d)(f) | 100,000 | 69,000 | ||
8% 11/15/13 (f) | 10,000 | 10,050 | ||
EchoStar DBS Corp.: | ||||
6.375% 10/1/11 | 150,000 | 147,000 | ||
9.125% 1/15/09 | 72,000 | 79,020 | ||
Granite Broadcasting Corp. 9.75% 12/1/10 | 40,000 | 36,400 | ||
Houghton Mifflin Co. 9.875% 2/1/13 | 70,000 | 71,750 | ||
Innova S. de R.L. 9.375% 9/19/13 | 160,000 | 170,000 | ||
Liberty Media Corp. 8.25% 2/1/30 | 1,100,000 | 1,237,470 | ||
LodgeNet Entertainment Corp. 9.5% 6/15/13 | 130,000 | 142,025 | ||
Loews Cineplex Entertainment Corp. 9% 8/1/14 (f) | 100,000 | 100,000 | ||
Medianews Group, Inc.: | ||||
6.375% 4/1/14 | 200,000 | 186,000 | ||
6.875% 10/1/13 | 250,000 | 242,500 | ||
PanAmSat Corp. 9% 8/15/14 (f)(g) | 130,000 | 130,000 | ||
PEI Holdings, Inc. 11% 3/15/10 | 11,000 | 12,760 | ||
PRIMEDIA, Inc.: | ||||
7.625% 4/1/08 | 280,000 | 274,400 | ||
8.875% 5/15/11 | 25,000 | 24,563 | ||
Radio One, Inc. 8.875% 7/1/11 | 100,000 | 109,500 | ||
Spanish Broadcasting System, Inc. 9.625% 11/1/09 | 45,000 | 47,419 | ||
The Reader's Digest Association, Inc. 6.5% 3/1/11 | 70,000 | 69,300 | ||
TV Azteca SA de CV: | ||||
euro 10.5% 2/15/07 (Reg. S) | 210,000 | 215,250 | ||
yankee 10.5% 2/15/07 | 5,000 | 5,125 | ||
Viacom, Inc. 7.7% 7/30/10 | 1,205,000 | 1,382,343 | ||
Walt Disney Co. 6.375% 3/1/12 | 700,000 | 755,504 | ||
9,535,796 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Multiline Retail - 0.1% | ||||
Barneys, Inc. 9% 4/1/08 | $ 20,000 | $ 20,600 | ||
The May Department Stores Co. 3.95% 7/15/07 (f) | 175,000 | 174,998 | ||
195,598 | ||||
Specialty Retail - 0.1% | ||||
Asbury Automotive Group, Inc.: | ||||
8% 3/15/14 | 60,000 | 56,100 | ||
9% 6/15/12 | 15,000 | 15,150 | ||
Boise Cascade Corp. 7.5% 2/1/08 | 40,000 | 44,269 | ||
General Nutrition Centers, Inc. 8.5% 12/1/10 (f) | 20,000 | 20,150 | ||
Hollywood Entertainment Corp. 9.625% 3/15/11 | 50,000 | 56,250 | ||
Nebraska Book Co., Inc. 8.625% 3/15/12 | 90,000 | 89,100 | ||
Sonic Automotive, Inc. 8.625% 8/15/13 | 50,000 | 51,375 | ||
Toys 'R' US, Inc. 7.875% 4/15/13 | 20,000 | 20,350 | ||
United Auto Group, Inc. 9.625% 3/15/12 | 50,000 | 54,750 | ||
407,494 | ||||
Textiles Apparel & Luxury Goods - 0.0% | ||||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 10,000 | 9,500 | ||
11.625% 1/15/08 | 10,000 | 10,000 | ||
12.25% 12/15/12 | 65,000 | 65,650 | ||
85,150 | ||||
TOTAL CONSUMER DISCRETIONARY | 16,405,279 | |||
CONSUMER STAPLES - 1.2% | ||||
Food & Staples Retailing - 0.7% | ||||
Jean Coutu Group, Inc.: | ||||
7.625% 8/1/12 (f) | 30,000 | 30,188 | ||
8.5% 8/1/14 (f) | 60,000 | 59,475 | ||
Pathmark Stores, Inc. 8.75% 2/1/12 | 200,000 | 204,000 | ||
Rite Aid Corp.: | ||||
6% 12/15/05 (f) | 20,000 | 20,000 | ||
7.625% 4/15/05 | 15,000 | 15,300 | ||
Safeway, Inc. 6.5% 3/1/11 | 2,000,000 | 2,136,780 | ||
Stater Brothers Holdings, Inc. 8.125% 6/15/12 (f) | 80,000 | 81,800 | ||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | 45,000 | 42,750 | ||
9.125% 12/15/11 | 10,000 | 8,725 | ||
2,599,018 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Food Products - 0.1% | ||||
Corn Products International, Inc. 8.25% 7/15/07 | $ 5,000 | $ 5,450 | ||
Del Monte Corp. 9.25% 5/15/11 | 50,000 | 54,625 | ||
Doane Pet Care Co.: | ||||
9.75% 5/15/07 | 50,000 | 47,500 | ||
10.75% 3/1/10 | 200,000 | 214,000 | ||
Kraft Foods, Inc. 5.25% 6/1/07 | 20,000 | 20,861 | ||
Pierre Foods, Inc. 9.875% 7/15/12 (f) | 40,000 | 40,500 | ||
United Agriculture Products, Inc. 8.25% 12/15/11 (f) | 30,000 | 33,000 | ||
415,936 | ||||
Household Products - 0.0% | ||||
Fort James Corp. 6.875% 9/15/07 | 150,000 | 157,125 | ||
Personal Products - 0.0% | ||||
Elizabeth Arden, Inc. 7.75% 1/15/14 | 20,000 | 20,450 | ||
Tobacco - 0.4% | ||||
Altria Group, Inc. 7% 11/4/13 | 1,240,000 | 1,279,996 | ||
TOTAL CONSUMER STAPLES | 4,472,525 | |||
ENERGY - 1.1% | ||||
Energy Equipment & Services - 0.1% | ||||
Cooper Cameron Corp. 2.65% 4/15/07 | 340,000 | 331,286 | ||
Grant Prideco, Inc. 9% 12/15/09 | 10,000 | 10,875 | ||
Hanover Compressor Co.: | ||||
8.625% 12/15/10 | 20,000 | 21,100 | ||
9% 6/1/14 | 50,000 | 52,625 | ||
Universal Compression, Inc. 7.25% 5/15/10 | 40,000 | 41,650 | ||
457,536 | ||||
Oil & Gas - 1.0% | ||||
Amerada Hess Corp.: | ||||
6.65% 8/15/11 | 70,000 | 75,068 | ||
7.125% 3/15/33 | 185,000 | 188,515 | ||
7.375% 10/1/09 | 160,000 | 175,207 | ||
Anadarko Petroleum Corp. 5% 10/1/12 | 400,000 | 397,594 | ||
Chesapeake Energy Corp.: | ||||
6.875% 1/15/16 | 50,000 | 49,250 | ||
7.75% 1/15/15 | 30,000 | 31,800 | ||
8.375% 11/1/08 | 50,000 | 54,500 | ||
El Paso Energy Corp.: | ||||
7.375% 12/15/12 | 5,000 | 4,450 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
ENERGY - continued | ||||
Oil & Gas - continued | ||||
El Paso Energy Corp.: - continued | ||||
7.75% 1/15/32 | $ 15,000 | $ 12,225 | ||
8.05% 10/15/30 | 95,000 | 78,850 | ||
El Paso Production Holding Co. 7.75% 6/1/13 | 140,000 | 133,000 | ||
EnCana Corp. 6.5% 8/15/34 | 155,000 | 155,339 | ||
EXCO Resources, Inc. 7.25% 1/15/11 | 30,000 | 30,750 | ||
General Maritime Corp. 10% 3/15/13 | 310,000 | 344,875 | ||
Giant Industries, Inc. 8% 5/15/14 | 130,000 | 132,769 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12 | 40,000 | 46,800 | ||
OAO Gazprom 9.625% 3/1/13 | 220,000 | 230,725 | ||
Overseas Shipholding Group, Inc.: | ||||
7.5% 2/15/24 | 55,000 | 51,425 | ||
8.25% 3/15/13 | 40,000 | 42,400 | ||
Pecom Energia SA: | ||||
8.125% 7/15/10 (Reg. S) | 75,000 | 73,500 | ||
9% 1/30/07 (f) | 100,000 | 103,500 | ||
9% 5/1/09 (Reg. S) | 95,000 | 96,544 | ||
Range Resources Corp. 7.375% 7/15/13 (f) | 40,000 | 40,500 | ||
Ship Finance International Ltd. 8.5% 12/15/13 | 330,000 | 316,800 | ||
Teekay Shipping Corp. 8.875% 7/15/11 | 30,000 | 33,000 | ||
The Coastal Corp.: | ||||
6.375% 2/1/09 | 5,000 | 4,475 | ||
6.5% 5/15/06 | 65,000 | 64,350 | ||
6.5% 6/1/08 | 100,000 | 91,625 | ||
7.5% 8/15/06 | 50,000 | 50,000 | ||
7.75% 6/15/10 | 200,000 | 185,000 | ||
Williams Companies, Inc.: | ||||
7.125% 9/1/11 | 5,000 | 5,200 | ||
7.625% 7/15/19 | 30,000 | 30,225 | ||
7.875% 9/1/21 | 35,000 | 35,219 | ||
8.125% 3/15/12 | 30,000 | 32,625 | ||
8.625% 6/1/10 | 30,000 | 33,675 | ||
8.75% 3/15/32 | 165,000 | 173,250 | ||
YPF SA yankee 9.125% 2/24/09 | 235,000 | 255,563 | ||
3,860,593 | ||||
TOTAL ENERGY | 4,318,129 | |||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - 11.8% | ||||
Capital Markets - 1.6% | ||||
Amvescap PLC 5.9% 1/15/07 | $ 25,000 | $ 26,463 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (h) | 100,000 | 96,751 | ||
4.25% 9/4/12 (h) | 205,000 | 205,399 | ||
BCP Caylux Holdings Luxembourg SCA 9.625% 6/15/14 (f) | 170,000 | 177,438 | ||
Credit Suisse First Boston (USA), Inc. 4.7% 6/1/09 | 440,000 | 445,051 | ||
E*TRADE Financial Corp. 8% 6/15/11 (f) | 130,000 | 129,675 | ||
Equinox Holdings Ltd. 9% 12/15/09 (f) | 20,000 | 19,950 | ||
Franklin Resources, Inc. 3.7% 4/15/08 | 1,135,000 | 1,124,891 | ||
Goldman Sachs Group, Inc.: | ||||
5.7% 9/1/12 | 1,100,000 | 1,127,431 | ||
6.6% 1/15/12 | 500,000 | 543,678 | ||
Legg Mason, Inc. 6.75% 7/2/08 | 30,000 | 32,716 | ||
Morgan Stanley: | ||||
4.75% 4/1/14 | 720,000 | 672,543 | ||
6.6% 4/1/12 | 1,100,000 | 1,194,670 | ||
5,796,656 | ||||
Commercial Banks - 1.4% | ||||
Bank of America Corp. 7.4% 1/15/11 | 1,000,000 | 1,139,934 | ||
Corporacion Andina de Fomento 5.2% 5/21/13 | 35,000 | 34,234 | ||
Export-Import Bank of Korea: | ||||
4.125% 2/10/09 (f) | 140,000 | 136,863 | ||
5.25% 2/10/14 (f) | 515,000 | 501,244 | ||
Korea Development Bank: | ||||
3.875% 3/2/09 | 600,000 | 581,222 | ||
4.75% 7/20/09 | 320,000 | 319,700 | ||
5.75% 9/10/13 | 350,000 | 354,777 | ||
National Westminster Bank PLC yankee 7.375% 10/1/09 | 1,500,000 | 1,709,823 | ||
Wachovia Corp. 4.875% 2/15/14 | 600,000 | 578,924 | ||
5,356,721 | ||||
Consumer Finance - 1.9% | ||||
American General Finance Corp.: | ||||
4% 3/15/11 | 655,000 | 627,888 | ||
4.625% 5/15/09 | 1,200,000 | 1,210,505 | ||
AmeriCredit Corp. 9.25% 5/1/09 | 150,000 | 160,500 | ||
Capital One Bank: | ||||
4.875% 5/15/08 | 1,075,000 | 1,094,931 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Bank: - continued | ||||
6.5% 6/13/13 | $ 1,090,000 | $ 1,138,642 | ||
Ford Motor Credit Co.: | ||||
7% 10/1/13 | 2,000,000 | 2,035,712 | ||
7.875% 6/15/10 | 250,000 | 272,936 | ||
General Motors Acceptance Corp. 6.875% 9/15/11 | 525,000 | 538,948 | ||
Household Finance Corp.: | ||||
4.75% 5/15/09 | 100,000 | 101,381 | ||
6.375% 11/27/12 | 30,000 | 32,208 | ||
6.75% 5/15/11 | 40,000 | 44,065 | ||
7,257,716 | ||||
Diversified Financial Services - 5.1% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 40,000 | 39,700 | ||
6.875% 5/1/29 | 170,000 | 147,050 | ||
8.25% 7/15/10 | 40,000 | 42,700 | ||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 50,000 | 44,500 | ||
6.977% 11/23/22 | 11,499 | 10,119 | ||
7.377% 5/23/19 | 51,886 | 35,801 | ||
7.379% 5/23/16 | 53,179 | 36,693 | ||
7.8% 4/1/08 | 65,000 | 58,500 | ||
Ameritech Capital Funding Corp. euro 6.25% 5/18/09 | 35,000 | 37,370 | ||
Arch Western Finance LLC 6.75% 7/1/13 (f) | 100,000 | 101,750 | ||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 30,000 | 32,100 | ||
Cadbury Schweppes U.S. Finance LLC: | ||||
3.875% 10/1/08 (f) | 90,000 | 88,823 | ||
5.125% 10/1/13 (f) | 1,060,000 | 1,045,091 | ||
CCO Holdings LLC/CCO Holdings Capital Corp. 8.75% 11/15/13 | 70,000 | 66,850 | ||
Cellu Tissue Holdings, Inc. 9.75% 3/15/10 (f) | 50,000 | 49,750 | ||
Charter Communications Holding II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 | 115,000 | 115,863 | ||
CMS Energy X-TRAS pass thru trust certificates 7% 1/15/05 | 10,000 | 10,075 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.748% 9/15/18 | 3,872 | 3,059 | ||
6.9% 7/2/18 | 4,746 | 3,749 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Continental Airlines, Inc. pass thru trust certificates: - continued | ||||
7.73% 9/15/12 | $ 4,680 | $ 3,463 | ||
8.321% 11/1/06 | 5,000 | 4,550 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 15,000 | 8,850 | ||
7.57% 11/18/10 | 5,000 | 4,521 | ||
7.779% 11/18/05 | 50,000 | 30,000 | ||
7.779% 1/2/12 | 25,045 | 10,769 | ||
7.92% 5/18/12 | 135,000 | 79,075 | ||
Deutsche Telekom International Finance BV: | ||||
5.25% 7/22/13 | 85,000 | 84,185 | ||
8.5% 6/15/10 | 305,000 | 359,734 | ||
8.75% 6/15/30 | 895,000 | 1,111,783 | ||
El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11 | 10,000 | 10,800 | ||
EnCana Holdings Finance Corp. 5.8% 5/1/14 | 240,000 | 246,517 | ||
Entercom Radio LLC/Entercom Capital, Inc. 7.625% 3/1/14 | 50,000 | 52,500 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 | 355,000 | 395,825 | ||
Global Cash Access LLC/Global Cash Access Finance Corp. 8.75% 3/15/12 (f) | 30,000 | 31,425 | ||
Hurricane Finance BV 9.625% 2/12/10 (f) | 75,000 | 79,875 | ||
Hutchison Whampoa International (03/13) Ltd. | 190,000 | 191,899 | ||
Hutchison Whampoa International (03/33) Ltd.: | ||||
6.25% 1/24/14 (f) | 1,720,000 | 1,692,752 | ||
7.45% 11/24/33 (f) | 300,000 | 291,443 | ||
Inmarsat Finance PLC 7.625% 6/30/12 (f) | 70,000 | 66,850 | ||
Ispat Inland ULC 9.75% 4/1/14 (f) | 70,000 | 72,275 | ||
J.P. Morgan Chase & Co. 4.875% 3/15/14 | 1,475,000 | 1,411,177 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (f) | 85,000 | 73,525 | ||
Mizuho Financial Group Cayman Ltd. 5.79% 4/15/14 (f) | 1,400,000 | 1,396,688 | ||
Mobile Telesystems Finance SA: | ||||
9.75% 1/30/08 (f) | 310,000 | 321,625 | ||
9.75% 1/30/08 (Reg. S) | 75,000 | 77,813 | ||
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc. 7.375% 9/1/10 | 40,000 | 40,800 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
MSW Energy Holdings LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 | $ 10,000 | $ 10,700 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | 120,000 | 124,500 | ||
Nexstar Finance, Inc. 7% 1/15/14 | 130,000 | 123,825 | ||
NiSource Finance Corp. 7.875% 11/15/10 | 125,000 | 144,769 | ||
Northern Telecom Capital Corp. 7.875% 6/15/26 | 25,000 | 23,500 | ||
Northwest Airlines, Inc. pass thru trust certificates: | ||||
7.068% 7/2/17 | 8,102 | 6,644 | ||
7.67% 1/2/15 | 8,505 | 6,889 | ||
Pemex Project Funding Master Trust: | ||||
6.125% 8/15/08 | 250,000 | 258,750 | ||
7.375% 12/15/14 | 500,000 | 523,750 | ||
Petronas Capital Ltd. 7% 5/22/12 (f) | 5,000 | 5,531 | ||
Qwest Capital Funding, Inc.: | ||||
7% 8/3/09 | 50,000 | 44,250 | ||
7.25% 2/15/11 | 35,000 | 30,275 | ||
7.625% 8/3/21 | 20,000 | 15,800 | ||
Sensus Metering Systems, Inc. 8.625% 12/15/13 (f) | 20,000 | 19,700 | ||
Sprint Capital Corp.: | ||||
6.125% 11/15/08 | 500,000 | 529,658 | ||
8.375% 3/15/12 | 1,100,000 | 1,288,800 | ||
Telecom Italia Capital 4% 11/15/08 (f) | 500,000 | 494,147 | ||
TRW Automotive Acquisition Corp. 9.375% 2/15/13 | 87,000 | 99,615 | ||
Tyco International Group SA yankee: | ||||
6.375% 6/15/05 | 5,000 | 5,149 | ||
6.375% 2/15/06 | 20,000 | 20,994 | ||
6.75% 2/15/11 | 1,070,000 | 1,173,261 | ||
6.875% 1/15/29 | 1,000,000 | 1,063,401 | ||
Tyumen Oil Co. 11% 11/6/07 | 175,000 | 191,625 | ||
U.S. West Capital Funding, Inc. 6.375% 7/15/08 | 125,000 | 110,000 | ||
UGS Corp. 10% 6/1/12 (f) | 30,000 | 31,800 | ||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 | 385,000 | 444,675 | ||
Verizon Global Funding Corp.: | ||||
7.25% 12/1/10 | 1,030,000 | 1,159,828 | ||
7.375% 9/1/12 | 465,000 | 529,462 | ||
Western Financial Bank 9.625% 5/15/12 | 15,000 | 16,500 | ||
WH Holdings Ltd./WH Capital Corp. 9.5% 4/1/11 | 30,000 | 31,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Williams Companies, Inc. Credit Linked Certificate Trust 6.75% 4/15/09 (f) | $ 215,000 | $ 216,613 | ||
Xerox Capital Trust I 8% 2/1/27 | 130,000 | 117,325 | ||
18,983,498 | ||||
Insurance - 0.2% | ||||
Aegon NV 4.75% 6/1/13 | 500,000 | 480,439 | ||
Assurant, Inc. 5.625% 2/15/14 | 210,000 | 209,066 | ||
Travelers Property Casualty Corp.: | ||||
5% 3/15/13 | 25,000 | 24,306 | ||
6.375% 3/15/33 | 35,000 | 34,566 | ||
748,377 | ||||
Real Estate - 1.0% | ||||
American Real Estate Partners/American Real Estate Finance Corp. 8.125% 6/1/12 (f) | 85,000 | 87,125 | ||
Boston Properties, Inc. 6.25% 1/15/13 | 100,000 | 105,658 | ||
Camden Property Trust 5.875% 11/30/12 | 200,000 | 204,443 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 200,000 | 210,057 | ||
CB Richard Ellis Services, Inc. 9.75% 5/15/10 | 10,000 | 11,000 | ||
Dominion Resources, Inc. 5.125% 12/15/09 | 500,000 | 508,971 | ||
EOP Operating LP: | ||||
4.75% 3/15/14 | 600,000 | 559,758 | ||
7% 7/15/11 | 500,000 | 549,728 | ||
Gables Realty LP 5.75% 7/15/07 | 585,000 | 614,215 | ||
Healthcare Realty Trust, Inc. 5.125% 4/1/14 | 435,000 | 409,388 | ||
MeriStar Hospitality Corp. 8.75% 8/15/07 | 50,000 | 51,000 | ||
MeriStar Hospitality Operating Partnership LP/MeriStar Hospitality Finance Corp. II 10.5% 6/15/09 | 200,000 | 216,000 | ||
Omega Healthcare Investors, Inc. 7% 4/1/14 (f) | 70,000 | 65,625 | ||
Senior Housing Properties Trust 7.875% 4/15/15 | 20,000 | 20,850 | ||
3,613,818 | ||||
Thrifts & Mortgage Finance - 0.6% | ||||
Countrywide Home Loans, Inc. 4% 3/22/11 | 720,000 | 678,966 | ||
Independence Community Bank Corp. 3.75% 4/1/14 (h) | 275,000 | 263,160 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Thrifts & Mortgage Finance - continued | ||||
Washington Mutual, Inc.: | ||||
4.375% 1/15/08 | $ 1,200,000 | $ 1,217,696 | ||
4.625% 4/1/14 | 100,000 | 92,302 | ||
2,252,124 | ||||
TOTAL FINANCIALS | 44,008,910 | |||
HEALTH CARE - 0.4% | ||||
Health Care Equipment & Supplies - 0.1% | ||||
Fisher Scientific International, Inc. 8% 9/1/13 | 125,000 | 135,625 | ||
Medical Device Manufacturing, Inc. 10% 7/15/12 (f) | 50,000 | 51,500 | ||
187,125 | ||||
Health Care Providers & Services - 0.3% | ||||
AmeriPath, Inc. 10.5% 4/1/13 | 150,000 | 153,000 | ||
Beverly Enterprises, Inc. 7.875% 6/15/14 (f) | 70,000 | 70,525 | ||
Concentra Operating Corp.: | ||||
9.125% 6/1/12 (f) | 10,000 | 10,700 | ||
9.5% 8/15/10 | 110,000 | 119,350 | ||
Fountain View, Inc. 9.25% 8/19/08 (e) | 110,000 | 110,000 | ||
HealthSouth Corp. 8.5% 2/1/08 | 85,000 | 84,044 | ||
IASIS Healthcare LLC/IASIS Capital Corp. 8.75% 6/15/14 (f) | 100,000 | 103,500 | ||
Mariner Health Care, Inc. 8.25% 12/15/13 (f) | 30,000 | 32,025 | ||
National Nephrology Associates, Inc. 9% 11/1/11 (f) | 20,000 | 23,076 | ||
PacifiCare Health Systems, Inc. 10.75% 6/1/09 | 82,000 | 93,070 | ||
Psychiatric Solutions, Inc. 10.625% 6/15/13 | 105,000 | 117,600 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 75,000 | 66,938 | ||
6.5% 6/1/12 | 15,000 | 13,275 | ||
7.375% 2/1/13 | 75,000 | 69,375 | ||
1,066,478 | ||||
Pharmaceuticals - 0.0% | ||||
Biovail Corp. yankee 7.875% 4/1/10 | 105,000 | 103,163 | ||
Leiner Health Products, Inc. 11% 6/1/12 (f) | 20,000 | 20,550 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
HEALTH CARE - continued | ||||
Pharmaceuticals - continued | ||||
VWR International, Inc.: | ||||
6.875% 4/15/12 (f) | $ 30,000 | $ 30,038 | ||
8% 4/15/14 (f) | 30,000 | 30,638 | ||
184,389 | ||||
TOTAL HEALTH CARE | 1,437,992 | |||
INDUSTRIALS - 1.0% | ||||
Aerospace & Defense - 0.7% | ||||
BE Aerospace, Inc.: | ||||
8.5% 10/1/10 | 100,000 | 107,500 | ||
9.5% 11/1/08 | 55,000 | 55,550 | ||
Bombardier, Inc. 6.3% 5/1/14 (f) | 590,000 | 509,261 | ||
Orbital Sciences Corp. 9% 7/15/11 | 135,000 | 147,150 | ||
Raytheon Co. 5.5% 11/15/12 | 1,550,000 | 1,586,020 | ||
2,405,481 | ||||
Airlines - 0.0% | ||||
AMR Corp. 9% 8/1/12 | 85,000 | 61,200 | ||
Delta Air Lines, Inc. 7.9% 12/15/09 | 50,000 | 19,500 | ||
Northwest Airlines, Inc.: | ||||
7.875% 3/15/08 | 25,000 | 17,125 | ||
9.875% 3/15/07 | 60,000 | 44,100 | ||
141,925 | ||||
Building Products - 0.0% | ||||
Jacuzzi Brands, Inc. 9.625% 7/1/10 | 20,000 | 21,600 | ||
Commercial Services & Supplies - 0.1% | ||||
Allied Waste North America, Inc.: | ||||
5.75% 2/15/11 | 70,000 | 65,975 | ||
7.875% 4/15/13 | 20,000 | 20,850 | ||
10% 8/1/09 | 60,000 | 63,450 | ||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 140,000 | 144,375 | ||
Cenveo Corp. 7.875% 12/1/13 | 60,000 | 54,450 | ||
349,100 | ||||
Electrical Equipment - 0.0% | ||||
General Cable Corp. 9.5% 11/15/10 | 20,000 | 21,650 | ||
Industrial Conglomerates - 0.0% | ||||
North American Energy Partners, Inc. 8.75% 12/1/11 (f) | 20,000 | 19,900 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Machinery - 0.1% | ||||
Cummins, Inc.: | ||||
5.65% 3/1/98 | $ 15,000 | $ 9,975 | ||
9.5% 12/1/10 (h) | 20,000 | 22,900 | ||
Dresser, Inc. 9.375% 4/15/11 | 15,000 | 16,200 | ||
Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09 | 93,000 | 98,580 | ||
Invensys PLC 9.875% 3/15/11 (f) | 150,000 | 150,750 | ||
Navistar International Corp. 7.5% 6/15/11 | 30,000 | 31,200 | ||
Terex Corp. 7.375% 1/15/14 | 100,000 | 99,750 | ||
429,355 | ||||
Marine - 0.0% | ||||
Horizon Lines LLC/Holdings Corp. 9% 11/1/12 (f) | 40,000 | 41,400 | ||
OMI Corp. 7.625% 12/1/13 | 95,000 | 93,100 | ||
134,500 | ||||
Road & Rail - 0.1% | ||||
CSX Corp. 7.45% 5/1/07 | 100,000 | 109,573 | ||
Kansas City Southern Railway Co. 7.5% 6/15/09 | 100,000 | 100,250 | ||
Quality Distribution LLC/QD Capital Corp. 9% 11/15/10 (f) | 40,000 | 38,800 | ||
TFM SA de CV yankee 11.75% 6/15/09 | 140,000 | 139,300 | ||
387,923 | ||||
TOTAL INDUSTRIALS | 3,911,434 | |||
INFORMATION TECHNOLOGY - 0.8% | ||||
Communications Equipment - 0.5% | ||||
Motorola, Inc.: | ||||
6.5% 11/15/28 | 300,000 | 297,610 | ||
7.625% 11/15/10 | 200,000 | 227,678 | ||
8% 11/1/11 | 1,200,000 | 1,392,922 | ||
Nortel Networks Corp. 6.125% 2/15/06 | 50,000 | 50,000 | ||
Northern Telecom Ltd. yankee 6.875% 9/1/23 | 30,000 | 27,000 | ||
1,995,210 | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Celestica, Inc. 7.875% 7/1/11 | 100,000 | 102,000 | ||
PerkinElmer, Inc. 8.875% 1/15/13 | 20,000 | 22,050 | ||
124,050 | ||||
IT Services - 0.1% | ||||
Iron Mountain, Inc. 6.625% 1/1/16 | 270,000 | 249,750 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INFORMATION TECHNOLOGY - continued | ||||
Office Electronics - 0.1% | ||||
Xerox Corp.: | ||||
7.125% 6/15/10 | $ 20,000 | $ 20,550 | ||
7.2% 4/1/16 | 165,000 | 162,113 | ||
7.625% 6/15/13 | 60,000 | 61,650 | ||
244,313 | ||||
Semiconductors & Semiconductor Equipment - 0.1% | ||||
AMI Semiconductor, Inc. 10.75% 2/1/13 | 28,000 | 32,690 | ||
Amkor Technology, Inc.: | ||||
7.125% 3/15/11 | 90,000 | 76,950 | ||
7.75% 5/15/13 | 30,000 | 25,650 | ||
Freescale Semiconductor, Inc. 7.125% 7/15/14 (f) | 60,000 | 60,300 | ||
Viasystems, Inc. 10.5% 1/15/11 (f) | 50,000 | 48,500 | ||
244,090 | ||||
TOTAL INFORMATION TECHNOLOGY | 2,857,413 | |||
MATERIALS - 2.2% | ||||
Chemicals - 0.5% | ||||
Berry Plastics Corp. 10.75% 7/15/12 | 80,000 | 89,000 | ||
Equistar Chemicals LP: | ||||
6.5% 2/15/06 | 75,000 | 75,750 | ||
7.55% 2/15/26 | 100,000 | 85,500 | ||
Equistar Chemicals LP/Equistar Funding Corp. 10.625% 5/1/11 | 145,000 | 159,863 | ||
Georgia Gulf Corp. 7.125% 12/15/13 (f) | 180,000 | 185,400 | ||
Huntsman International LLC 9.875% 3/1/09 | 115,000 | 124,488 | ||
JohnsonDiversey Holdings, Inc. 0% 5/15/13 (d) | 55,000 | 42,625 | ||
Koppers, Inc. 9.875% 10/15/13 | 50,000 | 55,250 | ||
Lyondell Chemical Co.: | ||||
9.625% 5/1/07 | 200,000 | 209,000 | ||
10.875% 5/1/09 | 55,000 | 57,338 | ||
Millennium America, Inc.: | ||||
9.25% 6/15/08 | 220,000 | 233,200 | ||
9.25% 6/15/08 (f) | 10,000 | 10,600 | ||
Nalco Co.: | ||||
7.75% 11/15/11 (f) | 130,000 | 135,525 | ||
8.875% 11/15/13 (f) | 250,000 | 261,250 | ||
OMNOVA Solutions, Inc. 11.25% 6/1/10 | 20,000 | 21,700 | ||
Pliant Corp. 0% 6/15/09 (d) | 60,000 | 51,900 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Chemicals - continued | ||||
Resolution Performance Products LLC/RPP Capital Corp.: | ||||
9.5% 4/15/10 | $ 70,000 | $ 71,750 | ||
13.5% 11/15/10 | 35,000 | 33,950 | ||
Solutia, Inc. 7.375% 10/15/27 (c) | 20,000 | 12,400 | ||
1,916,489 | ||||
Construction Materials - 0.1% | ||||
Texas Industries, Inc. 10.25% 6/15/11 | 200,000 | 222,500 | ||
Containers & Packaging - 0.5% | ||||
Anchor Glass Container Corp. 11% 2/15/13 | 215,000 | 245,100 | ||
BWAY Corp. 10% 10/15/10 | 105,000 | 110,775 | ||
Crown Cork & Seal, Inc. 8% 4/15/23 | 105,000 | 95,288 | ||
Crown European Holdings SA 9.5% 3/1/11 | 35,000 | 38,500 | ||
Graphic Packaging International, Inc.: | ||||
8.5% 8/15/11 | 220,000 | 237,600 | ||
9.5% 8/15/13 | 345,000 | 377,775 | ||
Jefferson Smurfit Corp. U.S.: | ||||
7.5% 6/1/13 | 30,000 | 29,700 | ||
8.25% 10/1/12 | 210,000 | 222,600 | ||
Owens-Brockway Glass Container, Inc.: | ||||
8.25% 5/15/13 | 15,000 | 15,750 | ||
8.875% 2/15/09 | 50,000 | 54,125 | ||
Owens-Illinois, Inc.: | ||||
7.15% 5/15/05 | 60,000 | 61,575 | ||
7.35% 5/15/08 | 50,000 | 50,500 | ||
7.5% 5/15/10 | 95,000 | 96,425 | ||
7.8% 5/15/18 | 45,000 | 42,750 | ||
8.1% 5/15/07 | 110,000 | 114,950 | ||
Sealed Air Corp.: | ||||
5.625% 7/15/13 (f) | 25,000 | 24,904 | ||
6.875% 7/15/33 (f) | 55,000 | 56,149 | ||
Silgan Holdings, Inc. 6.75% 11/15/13 | 100,000 | 98,500 | ||
1,972,966 | ||||
Metals & Mining - 0.3% | ||||
California Steel Industries, Inc. 6.125% 3/15/14 | 40,000 | 37,550 | ||
Corporacion Nacional del Cobre (Codelco): | ||||
5.5% 10/15/13 (f) | 165,000 | 166,086 | ||
6.375% 11/30/12 (f) | 335,000 | 360,210 | ||
CSN Islands VIII Corp. 9.75% 12/16/13 (f) | 75,000 | 71,531 | ||
Foundation Pennsylvania Coal Co. 7.25% 8/1/14 (f) | 50,000 | 50,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Freeport-McMoRan Copper & Gold, Inc.: | ||||
6.875% 2/1/14 | $ 75,000 | $ 70,219 | ||
10.125% 2/1/10 | 155,000 | 173,600 | ||
International Steel Group, Inc. 6.5% 4/15/14 (f) | 70,000 | 66,150 | ||
Massey Energy Co. 6.625% 11/15/10 | 40,000 | 40,400 | ||
Peabody Energy Corp. 6.875% 3/15/13 | 20,000 | 20,700 | ||
Phelps Dodge Corp. 8.75% 6/1/11 | 40,000 | 47,984 | ||
Wise Metals Group LLC/Alloys Finance 10.25% 5/15/12 (f) | 60,000 | 61,350 | ||
1,166,280 | ||||
Paper & Forest Products - 0.8% | ||||
Boise Cascade Corp. 8% 2/24/06 | 25,000 | 26,668 | ||
Buckeye Cellulose Corp. 9.25% 9/15/08 | 100,000 | 99,500 | ||
Buckeye Technologies, Inc. 8.5% 10/1/13 | 200,000 | 206,000 | ||
Georgia-Pacific Corp.: | ||||
7.375% 12/1/25 | 15,000 | 14,681 | ||
7.5% 5/15/06 | 50,000 | 53,000 | ||
7.75% 11/15/29 | 10,000 | 9,900 | ||
8% 1/15/24 | 130,000 | 136,013 | ||
8.125% 5/15/11 | 5,000 | 5,606 | ||
International Paper Co.: | ||||
4.25% 1/15/09 | 95,000 | 93,787 | ||
5.5% 1/15/14 | 235,000 | 233,286 | ||
Millar Western Forest Products Ltd. 7.75% 11/15/13 | 220,000 | 224,400 | ||
Norske Skog Canada Ltd. 7.375% 3/1/14 | 40,000 | 40,000 | ||
Riverside Forest Products Ltd. 7.875% 3/1/14 (f) | 40,000 | 41,200 | ||
Solo Cup Co. 8.5% 2/15/14 (f) | 145,000 | 134,850 | ||
Stone Container Corp.: | ||||
8.375% 7/1/12 | 200,000 | 209,000 | ||
9.75% 2/1/11 | 30,000 | 33,150 | ||
Weyerhaeuser Co.: | ||||
5.25% 12/15/09 | 1,000,000 | 1,024,844 | ||
7.375% 3/15/32 | 260,000 | 286,974 | ||
2,872,859 | ||||
TOTAL MATERIALS | 8,151,094 | |||
TELECOMMUNICATION SERVICES - 3.3% | ||||
Diversified Telecommunication Services - 1.8% | ||||
BellSouth Corp. 6.55% 6/15/34 | 1,800,000 | 1,817,555 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
British Telecommunications PLC: | ||||
8.375% 12/15/10 | $ 190,000 | $ 223,933 | ||
8.875% 12/15/30 | 145,000 | 182,590 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 | 30,000 | 26,400 | ||
Empresa Brasil de Telecomm SA 11% 12/15/08 (f) | 255,000 | 279,863 | ||
France Telecom SA 8.75% 3/1/11 | 815,000 | 950,916 | ||
Koninklijke KPN NV yankee 8% 10/1/10 | 500,000 | 581,609 | ||
KT Corp. 5.875% 6/24/14 (f) | 280,000 | 281,837 | ||
Level 3 Communications, Inc. 10.5% 12/1/08 | 255,000 | 188,700 | ||
MCI, Inc.: | ||||
5.908% 5/1/07 | 36,000 | 34,830 | ||
6.688% 5/1/09 | 36,000 | 33,210 | ||
NTL Cable PLC 8.75% 4/15/14 (f) | 120,000 | 124,200 | ||
Primus Telecommunications Group, Inc. 8% 1/15/14 | 90,000 | 64,800 | ||
Qwest Communications International, Inc.: | ||||
4.75% 2/15/09 (f)(h) | 40,000 | 38,000 | ||
7.5% 2/15/14 (f) | 160,000 | 149,200 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (f) | 220,000 | 252,450 | ||
14% 12/15/10 (f)(h) | 20,000 | 23,400 | ||
14.5% 12/15/14 (f)(h) | 210,000 | 251,475 | ||
Telefonica de Argentina SA 9.125% 11/7/10 | 55,000 | 54,313 | ||
Telefonica Europe BV 7.75% 9/15/10 | 700,000 | 808,804 | ||
Telenet Group Holding NV 0% 6/15/14 (d)(f) | 80,000 | 51,800 | ||
TELUS Corp. yankee 7.5% 6/1/07 | 180,000 | 196,475 | ||
U.S. West Communications 6.875% 9/15/33 | 165,000 | 136,125 | ||
6,752,485 | ||||
Wireless Telecommunication Services - 1.5% | ||||
America Movil SA de CV: | ||||
4.125% 3/1/09 (f) | 285,000 | 271,518 | ||
5.5% 3/1/14 (f) | 255,000 | 238,645 | ||
American Tower Corp. 7.5% 5/1/12 (f) | 105,000 | 103,163 | ||
AT&T Wireless Services, Inc.: | ||||
7.875% 3/1/11 | 455,000 | 522,951 | ||
8.75% 3/1/31 | 1,485,000 | 1,848,396 | ||
Centennial Communications Corp./Centennial Cellular Operating Co. LLC/Centennial Puerto Rico Operations Corp. 8.125% 2/1/14 (f) | 60,000 | 55,500 | ||
Cingular Wireless LLC 7.125% 12/15/31 | 1,500,000 | 1,593,024 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
Crown Castle International Corp.: | ||||
7.5% 12/1/13 | $ 50,000 | $ 49,875 | ||
9.375% 8/1/11 | 65,000 | 73,288 | ||
DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 | 50,000 | 56,063 | ||
Globe Telecom, Inc. 9.75% 4/15/12 | 55,000 | 59,950 | ||
Millicom International Cellular SA 10% 12/1/13 (f) | 80,000 | 79,800 | ||
Nextel Communications, Inc.: | ||||
7.375% 8/1/15 | 150,000 | 157,125 | ||
9.5% 2/1/11 | 60,000 | 67,650 | ||
Nextel Partners, Inc. 8.125% 7/1/11 | 85,000 | 88,825 | ||
Rogers Wireless, Inc.: | ||||
6.375% 3/1/14 | 140,000 | 130,025 | ||
9.625% 5/1/11 | 56,000 | 62,720 | ||
Rural Cellular Corp. 8.25% 3/15/12 (f) | 60,000 | 61,500 | ||
Telemig Cellular SA/Amazonia Cellular SA 8.75% 1/20/09 (f) | 85,000 | 80,538 | ||
UbiquiTel Operating Co. 9.875% 3/1/11 | 50,000 | 50,000 | ||
Western Wireless Corp. 9.25% 7/15/13 | 80,000 | 81,600 | ||
5,732,156 | ||||
TOTAL TELECOMMUNICATION SERVICES | 12,484,641 | |||
UTILITIES - 2.3% | ||||
Electric Utilities - 1.7% | ||||
AES Gener SA 7.5% 3/25/14 (f) | 70,000 | 67,200 | ||
Allegheny Energy Supply Co. LLC: | ||||
7.8% 3/15/11 | 170,000 | 167,450 | ||
8.25% 4/15/12 (f) | 90,000 | 89,881 | ||
10.25% 11/15/07 (f) | 26,657 | 28,790 | ||
10.25% 11/15/07 (f)(h) | 3,339 | 3,381 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 (f) | 280,000 | 279,053 | ||
CMS Energy Corp.: | ||||
8.5% 4/15/11 | 45,000 | 47,363 | ||
9.875% 10/15/07 | 245,000 | 267,050 | ||
DTE Energy Co.: | ||||
6.375% 4/15/33 | 250,000 | 240,440 | ||
7.05% 6/1/11 | 50,000 | 54,784 | ||
Duke Capital LLC 6.75% 2/15/32 | 1,400,000 | 1,402,491 | ||
Edison International 6.875% 9/15/04 | 15,000 | 15,000 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
FirstEnergy Corp.: | ||||
6.45% 11/15/11 | $ 45,000 | $ 47,598 | ||
7.375% 11/15/31 | 330,000 | 356,597 | ||
Illinois Power Co. 11.5% 12/15/10 | 55,000 | 65,450 | ||
Nevada Power Co. 6.5% 4/15/12 (f) | 50,000 | 49,125 | ||
Oncor Electric Delivery Co.: | ||||
6.375% 5/1/12 | 45,000 | 48,669 | ||
6.375% 1/15/15 | 1,000,000 | 1,073,236 | ||
Pacific Gas & Electric Co.: | ||||
4.2% 3/1/11 | 100,000 | 96,544 | ||
4.8% 3/1/14 | 135,000 | 129,918 | ||
6.05% 3/1/34 | 490,000 | 472,044 | ||
Progress Energy, Inc. 7.1% 3/1/11 | 1,000,000 | 1,102,509 | ||
Southern California Edison Co.: | ||||
4.65% 4/1/15 | 35,000 | 33,120 | ||
5% 1/15/14 | 30,000 | 29,631 | ||
TECO Energy, Inc. 7% 5/1/12 | 80,000 | 80,300 | ||
6,247,624 | ||||
Gas Utilities - 0.1% | ||||
ANR Pipeline, Inc. 9.625% 11/1/21 | 100,000 | 113,500 | ||
El Paso Energy Corp. 6.75% 5/15/09 | 25,000 | 23,156 | ||
Sonat, Inc.: | ||||
6.625% 2/1/08 | 20,000 | 18,650 | ||
6.75% 10/1/07 | 15,000 | 14,269 | ||
6.875% 6/1/05 | 85,000 | 85,531 | ||
255,106 | ||||
Multi-Utilities & Unregulated Power - 0.5% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 85,000 | 85,106 | ||
8.5% 11/1/07 | 40,000 | 40,950 | ||
8.75% 6/15/08 | 2,000 | 2,100 | ||
8.75% 5/15/13 (f) | 30,000 | 32,738 | ||
8.875% 2/15/11 | 282,000 | 298,568 | ||
9% 5/15/15 (f) | 30,000 | 32,700 | ||
9.375% 9/15/10 | 7,000 | 7,595 | ||
9.5% 6/1/09 | 19,000 | 20,710 | ||
10% 12/12/05 (f) | 5,919 | 6,037 | ||
Constellation Energy Group, Inc. 7.6% 4/1/32 | 1,000,000 | 1,120,016 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Multi-Utilities & Unregulated Power - continued | ||||
Dominion Resources, Inc. 8.125% 6/15/10 | $ 145,000 | $ 168,844 | ||
NRG Energy, Inc. 8% 12/15/13 (f) | 220,000 | 223,300 | ||
2,038,664 | ||||
TOTAL UTILITIES | 8,541,394 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $106,650,403) | 106,588,811 | |||
U.S. Government and Government Agency Obligations - 18.0% | ||||
U.S. Government Agency Obligations - 5.0% | ||||
Fannie Mae: | ||||
4.375% 7/17/13 | 2,205,000 | 2,088,283 | ||
4.625% 10/15/13 | 3,000,000 | 2,929,911 | ||
5.5% 7/18/12 | 500,000 | 506,561 | ||
6.25% 3/22/12 | 300,000 | 306,883 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 8,000,000 | 7,921,344 | ||
5.125% 8/20/12 | 2,418,000 | 2,420,844 | ||
5.25% 11/5/12 | 280,000 | 278,119 | ||
5.875% 3/21/11 | 2,095,000 | 2,226,369 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 18,678,314 | |||
U.S. Treasury Obligations - 13.0% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 945,000 | 1,053,859 | ||
6.375% 8/15/27 | 210,000 | 240,196 | ||
8% 11/15/21 | 6,000,000 | 7,955,862 | ||
9% 11/15/18 | 200,000 | 282,242 | ||
9.875% 11/15/15 | 3,000,000 | 4,361,250 | ||
U.S. Treasury Notes: | ||||
1.625% 2/28/06 | 6,000,000 | 5,923,596 | ||
2.375% 8/15/06 | 9,591,000 | 9,529,560 | ||
4% 11/15/12 | 9,840,000 | 9,627,830 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
U.S. Treasury Obligations - continued | ||||
U.S. Treasury Notes: - continued | ||||
5% 8/15/11 | $ 4,482,000 | $ 4,718,354 | ||
6.5% 2/15/10 | 4,500,000 | 5,093,613 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 48,786,362 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $68,399,874) | 67,464,676 | |||
U.S. Government Agency - Mortgage Securities - 33.8% | ||||
Fannie Mae - 33.7% | ||||
4% 8/1/19 (g) | 5,895,592 | 5,656,084 | ||
4.5% 5/1/18 to 9/1/33 | 20,633,906 | 20,069,157 | ||
4.5% 8/1/19 (g) | 4,000,000 | 3,933,750 | ||
5% 8/1/34 (g) | 42,609,899 | 41,557,945 | ||
5.5% 11/1/16 to 10/1/17 | 535,424 | 551,271 | ||
5.5% 8/1/34 (g) | 5,997,798 | 6,016,541 | ||
6.5% 5/1/08 to 2/1/33 | 7,143,018 | 7,550,964 | ||
6.5% 8/1/19 (g) | 5,755,122 | 6,080,646 | ||
7% 5/1/18 to 12/1/33 (g) | 32,622,591 | 34,537,337 | ||
TOTAL FANNIE MAE | 125,953,695 | |||
Government National Mortgage Association - 0.1% | ||||
7% 7/15/31 to 12/15/32 | 384,649 | 408,788 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $126,730,435) | 126,362,483 | |||
Asset-Backed Securities - 2.8% | ||||
ACE Securities Corp.: | ||||
Series 2003-FM1 Class M2, 3.3% 11/25/32 (h) | 40,000 | 40,732 | ||
Series 2004-HE1: | ||||
Class M1, 1.95% 2/25/34 (h) | 125,000 | 125,013 | ||
Class M2, 2.55% 2/25/34 (h) | 125,000 | 125,028 | ||
American Express Credit Account Trust Series 2004-C Class C, 1.88% 2/15/12 (f)(h) | 1,800,000 | 1,801,125 | ||
AmeriCredit Automobile Receivables Trust Series 2004-1 Class D, 5.07% 7/6/10 | 290,000 | 291,373 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Ameriquest Mortgage Securities, Inc. Series 2004-R2: | ||||
Class M1, 1.88% 4/25/34 (h) | $ 65,000 | $ 64,998 | ||
Class M2, 1.93% 4/25/34 (h) | 50,000 | 49,998 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2003-HE2 Class A2, 1.76% 4/15/33 (h) | 46,566 | 46,631 | ||
Series 2003-HE7 Class A3, 1.74% 12/15/33 (h) | 183,830 | 184,253 | ||
Bank One Issuance Trust Series 2002-C1 Class C1, 2.34% 12/15/09 (h) | 425,000 | 430,659 | ||
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 1.9119% 2/28/44 (h) | 470,031 | 471,243 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2003-B2 Class B2, 3.5% 2/17/09 | 60,000 | 60,329 | ||
Series 2003-B1 Class B1, 2.55% 2/17/09 (h) | 120,000 | 121,862 | ||
Series 2003-B4 Class B4, 2.18% 7/15/11 (h) | 90,000 | 91,626 | ||
CDC Mortgage Capital Trust Series 2003-HE2 Class M2, 3.35% 10/25/33 (h) | 30,000 | 30,888 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.73% 2/15/11 (h) | 230,000 | 231,436 | ||
Chase Credit Card Owner Trust Series 2004-1 Class B, 1.58% 5/15/09 (h) | 220,000 | 219,987 | ||
Citibank Credit Card Issuance Trust: | ||||
Series 2000-C2 Class C2, 2.25% 10/15/07 (h) | 1,000,000 | 1,002,635 | ||
Series 2002-B1 Class B1, 1.9% 6/25/09 (h) | 475,000 | 476,309 | ||
Series 2003-C1 Class C1, 2.24% 4/7/10 (h) | 305,000 | 311,971 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2004-2 Class M1, 1.95% 5/25/34 (h) | 275,000 | 274,991 | ||
Series 2004-3 Class M1, 1.95% 6/25/34 (h) | 75,000 | 75,077 | ||
First Franklin Mortgage Loan Trust Series 2004-FF2: | ||||
Class M3, 2% 3/25/34 (h) | 25,000 | 24,999 | ||
Class M4, 2.35% 3/25/34 (h) | 25,000 | 24,999 | ||
Class M6, 2.7% 3/25/34 (h) | 25,000 | 24,786 | ||
Fremont Home Loan Trust Series 2004-A: | ||||
Class M1, 2% 1/25/34 (h) | 225,000 | 224,993 | ||
Class M2, 2.6% 1/25/34 (h) | 275,000 | 274,991 | ||
GSAMP Trust Series 2004-FM2 Class M1, 1.95% 1/25/34 (h) | 250,000 | 249,990 | ||
Home Equity Asset Trust: | ||||
Series 2003-2: | ||||
Class A2, 1.83% 8/25/33 (h) | 10,662 | 10,693 | ||
Class M1, 2.33% 8/25/33 (h) | 25,000 | 25,325 | ||
Series 2003-4: | ||||
Class M1, 2.25% 10/25/33 (h) | 40,000 | 40,385 | ||
Class M2, 3.35% 10/25/33 (h) | 45,000 | 45,854 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Home Equity Asset Trust: - continued | ||||
Series 2004-3: | ||||
Class M2, 2.65% 8/25/34 (h) | $ 120,000 | $ 119,996 | ||
Class M3, 2.9% 8/25/34 (h) | 50,000 | 49,998 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-4N Class A, 8% 5/27/33 (f) | 23,154 | 23,212 | ||
Series 2003-2N Class A, 8% 9/27/33 (f) | 11,828 | 11,887 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (f) | 12,903 | 12,967 | ||
Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (f) | 200,000 | 179,000 | ||
Long Beach Mortgage Loan Trust Series 2003-3 Class M2, 3.3% 7/25/33 (h) | 45,000 | 46,184 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2003-B2 Class B2, 1.77% 10/15/10 (h) | 80,000 | 80,441 | ||
Series 2003-B3 Class B3, 1.755% 1/18/11 (h) | 285,000 | 285,715 | ||
Series 2003-B5 Class B5, 1.75% 2/15/11 (h) | 240,000 | 241,731 | ||
Meritage Mortgage Loan Trust Series 2004-1: | ||||
Class M1, 1.95% 7/25/34 (h) | 100,000 | 99,997 | ||
Class M2, 2% 7/25/34 (h) | 25,000 | 24,999 | ||
Class M3, 2.4% 7/25/34 (h) | 50,000 | 49,998 | ||
Class M4, 2.55% 7/25/34 (h) | 25,000 | 24,999 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-HE3 Class M1, 2.55% 12/27/32 (h) | 90,000 | 91,496 | ||
Series 2003-HE1 Class M2, 3.35% 5/25/33 (h) | 55,000 | 56,018 | ||
Series 2003-NC8 Class M1, 2.15% 9/25/33 (h) | 35,000 | 35,170 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4 Class M1, 2.45% 1/25/32 (h) | 40,000 | 40,635 | ||
Series 2002-NC1 Class M1, 2.25% 2/25/32 (f)(h) | 170,000 | 171,652 | ||
Series 2002-NC3 Class M1, 2.17% 8/25/32 (h) | 75,000 | 75,687 | ||
Series 2003-NC2 Class M2, 3.45% 2/25/33 (h) | 40,000 | 40,967 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (f) | 22,776 | 22,854 | ||
National Collegiate Funding LLC Series 2004-GT1 Class IO1, 7.87% 6/24/10 (f)(i) | 455,000 | 185,595 | ||
New Century Home Equity Loan Trust Series 2003-2 Class A2, 1.88% 1/25/33 (h) | 36,596 | 36,666 | ||
NovaStar Home Equity Loan Series 2004-1: | ||||
Class M1, 1.9% 6/25/34 (h) | 75,000 | 75,070 | ||
Class M4, 2.425% 6/25/34 (h) | 125,000 | 125,185 | ||
Sears Credit Account Master Trust II Series 2002-4 Class A, 1.51% 8/18/09 (h) | 100,000 | 100,120 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
SLM Private Credit Student Loan Trust Series 2004-A Class C, 2.47% 6/15/33 (h) | $ 260,000 | $ 261,270 | ||
WFS Financial 2004-3 Owner Trust Series 2004 3 Class D, 4.07% 2/17/12 | 365,000 | 365,000 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $10,381,179) | 10,409,688 | |||
Collateralized Mortgage Obligations - 3.5% | ||||
Private Sponsor - 3.1% | ||||
Bank of America Mortgage Securities, Inc.: | ||||
Series 2003-K: | ||||
Class 1A1, 3.3875% 12/25/33 (h) | 299,399 | 299,591 | ||
Class 2A1, 4.2187% 12/25/33 (h) | 386,959 | 382,492 | ||
Series 2003-L Class 2A1, 4.0362% 1/25/34 (h) | 2,209,348 | 2,191,998 | ||
Series 2004-B: | ||||
Class 1A1, 3.4463% 3/25/34 (h) | 1,004,893 | 1,001,164 | ||
Class 2A2, 4.16% 3/25/34 (h) | 249,195 | 247,747 | ||
Series 2004-C Class 1A1, 3.4381% 4/25/34 (h) | 592,642 | 586,067 | ||
Series 2004-D: | ||||
Class 1A1, 3.6061% 5/25/34 (h) | 636,390 | 629,454 | ||
Class 2A2, 4.2274% 5/25/34 (h) | 687,289 | 677,006 | ||
Series 2004-G Class 2A7, 4.6636% 8/25/34 (h) | 800,000 | 799,996 | ||
CS First Boston Mortgage Securities Corp. floater: | ||||
Series 2004-AR3 Class 6A2, 1.82% 3/25/34 (h) | 251,005 | 251,593 | ||
Series 2004-AR6 Class 9A2, 1.82% 7/25/34 (h) | 384,503 | 384,503 | ||
Granite Mortgages PLC floater Series 2004-2 Class 1C, 2.0681% 6/20/44 (h) | 235,000 | 235,000 | ||
Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34 | 94,850 | 98,133 | ||
Master Seasoned Securitization Trust Series 2004 1 Class 1A1, 6.343% 10/25/17 (g) | 620,000 | 640,150 | ||
Merrill Lynch Mortgage Investors, Inc.: | ||||
Series 2003-E Class XA1, 1% 10/25/28 (h)(i) | 2,049,661 | 30,042 | ||
Series 2003-G Class XA1, 1% 1/25/29 (i) | 2,887,874 | 49,861 | ||
Series 2003-H Class XA1, 1% 1/25/29 (f)(i) | 2,319,771 | 36,784 | ||
Merrill Lynch Trust XXIX Series 29 Class A, 5/1/13 (j) | 45,549 | 41,459 | ||
Residential Asset Mortgage Products, Inc. sequential pay: | ||||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 928,335 | 961,842 | ||
Series 2004-SL2 Class A1, 6.5% 11/25/16 | 117,206 | 121,217 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
Private Sponsor - continued | ||||
Residential Finance LP/Residential Finance Development Corp. floater: | ||||
Series 2003-CB1: | ||||
Class B3, 2.8131% 6/10/35 (f)(h) | $ 44,204 | $ 44,872 | ||
Class B4, 3.0131% 6/10/35 (f)(h) | 39,292 | 39,880 | ||
Class B5, 3.6131% 6/10/35 (f)(h) | 29,469 | 30,006 | ||
Class B6, 4.1131% 6/10/35 (f)(h) | 14,735 | 14,997 | ||
Series 2004-B: | ||||
Class B4, 2.4631% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Class B5, 2.9131% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Class B6, 3.3631% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Resix Finance Ltd. floater: | ||||
Series 2004-A Class B8, 6.5631% 2/10/36 (f)(h) | 828,248 | 828,244 | ||
Series 2004-B Class B8, 6.1131% 2/10/36 (f)(h) | 199,542 | 199,542 | ||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (f)(i) | 5,597,713 | 59,913 | ||
Washington Mutual Mortgage Securities Corp. sequential pay: | ||||
Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 95,330 | 100,677 | ||
Series 2004-RA2 Class 2A, 7% 7/25/33 | 250,105 | 259,025 | ||
TOTAL PRIVATE SPONSOR | 11,542,568 | |||
U.S. Government Agency - 0.4% | ||||
Fannie Mae sequential pay Series 1999-10 Class MZ, 6.5% 9/17/38 | 731,648 | 769,117 | ||
Fannie Mae guaranteed REMIC pass thru certificates planned amortization class Series 2001-53 Class OH, 6.5% 6/25/30 | 5,768 | 5,798 | ||
Freddie Mac planned amortization class Series 2355 Class CD, 6.5% 6/15/30 | 7,732 | 7,790 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
sequential pay Series 2750 Class ZT, 5% 2/15/34 | 372,668 | 301,099 | ||
Series 2749 Class MZ, 5% 2/15/24 | 59,468 | 59,458 | ||
Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.8704% 10/16/23 (h) | 25,000 | 26,402 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class Series 2003-75 Class LI, 5.5% 10/20/21 (i) | $ 5,845,087 | $ 168,640 | ||
sequential pay Series 2003-59 Class D, 3.654% 10/16/27 | 115,000 | 106,832 | ||
TOTAL U.S. GOVERNMENT AGENCY | 1,445,136 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $13,072,698) | 12,987,704 | |||
Commercial Mortgage Securities - 1.6% | ||||
Banc of America Large Loan, Inc. floater Series 2003-BBA2: | ||||
Class C, 1.85% 11/15/15 (f)(h) | 50,000 | 50,246 | ||
Class D, 1.93% 11/15/15 (f)(h) | 80,000 | 80,462 | ||
Class F, 2.28% 11/15/15 (f)(h) | 60,000 | 60,502 | ||
Class H, 2.78% 11/15/15 (f)(h) | 50,000 | 50,372 | ||
Class J, 3.33% 11/15/15 (f)(h) | 55,000 | 55,864 | ||
Class K, 2.8103% 11/15/15 (f)(h) | 50,000 | 50,510 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2004-1 Class A, 1.66% 4/25/34 (f)(h) | 390,139 | 389,895 | ||
Series 2004-2 Class M1, 1.82% 8/25/34 (f)(h) | 399,063 | 399,063 | ||
Series 2004-1 Class IO, 1.25% 4/25/34 (f)(i) | 4,175,558 | 279,893 | ||
Bear Stearns Commercial Mortgage Securities, Inc.: | ||||
floater: | ||||
Series 2003-BA1A Class A1, 1.4913% 4/14/15 (f)(h) | 292,813 | 292,789 | ||
Series 2004-ESA Class A2, 1.67% 5/14/16 (f)(h) | 350,000 | 350,174 | ||
sequential pay Series 2004-ESA Class A3, 4.741% 5/14/16 (f) | 180,000 | 182,054 | ||
Series 2004-ESA: | ||||
Class B, 4.888% 5/14/16 (f) | 325,000 | 327,184 | ||
Class C, 4.937% 5/14/16 (f) | 205,000 | 206,548 | ||
Class D, 4.986% 5/14/16 (f) | 75,000 | 75,471 | ||
Class E, 5.064% 5/14/16 (f) | 230,000 | 231,150 | ||
Class F, 5.182% 5/14/16 (f) | 55,000 | 55,516 | ||
COMM floater Series 2002-FL7: | ||||
Class A2, 1.73% 11/15/14 (f)(h) | 47,937 | 47,942 | ||
Class D, 1.95% 11/15/14 (f)(h) | 125,000 | 125,233 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
CS First Boston Mortgage Securities Corp. Series 2003-TFLA Class G, 1.9433% 4/15/13 (f)(h) | $ 105,000 | $ 100,801 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-22 Class B, 3.963% 5/16/32 | 60,000 | 57,958 | ||
Series 2003-36 Class C, 4.254% 2/16/31 | 55,000 | 53,478 | ||
Series 2003-47 Class C, 4.227% 10/16/27 | 105,000 | 102,157 | ||
Series 2003-47 Class XA, 0.2454% 6/16/43 (h)(i) | 6,632,656 | 336,813 | ||
GS Mortgage Securities Corp. II sequential pay: | ||||
Series 2001-LIBA Class A2, 6.615% 2/14/16 (f) | 315,000 | 341,622 | ||
Series 2003-C1 Class A2A, 3.59% 1/10/40 | 65,000 | 64,404 | ||
Host Marriot Pool Trust sequential pay Series 1999-HMTA Class D, 7.97% 8/3/15 (f) | 110,000 | 123,170 | ||
Trizechahn Office Properties Trust Series 2001-TZHA: | ||||
Class C3, 6.522% 3/15/13 (f) | 25,000 | 26,785 | ||
Class C4, 6.893% 5/15/16 (f) | 500,000 | 557,006 | ||
Class E3, 7.253% 3/15/13 (f) | 235,000 | 248,367 | ||
Wachovia Bank Commercial Mortgage Trust sequential pay Series 2003-C8 Class A3, 4.445% 11/15/35 | 785,000 | 773,322 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $6,308,252) | 6,096,751 | |||
Foreign Government and Government Agency Obligations - 3.0% | ||||
Argentine Republic 1.2138% 8/3/12 (h) | 105,000 | 70,872 | ||
Bogota Distrito Capital 9.5% 12/12/06 (Reg. S) | 95,000 | 103,550 | ||
Brazilian Federative Republic: | ||||
Brady: | ||||
capitalization bond 8% 4/15/14 | 1,149,315 | 1,083,948 | ||
new money bond L 7.6875% 4/15/09 (Reg.) (h) | 14,707 | 13,714 | ||
new money bond L, 2.11% 4/15/09 (Bearer) (h) | 44,120 | 41,141 | ||
par Z-L 6% 4/15/24 | 265,000 | 214,650 | ||
11% 8/17/40 | 385,000 | 378,070 | ||
11.25% 7/26/07 | 125,000 | 137,750 | ||
11.5% 3/12/08 | 95,000 | 104,500 | ||
12% 4/15/10 | 55,000 | 60,638 | ||
12.25% 3/6/30 | 70,000 | 75,600 | ||
12.75% 1/15/20 | 45,000 | 49,950 | ||
Central Bank of Nigeria promissory note 5.092% 1/5/10 | 76,333 | 69,825 | ||
Chilean Republic: | ||||
5.625% 7/23/07 | 100,000 | 104,875 | ||
7.125% 1/11/12 | 1,250,000 | 1,404,688 | ||
Foreign Government and Government Agency | ||||
Principal | Value | |||
City of Kiev 8.75% 8/8/08 | $ 200,000 | $ 203,000 | ||
Colombian Republic: | ||||
9.75% 4/23/09 | 200,000 | 220,500 | ||
10.75% 1/15/13 | 160,000 | 179,200 | ||
11.75% 2/25/20 | 95,000 | 109,131 | ||
Dominican Republic: | ||||
Brady 2% 8/30/09 (h) | 142,083 | 94,841 | ||
9.5% 9/27/06 (Reg. S) | 15,000 | 11,325 | ||
Ecuador Republic: | ||||
12% 11/15/12 (Reg. S) | 235,000 | 221,488 | ||
euro par 4.75% 2/28/25 (e) | 5,000 | 2,931 | ||
Hong Kong Gov Spl Admin Reg 5.125% 8/1/14 (f) | 1,185,000 | 1,177,589 | ||
Jamaican Government 10.625% 6/20/17 | 10,000 | 9,625 | ||
Lebanese Republic 10.125% 8/6/08 | 55,000 | 60,775 | ||
Panamanian Republic: | ||||
9.625% 2/8/11 | 25,000 | 28,000 | ||
10.75% 5/15/20 | 60,000 | 69,600 | ||
Peruvian Republic 9.125% 2/21/12 | 135,000 | 141,750 | ||
Philippine Republic: | ||||
Brady principal collateralized interest reduction bond 6.5% 12/1/17 | 45,000 | 43,875 | ||
8.375% 2/15/11 | 445,000 | 449,450 | ||
8.875% 3/17/15 | 40,000 | 40,300 | ||
9.875% 1/15/19 | 145,000 | 150,075 | ||
Quebec Province 7.5% 9/15/29 | 100,000 | 122,711 | ||
Russian Federation: | ||||
5% 3/31/30 (Reg. S) (e) | 1,192,000 | 1,093,660 | ||
8.25% 3/31/10 (Reg. S) | 165,000 | 177,169 | ||
euro 10% 6/26/07 | 105,000 | 117,994 | ||
South African Republic 6.5% 6/2/14 | 255,000 | 261,375 | ||
State of Israel 4.625% 6/15/13 | 20,000 | 18,725 | ||
Turkish Republic: | ||||
10.5% 1/13/08 | 170,000 | 187,850 | ||
11% 1/14/13 | 100,000 | 115,250 | ||
11.75% 6/15/10 | 255,000 | 298,988 | ||
12.375% 6/15/09 | 90,000 | 107,213 | ||
United Mexican States: | ||||
4.625% 10/8/08 | 160,000 | 159,360 | ||
7.5% 1/14/12 | 100,000 | 110,000 | ||
Uruguay Republic 7.25% 2/15/11 | 70,000 | 61,338 | ||
Venezuelan Republic: | ||||
Discount A, 2.1325% 3/31/20 (h) | 250,000 | 213,125 | ||
Foreign Government and Government Agency | ||||
Principal | Value | |||
Venezuelan Republic: - continued | ||||
5.375% 8/7/10 | $ 35,000 | $ 28,963 | ||
9.25% 9/15/27 | 150,000 | 133,125 | ||
10.75% 9/19/13 | 380,000 | 394,250 | ||
13.625% 8/15/18 | 65,000 | 73,938 | ||
euro Brady: | ||||
debt conversion bond 2.75% 12/18/07 (h) | 249,990 | 241,397 | ||
par W-B 6.75% 3/31/20 | 250,000 | 228,750 | ||
Vietnamese Socialist Republic Brady par 3.75% 3/12/28 (e) | 90,000 | 61,650 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $11,084,149) | 11,334,057 | |||
Common Stocks - 0.0% | ||||
Shares | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Multiline Retail - 0.0% | ||||
Barneys, Inc. warrants 4/1/08 (a) | 20 | 1,200 | ||
CONSUMER STAPLES - 0.0% | ||||
Personal Products - 0.0% | ||||
Revlon, Inc. Class A (a) | 18,648 | 42,890 | ||
TOTAL COMMON STOCKS (Cost $36,503) | 44,090 | |||
Nonconvertible Preferred Stocks - 0.0% | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Media - 0.0% | ||||
PRIMEDIA, Inc.: | ||||
Series D, 10.00% | 425 | 39,950 | ||
Series H, 8.625% | 1,000 | 84,000 | ||
123,950 | ||||
TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $133,738) | 123,950 | |||
Sovereign Loan Participations - 0.1% | ||||
Principal | Value | |||
Indonesian Republic loan participation: | ||||
Credit Suisse First Boston 2.0625% 3/28/13 (h) | $ 124,405 | $ 106,988 | ||
Deutsche Bank: | ||||
2.0625% 3/28/13 (h) | 14,643 | 12,593 | ||
2.5625% 3/21/05 (h) | 15,000 | 14,588 | ||
Salomon Brothers 2.5625% 3/21/05 (h) | 15,000 | 14,588 | ||
TOTAL SOVEREIGN LOAN PARTICIPATIONS (Cost $147,490) | 148,757 | |||
Fixed-Income Funds - 9.1% | ||||
Shares | ||||
Fidelity Ultra-Short Central Fund (b) | 341,900 | 34,039,564 | ||
Cash Equivalents - 15.8% | ||||
Maturity | ||||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 59,230,746 | 59,224,000 | ||
TOTAL INVESTMENT PORTFOLIO - 116.2% (Cost $436,168,709) | 434,824,531 | |||
NET OTHER ASSETS - (16.2)% | (60,573,776) | |||
NET ASSETS - 100% | $ 374,250,755 |
Swap Agreements | |||||
Expiration | Notional | Value | |||
Credit Default Swap | |||||
Receive quarterly notional amount multilpied by .43% and pay Bank of America upon default event of Apache Corp., par value of the notional amount of Apache Corp. 6.25% 4/15/12 | Sept. 2014 | $ 400,000 | $ (181) | ||
Receive quarterly notional amount multiplied by .35% and pay Goldman Sachs upon default event of Devon Energy Corp., par value of the notional amount of Devon Energy Corp. 7.95% 4/15/32 | June 2006 | 200,000 | 8 | ||
Receive quarterly notional amount multiplied by .53% and pay Deutsche Bank upon default event of SBC Communications, Inc., par value of the notional amount of SBC Communications, Inc. 6.25% 3/15/11 | March 2009 | 300,000 | 1,452 | ||
Receive quarterly notional amount multiplied by .53% and pay Lehman Brothers, Inc., upon default event of SBC Communications, Inc., par value of the notional amount of SBC Communications, Inc. 6.25% 3/15/11 | March 2009 | 200,000 | 594 | ||
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. 1.12% 7/25/35 | August 2007 | 25,000 | 316 | ||
TOTAL CREDIT DEFAULT SWAP | 1,125,000 | 2,189 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.857% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2008 | 3,000,000 | (25,221) | ||
Receive quarterly a fixed rate equal to 4.135% and pay quarterly a floating rate based on 3-month LIBOR with Merrill Lynch, Inc. | June 2006 | 8,000,000 | 36,964 | ||
Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | July 2014 | 1,135,000 | (1,932) | ||
TOTAL INTEREST RATE SWAP | 12,135,000 | 9,811 | |||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Total Return Swap | |||||
Receive monthly a return equal to Lehman Brothers CMBS AAA 8.5+ and pay monthly a floating rate based on 1-month LIBOR minus 65 basis points with Lehman Brothers, Inc. | Oct. 2004 | $ 1,000,000 | $ 15,634 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 50 basis points with Lehman Brothers, Inc. | August 2004 | 630,000 | 6,082 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 50 basis points with Lehman Brothers, Inc. | Sept. 2004 | 600,000 | 5,793 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 55 basis points with Deutsche Bank | Dec. 2004 | 500,000 | 5,069 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 72 basis points with Bank of America | Jan. 2005 | 1,000,000 | 445 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage-Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 70 basis points with Bank of America | Dec. 2004 | 1,000,000 | 26,163 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage-Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 80 basis points with Bank of America | Nov. 2004 | 2,000,000 | 28,594 | ||
TOTAL TOTAL RETURN SWAP | 6,730,000 | 87,780 | |||
$ 19,990,000 | $ 99,780 |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(f) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $25,398,709 or 6.8% of net assets. |
(g) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(j) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(k) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$59,224,000 due 8/2/04 at 1.37% | |
Bank of America, National Association | $ 9,951,645 |
Banc of America Securities LLC | 21,905,332 |
Bear Stearns & Co. Inc. | 2,487,911 |
BNP Paribas Securities Corp. | 2,487,911 |
Goldman, Sachs & Co. | 2,487,911 |
Morgan Stanley & Co. Incorporated | 19,903,290 |
$ 59,224,000 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.5% |
Cayman Islands | 1.3% |
United Kingdom | 1.3% |
Netherlands | 1.0% |
Others (individually less than 1%) | 6.9% |
100.0% |
Income Tax Information |
The fund hereby designates approximately $346,000 as a 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, 2004 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $59,224,000) (cost $436,168,709) - See accompanying schedule | $ 434,824,531 | |
Cash | 274,348 | |
Receivable for investments sold | 355,713 | |
Receivable for fund shares sold | 292,929 | |
Dividends receivable | 1,063 | |
Interest receivable | 3,569,415 | |
Swap agreements, at value | 99,780 | |
Prepaid expenses | 239 | |
Receivable from investment adviser for expense reductions | 31,093 | |
Total assets | 439,449,111 | |
Liabilities | ||
Payable for investments purchased | $ 648,329 | |
Delayed delivery | 64,162,395 | |
Payable for fund shares redeemed | 105,811 | |
Distributions payable | 36,647 | |
Accrued management fee | 131,425 | |
Distribution fees payable | 228 | |
Other affiliated payables | 67,193 | |
Other payables and accrued expenses | 46,328 | |
Total liabilities | 65,198,356 | |
Net Assets | $ 374,250,755 | |
Net Assets consist of: | ||
Paid in capital | $ 374,446,491 | |
Undistributed net investment income | 79,241 | |
Accumulated undistributed net realized gain (loss) on investments | 969,421 | |
Net unrealized appreciation (depreciation) on investments | (1,244,398) | |
Net Assets | $ 374,250,755 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2004 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 10.46 | |
Maximum offering price per share (100/95.25 of $10.46) | $ 10.98 | |
Class T: | $ 10.46 | |
Maximum offering price per share (100/96.50 of $10.46) | $ 10.84 | |
Class B: | $ 10.46 | |
Class C: | $ 10.46 | |
Fidelity Total Bond: | $ 10.46 | |
Institutional Class: | $ 10.46 |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2004 | ||
Investment Income | ||
Dividends | $ 19,783 | |
Interest | 10,504,723 | |
Total income | 10,524,506 | |
Expenses | ||
Management fee | $ 1,152,050 | |
Transfer agent fees | 535,569 | |
Distribution fees | 337 | |
Accounting fees and expenses | 114,560 | |
Non-interested trustees' compensation | 1,181 | |
Custodian fees and expenses | 23,733 | |
Registration fees | 140,491 | |
Audit | 38,827 | |
Legal | 4,405 | |
Miscellaneous | 16,445 | |
Total expenses before reductions | 2,027,598 | |
Expense reductions | (275,019) | 1,752,579 |
Net investment income (loss) | 8,771,927 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 1,044,604 | |
Swap agreements | (106,905) | |
Total net realized gain (loss) | 937,699 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 744,733 | |
Swap agreements | 101,024 | |
Delayed delivery commitments | (138,750) | |
Total change in net unrealized appreciation (depreciation) | 707,007 | |
Net gain (loss) | 1,644,706 | |
Net increase (decrease) in net assets resulting from operations | $ 10,416,633 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | October 15, 2002 | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 8,771,927 | $ 1,155,369 |
Net realized gain (loss) | 937,699 | 1,196,805 |
Change in net unrealized appreciation (depreciation) | 707,007 | (1,951,405) |
Net increase (decrease) in net assets resulting | 10,416,633 | 400,769 |
Distributions to shareholders from net investment income | (8,644,971) | (1,105,904) |
Distributions to shareholders from net realized gain | (461,703) | - |
Total distributions | (9,106,674) | (1,105,904) |
Share transactions - net increase (decrease) | 292,125,223 | 81,520,708 |
Total increase (decrease) in net assets | 293,435,182 | 80,815,573 |
Net Assets | ||
Beginning of period | 80,815,573 | - |
End of period (including undistributed net investment income of $79,241 and undistributed net investment income of $48,177, respectively) | $ 374,250,755 | $ 80,815,573 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .046 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .191 |
Distributions from net investment income | (.041) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.85% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | .87%A |
Expenses net of voluntary waivers, if any | .80%A |
Expenses net of all reductions | .80%A |
Net investment income (loss) | 3.51%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .045 |
Net realized and unrealized gain (loss) | .144 |
Total from investment operations | .189 |
Distributions from net investment income | (.039) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.84% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | .96%A |
Expenses net of voluntary waivers, if any | .90%A |
Expenses net of all reductions | .90%A |
Net investment income (loss) | 3.41%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .036 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .181 |
Distributions from net investment income | (.031) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.76% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 1.62%A |
Expenses net of voluntary waivers, if any | 1.55%A |
Expenses net of all reductions | 1.55%A |
Net investment income (loss) | 2.76%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 104 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .035 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .180 |
Distributions from net investment income | (.030) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.74% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 1.74%A |
Expenses net of voluntary waivers, if any | 1.65%A |
Expenses net of all reductions | 1.65%A |
Net investment income (loss) | 2.66%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 142 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Total Bond
Years ended July 31, | 2004 | 2003F |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 10.28 | $ 10.00 |
Income from Investment Operations | ||
Net investment income (loss)D | .340 | .232 |
Net realized and unrealized gain (loss) | .237 | .269E |
Total from investment operations | .577 | .501 |
Distributions from net investment income | (.337) | (.221) |
Distributions from net realized gain | (.060) | - |
Total distributions | (.397) | (.221) |
Net asset value, end of period | $ 10.46 | $ 10.28 |
Total ReturnB,C | 5.68% | 5.01% |
Ratios to Average Net AssetsG | ||
Expenses before expense reductions | .75% | 1.01%A |
Expenses net of voluntary waivers, if any | .65% | .65%A |
Expenses net of all reductions | .65% | .65%A |
Net investment income (loss) | 3.25% | 2.83%A |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 373,699 | $ 80,816 |
Portfolio turnover rate | 251% | 423%A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E 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 class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Year ended July 31, | 2004E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)D | .048 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .193 |
Distributions from net investment income | (.043) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C | 1.87% |
Ratios to Average Net AssetsF | |
Expenses before expense reductions | .71%A |
Expenses net of voluntary waivers, if any | .65%A |
Expenses net of all reductions | .65%A |
Net investment income (loss) | 3.66%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2004
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 fund offers Class A, Class T, Class B, Class C, Fidelity Total Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
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, including restricted 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 valuation models. Equity securities, including restricted 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 prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, 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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from net investment income and realized gain for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swap agreements, market discount, non-taxable dividends, financing transactions and losses deferred due to wash sales.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 2,516,785 | |
Unrealized depreciation | (3,578,968) | |
Net unrealized appreciation (depreciation) | (1,062,183) | |
Undistributed ordinary income | 1,657,054 | |
Undistributed long-term capital gain | 169,658 | |
Cost for federal income tax purposes | $ 435,886,714 |
The tax character of distributions paid was as follows:
July 31, 2004 | July 31, 2003 | |
Ordinary Income | $ 9,106,674 | $ 1,105,904 |
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 by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - 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 at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Total return swaps are agreements to exchange the return generated by one instrument for the return generated by another instrument, for example, the agreement to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the index exceeds the offsetting interest obligation, the fund will receive a payment from the counterparty. To the extent it is less, the fund will make a payment to the counterparty. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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. Periodic payments and premiums received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
Annual Report
2. Operating Policies - continued
Swap Agreements - continued
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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
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 may 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 sale 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. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $190,553,218 and $50,166,230, respectively.
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
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 20 | $ 20 |
Class T | 0% | .25% | 32 | 32 |
Class B | .65% | .25% | 115 | 115 |
Class C | .75% | .25% | 170 | 129 |
$ 337 | $ 296 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, no sales charges were retained by FDC.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the fund, except for Fidelity Total Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, , is the transfer agent for Fidelity Total Bond shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of shareholder
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
Amount | % of | |
Class A | $ 20 | .16 |
Class T | 20 | .16 |
Class B | 20 | .16 |
Class C | 29 | .17 |
Fidelity Total Bond | 535,460 | .20 |
Institutional Class | 20 | .16 |
$ 535,569 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month.
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 $440,328 for the period.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
6. Expense Reductions.
FMR agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | .80% | $ 9 |
Class T | .90% | 8 |
Class B | 1.55% | 8 |
Class C | 1.65% | 15 |
Fidelity Total Bond | .65% | 273,223 |
Institutional Class | .65% | 8 |
$ 273,271 |
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 $1,748.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2004A | 2003B |
From net investment income | ||
Class A | $ 394 | $ - |
Class T | 382 | - |
Class B | 301 | - |
Class C | 386 | - |
Fidelity Total Bond | 8,643,095 | 1,105,904 |
Institutional Class | 413 | - |
Total | $ 8,644,971 | $ 1,105,904 |
From net realized gain | ||
Fidelity Total Bond | $ 461,703 | $ - |
A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Distributions for Fidelity Total Bond are for the period October 15, 2002 (commencement of operations) to July 31, 2003.
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2004A | 2003B | 2004A | 2003B |
Class A | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 38 | - | 394 | - |
Net increase (decrease) | 9,737 | - | $ 100,394 | $ - |
Class T | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 37 | - | 382 | - |
Net increase (decrease) | 9,736 | - | $ 100,382 | $ - |
Class B | ||||
Shares sold | 9,950 | - | $ 102,625 | $ - |
Reinvestment of distributions | 29 | - | 301 | - |
Net increase (decrease) | 9,979 | - | $ 102,926 | $ - |
Class C | ||||
Shares sold | 13,566 | - | $ 140,062 | $ - |
Reinvestment of distributions | 37 | - | 386 | - |
Net increase (decrease) | 13,603 | - | $ 140,448 | $ - |
Fidelity Total Bond | ||||
Shares sold | 34,227,901 | 14,730,271 | $ 358,024,636 | $ 153,496,596 |
Reinvestment of distributions | 845,761 | 98,006 | 8,865,286 | 1,022,553 |
Shares redeemed | (7,201,869) | (6,966,063) | (75,309,262) | (72,998,441) |
Net increase (decrease) | 27,871,793 | 7,862,214 | $ 291,580,660 | $ 81,520,708 |
Institutional Class | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 40 | - | 413 | - |
Net increase (decrease) | 9,739 | - | $ 100,413 | $ - |
A Share transactions for Class A, Class T, Class B, Class C, and Institutional Class are for the period June 16, 2004 (commencement of sales of shares) to July 31, 2004.
B Share transactions for Fidelity Total Bond are for the period October 15, 2002 (commencement of operations) to July 31, 2003.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Total Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Total Bond Fund (a fund of Fidelity Income Fund) at July 31, 2004 and the results of its operations, the changes in its 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 Total Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 293 funds advised by FMR or an affiliate. Mr. McCoy oversees 295 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 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
Year of Election or Appointment: 2001 Senior Vice President of the fund (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 (50) | |
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 (52) | |
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998 and retired as Chairman May 1999, and 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. He is also a member of the Executive Committee and Chairman of the Policy Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 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 Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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 (43) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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. | |
Kevin E. Grant (44) | |
Year of Election or Appointment: 2002 Vice President of the fund. Mr. Grant also serves as 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 (55) | |
Year of Election or Appointment: 2002 Secretary of the fund. 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 (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of the fund. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the fund. 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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of the fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the fund. 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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of the fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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 Advisor Total Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Institutional Class | 9/07/04 | 9/03/04 | $0.02 |
A total of 16.67% 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 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | ,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.496 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
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 Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
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 Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
ATBI-UANN-0904
1.804580.100
Fidelity
Total Bond
Fund
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR 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.
Commencing with the fiscal quarter ending October 31, 2004, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. The fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the fund's portfolio holdings, view the fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com/holdings.
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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
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 Fidelity Total Bond'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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Life of |
Fidelity Total Bond | 5.68% | 5.97% |
A From October 15, 2002.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Total Bond 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 had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
Fidelity Total Bond Fund rose 5.68% during the past year, topping the 5.47% return of the Lehman Brothers U.S. Universal Index and the 4.46% return of the LipperSM Intermediate Investment Grade Debt Funds Average. Sector allocation contributed a lot, as I took advantage of the fund's flexibility to access value across the entire bond market. Of particular note, my positioning in the below-investment-grade high-yield and emerging-markets sectors - which combined represented only a small portion of the fund's net assets - paid off in spades. The fund was rewarded for overweighting high-yield securities, which handily outpaced most fixed-income alternatives amid a positive environment for riskier assets. We had a better tactical result, however, on the more-volatile emerging-markets front, thanks to some timely shifts into and out of the sector. Within the investment-grade universe, I continued to shy away from weak government bonds - particularly Treasuries - while favoring higher-yielding spread sectors, notably mortgage securities, which outperformed throughout the period. Favorable issue selection within corporates also helped, as did effective yield-curve positioning. Conversely, there are always things I could have done better - including having larger over- and underweightings - but during a period in which so much went right for the fund, it's difficult to find anything that had a meaningful negative impact.
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
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.50 | $ 1.00 |
HypotheticalA | $ 1,000.00 | $ 1,005.30 | $ 1.00 |
Class T(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.40 | $ 1.14 |
HypotheticalA | $ 1,000.00 | $ 1,005.17 | $ 1.13 |
Beginning | Ending | Expenses Paid | |
Class B(dagger) | |||
Actual | $ 1,000.00 | $ 1,017.60 | $ 1.97 |
HypotheticalA | $ 1,000.00 | $ 1,004.35 | $ 1.95 |
Class C(dagger) | |||
Actual | $ 1,000.00 | $ 1,017.40 | $ 2.09 |
HypotheticalA | $ 1,000.00 | $ 1,004.22 | $ 2.08 |
Fidelity Total Bond | |||
Actual | $ 1,000.00 | $ 1,006.10 | $ 3.24 |
HypotheticalA | $ 1,000.00 | $ 1,021.73 | $ 3.27 |
Institutional Class(dagger) | |||
Actual | $ 1,000.00 | $ 1,018.70 | $ .82 |
HypotheticalA | $ 1,000.00 | $ 1,005.48 | $ .82 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Class A | .80% |
Class T | .90% |
Class B | 1.55% |
Class C | 1.65% |
Fidelity Total Bond | .65% |
Institutional Class | .65% |
8 Calculated by multiplying by 46/366 to reflect the period 6/16/2004 to July 31, 2004.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) as of July 31, 2004 | |||||||
As of July 31, 2004 | As of January 31, 2004 | ||||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | AAA 5.4% | ![]() | AAA 3.8% | ||||
![]() | AA 3.2% | ![]() | AA 3.4% | ||||
![]() | A 10.0% | ![]() | A 6.2% | ||||
![]() | BBB 15.9% | ![]() | BBB 11.1% | ||||
![]() | BB and Below 9.3% | ![]() | BB and Below 8.5% | ||||
![]() | Not Rated 0.8% | ![]() | Not Rated 1.3% | ||||
![]() | Equities 0.0% | ![]() | Equities 0.1% | ||||
![]() | Short-Term Investments | ![]() | Short-Term Investments |
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, 2004 | ||
6 months ago | ||
Years | 5.8 | 5.1 |
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, 2004 | ||
6 months ago | ||
Years | 4.7 | 4.5 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Corporate Bonds 29.0% | ![]() | Corporate Bonds 23.2% | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 6.2% | ![]() | CMOs and Other Mortgage Related Securities 4.2% | ||||
![]() | Stocks 0.0% | ![]() | Stocks 0.1% | ||||
![]() | Other Investments 3.1% | ![]() | Other Investments 1.4% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 10.5% | ** Foreign investments | 6.5% | ||||
* Futures and Swaps | 5.4% | ** Futures and Swaps | 1.8% |
The information in the above table 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, 2004
Showing Percentage of Net Assets
Nonconvertible Bonds - 28.5% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 4.4% | ||||
Auto Components - 0.4% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.75% 1/15/08 | $ 200,000 | $ 203,395 | ||
7.2% 9/1/09 | 1,000,000 | 1,098,733 | ||
EaglePicher, Inc. 9.75% 9/1/13 | 20,000 | 21,500 | ||
Visteon Corp. 7% 3/10/14 | 80,000 | 75,900 | ||
1,399,528 | ||||
Automobiles - 0.1% | ||||
General Motors Corp. 7.2% 1/15/11 | 500,000 | 522,651 | ||
Hotels, Restaurants & Leisure - 1.0% | ||||
Argosy Gaming Co. 7% 1/15/14 (f) | 80,000 | 79,800 | ||
Bally Total Fitness Holding Corp.: | ||||
9.875% 10/15/07 | 15,000 | 12,975 | ||
10.5% 7/15/11 | 120,000 | 116,100 | ||
Friendly Ice Cream Corp. 8.375% 6/15/12 | 70,000 | 66,500 | ||
Gaylord Entertainment Co. 8% 11/15/13 | 160,000 | 164,800 | ||
Herbst Gaming, Inc. 8.125% 6/1/12 (f) | 70,000 | 68,950 | ||
HMH Properties, Inc. 7.875% 8/1/08 | 213,000 | 219,390 | ||
Host Marriott LP: | ||||
7.125% 11/1/13 | 35,000 | 34,781 | ||
8.375% 2/15/06 | 200,000 | 212,000 | ||
Mandalay Resort Group 6.375% 12/15/11 | 150,000 | 153,375 | ||
MGM MIRAGE: | ||||
6% 10/1/09 | 20,000 | 19,850 | ||
8.375% 2/1/11 | 40,000 | 42,800 | ||
Mohegan Tribal Gaming Authority: | ||||
7.125% 8/15/14 (f) | 40,000 | 40,500 | ||
8.375% 7/1/11 | 35,000 | 39,550 | ||
Morton's Restaurant Group, Inc. 7.5% 7/1/10 | 65,000 | 61,100 | ||
MTR Gaming Group, Inc. 9.75% 4/1/10 | 135,000 | 145,800 | ||
NCL Corp. Ltd. 10.625% 7/15/14 (f) | 80,000 | 80,800 | ||
Park Place Entertainment Corp. 7.875% 12/15/05 | 50,000 | 52,625 | ||
Penn National Gaming, Inc.: | ||||
6.875% 12/1/11 (f) | 80,000 | 79,200 | ||
8.875% 3/15/10 | 100,000 | 109,250 | ||
Premier Entertainment Biloxi LLC 10.75% 2/1/12 (f) | 20,000 | 21,100 | ||
Resorts International Hotel & Casino, Inc. 11.5% 3/15/09 | 225,000 | 253,125 | ||
Seneca Gaming Corp. 7.25% 5/1/12 (f) | 50,000 | 49,813 | ||
Six Flags, Inc.: | ||||
9.5% 2/1/09 | 280,000 | 270,200 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Hotels, Restaurants & Leisure - continued | ||||
Six Flags, Inc.: - continued | ||||
9.625% 6/1/14 | $ 100,000 | $ 92,250 | ||
Speedway Motorsports, Inc. 6.75% 6/1/13 (f) | 100,000 | 99,500 | ||
Station Casinos, Inc.: | ||||
6% 4/1/12 | 70,000 | 68,775 | ||
6.5% 2/1/14 | 40,000 | 38,900 | ||
6.875% 3/1/16 | 100,000 | 97,000 | ||
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | 325,000 | 349,375 | ||
Town Sports International, Inc. 9.625% 4/15/11 | 20,000 | 19,350 | ||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 100,000 | 114,500 | ||
Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (f) | 9,000 | 9,540 | ||
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | 160,000 | 169,600 | ||
Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp. 12% 11/1/10 | 167,000 | 206,663 | ||
3,659,837 | ||||
Household Durables - 0.1% | ||||
D.R. Horton, Inc. 8.5% 4/15/12 | 30,000 | 33,450 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.5% 1/15/14 | 100,000 | 94,000 | ||
8.875% 4/1/12 | 10,000 | 10,850 | ||
Sealy Mattress Co. 8.25% 6/15/14 (f) | 50,000 | 50,000 | ||
WCI Communities, Inc. 9.125% 5/1/12 | 35,000 | 37,625 | ||
William Lyon Homes, Inc. 10.75% 4/1/13 | 40,000 | 44,800 | ||
270,725 | ||||
Internet & Catalog Retail - 0.1% | ||||
USA Interactive 7% 1/15/13 | 300,000 | 328,500 | ||
Media - 2.5% | ||||
AMC Entertainment, Inc. 8% 3/1/14 (f) | 290,000 | 266,800 | ||
AOL Time Warner, Inc. 7.625% 4/15/31 | 1,000,000 | 1,100,158 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 8.2% 7/15/09 | 1,000,000 | 1,157,109 | ||
Cablevision Systems Corp.: | ||||
5.66% 4/1/09 (f)(h) | 40,000 | 40,400 | ||
8% 4/15/12 (f) | 180,000 | 176,400 | ||
Carmike Cinemas, Inc. 7.5% 2/15/14 (f) | 60,000 | 57,000 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Media - continued | ||||
Charter Communications Operating LLC/Charter Communications Operating Capital Corp. 8.375% 4/30/14 (f) | $ 70,000 | $ 67,550 | ||
Cinemark, Inc. 0% 3/15/14 (d) | 100,000 | 66,250 | ||
Comcast Corp. 5.85% 1/15/10 | 500,000 | 525,084 | ||
Cox Communications, Inc.: | ||||
4.625% 6/1/13 | 90,000 | 83,770 | ||
7.125% 10/1/12 | 355,000 | 391,496 | ||
CSC Holdings, Inc.: | ||||
6.75% 4/15/12 (f) | 40,000 | 38,400 | ||
7.875% 2/15/18 | 50,000 | 48,000 | ||
Dex Media, Inc.: | ||||
0% 11/15/13 (d)(f) | 100,000 | 69,000 | ||
8% 11/15/13 (f) | 10,000 | 10,050 | ||
EchoStar DBS Corp.: | ||||
6.375% 10/1/11 | 150,000 | 147,000 | ||
9.125% 1/15/09 | 72,000 | 79,020 | ||
Granite Broadcasting Corp. 9.75% 12/1/10 | 40,000 | 36,400 | ||
Houghton Mifflin Co. 9.875% 2/1/13 | 70,000 | 71,750 | ||
Innova S. de R.L. 9.375% 9/19/13 | 160,000 | 170,000 | ||
Liberty Media Corp. 8.25% 2/1/30 | 1,100,000 | 1,237,470 | ||
LodgeNet Entertainment Corp. 9.5% 6/15/13 | 130,000 | 142,025 | ||
Loews Cineplex Entertainment Corp. 9% 8/1/14 (f) | 100,000 | 100,000 | ||
Medianews Group, Inc.: | ||||
6.375% 4/1/14 | 200,000 | 186,000 | ||
6.875% 10/1/13 | 250,000 | 242,500 | ||
PanAmSat Corp. 9% 8/15/14 (f)(g) | 130,000 | 130,000 | ||
PEI Holdings, Inc. 11% 3/15/10 | 11,000 | 12,760 | ||
PRIMEDIA, Inc.: | ||||
7.625% 4/1/08 | 280,000 | 274,400 | ||
8.875% 5/15/11 | 25,000 | 24,563 | ||
Radio One, Inc. 8.875% 7/1/11 | 100,000 | 109,500 | ||
Spanish Broadcasting System, Inc. 9.625% 11/1/09 | 45,000 | 47,419 | ||
The Reader's Digest Association, Inc. 6.5% 3/1/11 | 70,000 | 69,300 | ||
TV Azteca SA de CV: | ||||
euro 10.5% 2/15/07 (Reg. S) | 210,000 | 215,250 | ||
yankee 10.5% 2/15/07 | 5,000 | 5,125 | ||
Viacom, Inc. 7.7% 7/30/10 | 1,205,000 | 1,382,343 | ||
Walt Disney Co. 6.375% 3/1/12 | 700,000 | 755,504 | ||
9,535,796 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - continued | ||||
Multiline Retail - 0.1% | ||||
Barneys, Inc. 9% 4/1/08 | $ 20,000 | $ 20,600 | ||
The May Department Stores Co. 3.95% 7/15/07 (f) | 175,000 | 174,998 | ||
195,598 | ||||
Specialty Retail - 0.1% | ||||
Asbury Automotive Group, Inc.: | ||||
8% 3/15/14 | 60,000 | 56,100 | ||
9% 6/15/12 | 15,000 | 15,150 | ||
Boise Cascade Corp. 7.5% 2/1/08 | 40,000 | 44,269 | ||
General Nutrition Centers, Inc. 8.5% 12/1/10 (f) | 20,000 | 20,150 | ||
Hollywood Entertainment Corp. 9.625% 3/15/11 | 50,000 | 56,250 | ||
Nebraska Book Co., Inc. 8.625% 3/15/12 | 90,000 | 89,100 | ||
Sonic Automotive, Inc. 8.625% 8/15/13 | 50,000 | 51,375 | ||
Toys 'R' US, Inc. 7.875% 4/15/13 | 20,000 | 20,350 | ||
United Auto Group, Inc. 9.625% 3/15/12 | 50,000 | 54,750 | ||
407,494 | ||||
Textiles Apparel & Luxury Goods - 0.0% | ||||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 10,000 | 9,500 | ||
11.625% 1/15/08 | 10,000 | 10,000 | ||
12.25% 12/15/12 | 65,000 | 65,650 | ||
85,150 | ||||
TOTAL CONSUMER DISCRETIONARY | 16,405,279 | |||
CONSUMER STAPLES - 1.2% | ||||
Food & Staples Retailing - 0.7% | ||||
Jean Coutu Group, Inc.: | ||||
7.625% 8/1/12 (f) | 30,000 | 30,188 | ||
8.5% 8/1/14 (f) | 60,000 | 59,475 | ||
Pathmark Stores, Inc. 8.75% 2/1/12 | 200,000 | 204,000 | ||
Rite Aid Corp.: | ||||
6% 12/15/05 (f) | 20,000 | 20,000 | ||
7.625% 4/15/05 | 15,000 | 15,300 | ||
Safeway, Inc. 6.5% 3/1/11 | 2,000,000 | 2,136,780 | ||
Stater Brothers Holdings, Inc. 8.125% 6/15/12 (f) | 80,000 | 81,800 | ||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | 45,000 | 42,750 | ||
9.125% 12/15/11 | 10,000 | 8,725 | ||
2,599,018 | ||||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Food Products - 0.1% | ||||
Corn Products International, Inc. 8.25% 7/15/07 | $ 5,000 | $ 5,450 | ||
Del Monte Corp. 9.25% 5/15/11 | 50,000 | 54,625 | ||
Doane Pet Care Co.: | ||||
9.75% 5/15/07 | 50,000 | 47,500 | ||
10.75% 3/1/10 | 200,000 | 214,000 | ||
Kraft Foods, Inc. 5.25% 6/1/07 | 20,000 | 20,861 | ||
Pierre Foods, Inc. 9.875% 7/15/12 (f) | 40,000 | 40,500 | ||
United Agriculture Products, Inc. 8.25% 12/15/11 (f) | 30,000 | 33,000 | ||
415,936 | ||||
Household Products - 0.0% | ||||
Fort James Corp. 6.875% 9/15/07 | 150,000 | 157,125 | ||
Personal Products - 0.0% | ||||
Elizabeth Arden, Inc. 7.75% 1/15/14 | 20,000 | 20,450 | ||
Tobacco - 0.4% | ||||
Altria Group, Inc. 7% 11/4/13 | 1,240,000 | 1,279,996 | ||
TOTAL CONSUMER STAPLES | 4,472,525 | |||
ENERGY - 1.1% | ||||
Energy Equipment & Services - 0.1% | ||||
Cooper Cameron Corp. 2.65% 4/15/07 | 340,000 | 331,286 | ||
Grant Prideco, Inc. 9% 12/15/09 | 10,000 | 10,875 | ||
Hanover Compressor Co.: | ||||
8.625% 12/15/10 | 20,000 | 21,100 | ||
9% 6/1/14 | 50,000 | 52,625 | ||
Universal Compression, Inc. 7.25% 5/15/10 | 40,000 | 41,650 | ||
457,536 | ||||
Oil & Gas - 1.0% | ||||
Amerada Hess Corp.: | ||||
6.65% 8/15/11 | 70,000 | 75,068 | ||
7.125% 3/15/33 | 185,000 | 188,515 | ||
7.375% 10/1/09 | 160,000 | 175,207 | ||
Anadarko Petroleum Corp. 5% 10/1/12 | 400,000 | 397,594 | ||
Chesapeake Energy Corp.: | ||||
6.875% 1/15/16 | 50,000 | 49,250 | ||
7.75% 1/15/15 | 30,000 | 31,800 | ||
8.375% 11/1/08 | 50,000 | 54,500 | ||
El Paso Energy Corp.: | ||||
7.375% 12/15/12 | 5,000 | 4,450 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
ENERGY - continued | ||||
Oil & Gas - continued | ||||
El Paso Energy Corp.: - continued | ||||
7.75% 1/15/32 | $ 15,000 | $ 12,225 | ||
8.05% 10/15/30 | 95,000 | 78,850 | ||
El Paso Production Holding Co. 7.75% 6/1/13 | 140,000 | 133,000 | ||
EnCana Corp. 6.5% 8/15/34 | 155,000 | 155,339 | ||
EXCO Resources, Inc. 7.25% 1/15/11 | 30,000 | 30,750 | ||
General Maritime Corp. 10% 3/15/13 | 310,000 | 344,875 | ||
Giant Industries, Inc. 8% 5/15/14 | 130,000 | 132,769 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12 | 40,000 | 46,800 | ||
OAO Gazprom 9.625% 3/1/13 | 220,000 | 230,725 | ||
Overseas Shipholding Group, Inc.: | ||||
7.5% 2/15/24 | 55,000 | 51,425 | ||
8.25% 3/15/13 | 40,000 | 42,400 | ||
Pecom Energia SA: | ||||
8.125% 7/15/10 (Reg. S) | 75,000 | 73,500 | ||
9% 1/30/07 (f) | 100,000 | 103,500 | ||
9% 5/1/09 (Reg. S) | 95,000 | 96,544 | ||
Range Resources Corp. 7.375% 7/15/13 (f) | 40,000 | 40,500 | ||
Ship Finance International Ltd. 8.5% 12/15/13 | 330,000 | 316,800 | ||
Teekay Shipping Corp. 8.875% 7/15/11 | 30,000 | 33,000 | ||
The Coastal Corp.: | ||||
6.375% 2/1/09 | 5,000 | 4,475 | ||
6.5% 5/15/06 | 65,000 | 64,350 | ||
6.5% 6/1/08 | 100,000 | 91,625 | ||
7.5% 8/15/06 | 50,000 | 50,000 | ||
7.75% 6/15/10 | 200,000 | 185,000 | ||
Williams Companies, Inc.: | ||||
7.125% 9/1/11 | 5,000 | 5,200 | ||
7.625% 7/15/19 | 30,000 | 30,225 | ||
7.875% 9/1/21 | 35,000 | 35,219 | ||
8.125% 3/15/12 | 30,000 | 32,625 | ||
8.625% 6/1/10 | 30,000 | 33,675 | ||
8.75% 3/15/32 | 165,000 | 173,250 | ||
YPF SA yankee 9.125% 2/24/09 | 235,000 | 255,563 | ||
3,860,593 | ||||
TOTAL ENERGY | 4,318,129 | |||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - 11.8% | ||||
Capital Markets - 1.6% | ||||
Amvescap PLC 5.9% 1/15/07 | $ 25,000 | $ 26,463 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (h) | 100,000 | 96,751 | ||
4.25% 9/4/12 (h) | 205,000 | 205,399 | ||
BCP Caylux Holdings Luxembourg SCA 9.625% 6/15/14 (f) | 170,000 | 177,438 | ||
Credit Suisse First Boston (USA), Inc. 4.7% 6/1/09 | 440,000 | 445,051 | ||
E*TRADE Financial Corp. 8% 6/15/11 (f) | 130,000 | 129,675 | ||
Equinox Holdings Ltd. 9% 12/15/09 (f) | 20,000 | 19,950 | ||
Franklin Resources, Inc. 3.7% 4/15/08 | 1,135,000 | 1,124,891 | ||
Goldman Sachs Group, Inc.: | ||||
5.7% 9/1/12 | 1,100,000 | 1,127,431 | ||
6.6% 1/15/12 | 500,000 | 543,678 | ||
Legg Mason, Inc. 6.75% 7/2/08 | 30,000 | 32,716 | ||
Morgan Stanley: | ||||
4.75% 4/1/14 | 720,000 | 672,543 | ||
6.6% 4/1/12 | 1,100,000 | 1,194,670 | ||
5,796,656 | ||||
Commercial Banks - 1.4% | ||||
Bank of America Corp. 7.4% 1/15/11 | 1,000,000 | 1,139,934 | ||
Corporacion Andina de Fomento 5.2% 5/21/13 | 35,000 | 34,234 | ||
Export-Import Bank of Korea: | ||||
4.125% 2/10/09 (f) | 140,000 | 136,863 | ||
5.25% 2/10/14 (f) | 515,000 | 501,244 | ||
Korea Development Bank: | ||||
3.875% 3/2/09 | 600,000 | 581,222 | ||
4.75% 7/20/09 | 320,000 | 319,700 | ||
5.75% 9/10/13 | 350,000 | 354,777 | ||
National Westminster Bank PLC yankee 7.375% 10/1/09 | 1,500,000 | 1,709,823 | ||
Wachovia Corp. 4.875% 2/15/14 | 600,000 | 578,924 | ||
5,356,721 | ||||
Consumer Finance - 1.9% | ||||
American General Finance Corp.: | ||||
4% 3/15/11 | 655,000 | 627,888 | ||
4.625% 5/15/09 | 1,200,000 | 1,210,505 | ||
AmeriCredit Corp. 9.25% 5/1/09 | 150,000 | 160,500 | ||
Capital One Bank: | ||||
4.875% 5/15/08 | 1,075,000 | 1,094,931 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Bank: - continued | ||||
6.5% 6/13/13 | $ 1,090,000 | $ 1,138,642 | ||
Ford Motor Credit Co.: | ||||
7% 10/1/13 | 2,000,000 | 2,035,712 | ||
7.875% 6/15/10 | 250,000 | 272,936 | ||
General Motors Acceptance Corp. 6.875% 9/15/11 | 525,000 | 538,948 | ||
Household Finance Corp.: | ||||
4.75% 5/15/09 | 100,000 | 101,381 | ||
6.375% 11/27/12 | 30,000 | 32,208 | ||
6.75% 5/15/11 | 40,000 | 44,065 | ||
7,257,716 | ||||
Diversified Financial Services - 5.1% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 40,000 | 39,700 | ||
6.875% 5/1/29 | 170,000 | 147,050 | ||
8.25% 7/15/10 | 40,000 | 42,700 | ||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 50,000 | 44,500 | ||
6.977% 11/23/22 | 11,499 | 10,119 | ||
7.377% 5/23/19 | 51,886 | 35,801 | ||
7.379% 5/23/16 | 53,179 | 36,693 | ||
7.8% 4/1/08 | 65,000 | 58,500 | ||
Ameritech Capital Funding Corp. euro 6.25% 5/18/09 | 35,000 | 37,370 | ||
Arch Western Finance LLC 6.75% 7/1/13 (f) | 100,000 | 101,750 | ||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 30,000 | 32,100 | ||
Cadbury Schweppes U.S. Finance LLC: | ||||
3.875% 10/1/08 (f) | 90,000 | 88,823 | ||
5.125% 10/1/13 (f) | 1,060,000 | 1,045,091 | ||
CCO Holdings LLC/CCO Holdings Capital Corp. 8.75% 11/15/13 | 70,000 | 66,850 | ||
Cellu Tissue Holdings, Inc. 9.75% 3/15/10 (f) | 50,000 | 49,750 | ||
Charter Communications Holding II LLC/Charter Communications Holdings II Capital Corp. 10.25% 9/15/10 | 115,000 | 115,863 | ||
CMS Energy X-TRAS pass thru trust certificates 7% 1/15/05 | 10,000 | 10,075 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.748% 9/15/18 | 3,872 | 3,059 | ||
6.9% 7/2/18 | 4,746 | 3,749 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Continental Airlines, Inc. pass thru trust certificates: - continued | ||||
7.73% 9/15/12 | $ 4,680 | $ 3,463 | ||
8.321% 11/1/06 | 5,000 | 4,550 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 15,000 | 8,850 | ||
7.57% 11/18/10 | 5,000 | 4,521 | ||
7.779% 11/18/05 | 50,000 | 30,000 | ||
7.779% 1/2/12 | 25,045 | 10,769 | ||
7.92% 5/18/12 | 135,000 | 79,075 | ||
Deutsche Telekom International Finance BV: | ||||
5.25% 7/22/13 | 85,000 | 84,185 | ||
8.5% 6/15/10 | 305,000 | 359,734 | ||
8.75% 6/15/30 | 895,000 | 1,111,783 | ||
El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11 | 10,000 | 10,800 | ||
EnCana Holdings Finance Corp. 5.8% 5/1/14 | 240,000 | 246,517 | ||
Entercom Radio LLC/Entercom Capital, Inc. 7.625% 3/1/14 | 50,000 | 52,500 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 | 355,000 | 395,825 | ||
Global Cash Access LLC/Global Cash Access Finance Corp. 8.75% 3/15/12 (f) | 30,000 | 31,425 | ||
Hurricane Finance BV 9.625% 2/12/10 (f) | 75,000 | 79,875 | ||
Hutchison Whampoa International (03/13) Ltd. | 190,000 | 191,899 | ||
Hutchison Whampoa International (03/33) Ltd.: | ||||
6.25% 1/24/14 (f) | 1,720,000 | 1,692,752 | ||
7.45% 11/24/33 (f) | 300,000 | 291,443 | ||
Inmarsat Finance PLC 7.625% 6/30/12 (f) | 70,000 | 66,850 | ||
Ispat Inland ULC 9.75% 4/1/14 (f) | 70,000 | 72,275 | ||
J.P. Morgan Chase & Co. 4.875% 3/15/14 | 1,475,000 | 1,411,177 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (f) | 85,000 | 73,525 | ||
Mizuho Financial Group Cayman Ltd. 5.79% 4/15/14 (f) | 1,400,000 | 1,396,688 | ||
Mobile Telesystems Finance SA: | ||||
9.75% 1/30/08 (f) | 310,000 | 321,625 | ||
9.75% 1/30/08 (Reg. S) | 75,000 | 77,813 | ||
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc. 7.375% 9/1/10 | 40,000 | 40,800 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
MSW Energy Holdings LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 | $ 10,000 | $ 10,700 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | 120,000 | 124,500 | ||
Nexstar Finance, Inc. 7% 1/15/14 | 130,000 | 123,825 | ||
NiSource Finance Corp. 7.875% 11/15/10 | 125,000 | 144,769 | ||
Northern Telecom Capital Corp. 7.875% 6/15/26 | 25,000 | 23,500 | ||
Northwest Airlines, Inc. pass thru trust certificates: | ||||
7.068% 7/2/17 | 8,102 | 6,644 | ||
7.67% 1/2/15 | 8,505 | 6,889 | ||
Pemex Project Funding Master Trust: | ||||
6.125% 8/15/08 | 250,000 | 258,750 | ||
7.375% 12/15/14 | 500,000 | 523,750 | ||
Petronas Capital Ltd. 7% 5/22/12 (f) | 5,000 | 5,531 | ||
Qwest Capital Funding, Inc.: | ||||
7% 8/3/09 | 50,000 | 44,250 | ||
7.25% 2/15/11 | 35,000 | 30,275 | ||
7.625% 8/3/21 | 20,000 | 15,800 | ||
Sensus Metering Systems, Inc. 8.625% 12/15/13 (f) | 20,000 | 19,700 | ||
Sprint Capital Corp.: | ||||
6.125% 11/15/08 | 500,000 | 529,658 | ||
8.375% 3/15/12 | 1,100,000 | 1,288,800 | ||
Telecom Italia Capital 4% 11/15/08 (f) | 500,000 | 494,147 | ||
TRW Automotive Acquisition Corp. 9.375% 2/15/13 | 87,000 | 99,615 | ||
Tyco International Group SA yankee: | ||||
6.375% 6/15/05 | 5,000 | 5,149 | ||
6.375% 2/15/06 | 20,000 | 20,994 | ||
6.75% 2/15/11 | 1,070,000 | 1,173,261 | ||
6.875% 1/15/29 | 1,000,000 | 1,063,401 | ||
Tyumen Oil Co. 11% 11/6/07 | 175,000 | 191,625 | ||
U.S. West Capital Funding, Inc. 6.375% 7/15/08 | 125,000 | 110,000 | ||
UGS Corp. 10% 6/1/12 (f) | 30,000 | 31,800 | ||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 | 385,000 | 444,675 | ||
Verizon Global Funding Corp.: | ||||
7.25% 12/1/10 | 1,030,000 | 1,159,828 | ||
7.375% 9/1/12 | 465,000 | 529,462 | ||
Western Financial Bank 9.625% 5/15/12 | 15,000 | 16,500 | ||
WH Holdings Ltd./WH Capital Corp. 9.5% 4/1/11 | 30,000 | 31,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Williams Companies, Inc. Credit Linked Certificate Trust 6.75% 4/15/09 (f) | $ 215,000 | $ 216,613 | ||
Xerox Capital Trust I 8% 2/1/27 | 130,000 | 117,325 | ||
18,983,498 | ||||
Insurance - 0.2% | ||||
Aegon NV 4.75% 6/1/13 | 500,000 | 480,439 | ||
Assurant, Inc. 5.625% 2/15/14 | 210,000 | 209,066 | ||
Travelers Property Casualty Corp.: | ||||
5% 3/15/13 | 25,000 | 24,306 | ||
6.375% 3/15/33 | 35,000 | 34,566 | ||
748,377 | ||||
Real Estate - 1.0% | ||||
American Real Estate Partners/American Real Estate Finance Corp. 8.125% 6/1/12 (f) | 85,000 | 87,125 | ||
Boston Properties, Inc. 6.25% 1/15/13 | 100,000 | 105,658 | ||
Camden Property Trust 5.875% 11/30/12 | 200,000 | 204,443 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 200,000 | 210,057 | ||
CB Richard Ellis Services, Inc. 9.75% 5/15/10 | 10,000 | 11,000 | ||
Dominion Resources, Inc. 5.125% 12/15/09 | 500,000 | 508,971 | ||
EOP Operating LP: | ||||
4.75% 3/15/14 | 600,000 | 559,758 | ||
7% 7/15/11 | 500,000 | 549,728 | ||
Gables Realty LP 5.75% 7/15/07 | 585,000 | 614,215 | ||
Healthcare Realty Trust, Inc. 5.125% 4/1/14 | 435,000 | 409,388 | ||
MeriStar Hospitality Corp. 8.75% 8/15/07 | 50,000 | 51,000 | ||
MeriStar Hospitality Operating Partnership LP/MeriStar Hospitality Finance Corp. II 10.5% 6/15/09 | 200,000 | 216,000 | ||
Omega Healthcare Investors, Inc. 7% 4/1/14 (f) | 70,000 | 65,625 | ||
Senior Housing Properties Trust 7.875% 4/15/15 | 20,000 | 20,850 | ||
3,613,818 | ||||
Thrifts & Mortgage Finance - 0.6% | ||||
Countrywide Home Loans, Inc. 4% 3/22/11 | 720,000 | 678,966 | ||
Independence Community Bank Corp. 3.75% 4/1/14 (h) | 275,000 | 263,160 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Thrifts & Mortgage Finance - continued | ||||
Washington Mutual, Inc.: | ||||
4.375% 1/15/08 | $ 1,200,000 | $ 1,217,696 | ||
4.625% 4/1/14 | 100,000 | 92,302 | ||
2,252,124 | ||||
TOTAL FINANCIALS | 44,008,910 | |||
HEALTH CARE - 0.4% | ||||
Health Care Equipment & Supplies - 0.1% | ||||
Fisher Scientific International, Inc. 8% 9/1/13 | 125,000 | 135,625 | ||
Medical Device Manufacturing, Inc. 10% 7/15/12 (f) | 50,000 | 51,500 | ||
187,125 | ||||
Health Care Providers & Services - 0.3% | ||||
AmeriPath, Inc. 10.5% 4/1/13 | 150,000 | 153,000 | ||
Beverly Enterprises, Inc. 7.875% 6/15/14 (f) | 70,000 | 70,525 | ||
Concentra Operating Corp.: | ||||
9.125% 6/1/12 (f) | 10,000 | 10,700 | ||
9.5% 8/15/10 | 110,000 | 119,350 | ||
Fountain View, Inc. 9.25% 8/19/08 (e) | 110,000 | 110,000 | ||
HealthSouth Corp. 8.5% 2/1/08 | 85,000 | 84,044 | ||
IASIS Healthcare LLC/IASIS Capital Corp. 8.75% 6/15/14 (f) | 100,000 | 103,500 | ||
Mariner Health Care, Inc. 8.25% 12/15/13 (f) | 30,000 | 32,025 | ||
National Nephrology Associates, Inc. 9% 11/1/11 (f) | 20,000 | 23,076 | ||
PacifiCare Health Systems, Inc. 10.75% 6/1/09 | 82,000 | 93,070 | ||
Psychiatric Solutions, Inc. 10.625% 6/15/13 | 105,000 | 117,600 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 75,000 | 66,938 | ||
6.5% 6/1/12 | 15,000 | 13,275 | ||
7.375% 2/1/13 | 75,000 | 69,375 | ||
1,066,478 | ||||
Pharmaceuticals - 0.0% | ||||
Biovail Corp. yankee 7.875% 4/1/10 | 105,000 | 103,163 | ||
Leiner Health Products, Inc. 11% 6/1/12 (f) | 20,000 | 20,550 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
HEALTH CARE - continued | ||||
Pharmaceuticals - continued | ||||
VWR International, Inc.: | ||||
6.875% 4/15/12 (f) | $ 30,000 | $ 30,038 | ||
8% 4/15/14 (f) | 30,000 | 30,638 | ||
184,389 | ||||
TOTAL HEALTH CARE | 1,437,992 | |||
INDUSTRIALS - 1.0% | ||||
Aerospace & Defense - 0.7% | ||||
BE Aerospace, Inc.: | ||||
8.5% 10/1/10 | 100,000 | 107,500 | ||
9.5% 11/1/08 | 55,000 | 55,550 | ||
Bombardier, Inc. 6.3% 5/1/14 (f) | 590,000 | 509,261 | ||
Orbital Sciences Corp. 9% 7/15/11 | 135,000 | 147,150 | ||
Raytheon Co. 5.5% 11/15/12 | 1,550,000 | 1,586,020 | ||
2,405,481 | ||||
Airlines - 0.0% | ||||
AMR Corp. 9% 8/1/12 | 85,000 | 61,200 | ||
Delta Air Lines, Inc. 7.9% 12/15/09 | 50,000 | 19,500 | ||
Northwest Airlines, Inc.: | ||||
7.875% 3/15/08 | 25,000 | 17,125 | ||
9.875% 3/15/07 | 60,000 | 44,100 | ||
141,925 | ||||
Building Products - 0.0% | ||||
Jacuzzi Brands, Inc. 9.625% 7/1/10 | 20,000 | 21,600 | ||
Commercial Services & Supplies - 0.1% | ||||
Allied Waste North America, Inc.: | ||||
5.75% 2/15/11 | 70,000 | 65,975 | ||
7.875% 4/15/13 | 20,000 | 20,850 | ||
10% 8/1/09 | 60,000 | 63,450 | ||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 140,000 | 144,375 | ||
Cenveo Corp. 7.875% 12/1/13 | 60,000 | 54,450 | ||
349,100 | ||||
Electrical Equipment - 0.0% | ||||
General Cable Corp. 9.5% 11/15/10 | 20,000 | 21,650 | ||
Industrial Conglomerates - 0.0% | ||||
North American Energy Partners, Inc. 8.75% 12/1/11 (f) | 20,000 | 19,900 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Machinery - 0.1% | ||||
Cummins, Inc.: | ||||
5.65% 3/1/98 | $ 15,000 | $ 9,975 | ||
9.5% 12/1/10 (h) | 20,000 | 22,900 | ||
Dresser, Inc. 9.375% 4/15/11 | 15,000 | 16,200 | ||
Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09 | 93,000 | 98,580 | ||
Invensys PLC 9.875% 3/15/11 (f) | 150,000 | 150,750 | ||
Navistar International Corp. 7.5% 6/15/11 | 30,000 | 31,200 | ||
Terex Corp. 7.375% 1/15/14 | 100,000 | 99,750 | ||
429,355 | ||||
Marine - 0.0% | ||||
Horizon Lines LLC/Holdings Corp. 9% 11/1/12 (f) | 40,000 | 41,400 | ||
OMI Corp. 7.625% 12/1/13 | 95,000 | 93,100 | ||
134,500 | ||||
Road & Rail - 0.1% | ||||
CSX Corp. 7.45% 5/1/07 | 100,000 | 109,573 | ||
Kansas City Southern Railway Co. 7.5% 6/15/09 | 100,000 | 100,250 | ||
Quality Distribution LLC/QD Capital Corp. 9% 11/15/10 (f) | 40,000 | 38,800 | ||
TFM SA de CV yankee 11.75% 6/15/09 | 140,000 | 139,300 | ||
387,923 | ||||
TOTAL INDUSTRIALS | 3,911,434 | |||
INFORMATION TECHNOLOGY - 0.8% | ||||
Communications Equipment - 0.5% | ||||
Motorola, Inc.: | ||||
6.5% 11/15/28 | 300,000 | 297,610 | ||
7.625% 11/15/10 | 200,000 | 227,678 | ||
8% 11/1/11 | 1,200,000 | 1,392,922 | ||
Nortel Networks Corp. 6.125% 2/15/06 | 50,000 | 50,000 | ||
Northern Telecom Ltd. yankee 6.875% 9/1/23 | 30,000 | 27,000 | ||
1,995,210 | ||||
Electronic Equipment & Instruments - 0.0% | ||||
Celestica, Inc. 7.875% 7/1/11 | 100,000 | 102,000 | ||
PerkinElmer, Inc. 8.875% 1/15/13 | 20,000 | 22,050 | ||
124,050 | ||||
IT Services - 0.1% | ||||
Iron Mountain, Inc. 6.625% 1/1/16 | 270,000 | 249,750 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INFORMATION TECHNOLOGY - continued | ||||
Office Electronics - 0.1% | ||||
Xerox Corp.: | ||||
7.125% 6/15/10 | $ 20,000 | $ 20,550 | ||
7.2% 4/1/16 | 165,000 | 162,113 | ||
7.625% 6/15/13 | 60,000 | 61,650 | ||
244,313 | ||||
Semiconductors & Semiconductor Equipment - 0.1% | ||||
AMI Semiconductor, Inc. 10.75% 2/1/13 | 28,000 | 32,690 | ||
Amkor Technology, Inc.: | ||||
7.125% 3/15/11 | 90,000 | 76,950 | ||
7.75% 5/15/13 | 30,000 | 25,650 | ||
Freescale Semiconductor, Inc. 7.125% 7/15/14 (f) | 60,000 | 60,300 | ||
Viasystems, Inc. 10.5% 1/15/11 (f) | 50,000 | 48,500 | ||
244,090 | ||||
TOTAL INFORMATION TECHNOLOGY | 2,857,413 | |||
MATERIALS - 2.2% | ||||
Chemicals - 0.5% | ||||
Berry Plastics Corp. 10.75% 7/15/12 | 80,000 | 89,000 | ||
Equistar Chemicals LP: | ||||
6.5% 2/15/06 | 75,000 | 75,750 | ||
7.55% 2/15/26 | 100,000 | 85,500 | ||
Equistar Chemicals LP/Equistar Funding Corp. 10.625% 5/1/11 | 145,000 | 159,863 | ||
Georgia Gulf Corp. 7.125% 12/15/13 (f) | 180,000 | 185,400 | ||
Huntsman International LLC 9.875% 3/1/09 | 115,000 | 124,488 | ||
JohnsonDiversey Holdings, Inc. 0% 5/15/13 (d) | 55,000 | 42,625 | ||
Koppers, Inc. 9.875% 10/15/13 | 50,000 | 55,250 | ||
Lyondell Chemical Co.: | ||||
9.625% 5/1/07 | 200,000 | 209,000 | ||
10.875% 5/1/09 | 55,000 | 57,338 | ||
Millennium America, Inc.: | ||||
9.25% 6/15/08 | 220,000 | 233,200 | ||
9.25% 6/15/08 (f) | 10,000 | 10,600 | ||
Nalco Co.: | ||||
7.75% 11/15/11 (f) | 130,000 | 135,525 | ||
8.875% 11/15/13 (f) | 250,000 | 261,250 | ||
OMNOVA Solutions, Inc. 11.25% 6/1/10 | 20,000 | 21,700 | ||
Pliant Corp. 0% 6/15/09 (d) | 60,000 | 51,900 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Chemicals - continued | ||||
Resolution Performance Products LLC/RPP Capital Corp.: | ||||
9.5% 4/15/10 | $ 70,000 | $ 71,750 | ||
13.5% 11/15/10 | 35,000 | 33,950 | ||
Solutia, Inc. 7.375% 10/15/27 (c) | 20,000 | 12,400 | ||
1,916,489 | ||||
Construction Materials - 0.1% | ||||
Texas Industries, Inc. 10.25% 6/15/11 | 200,000 | 222,500 | ||
Containers & Packaging - 0.5% | ||||
Anchor Glass Container Corp. 11% 2/15/13 | 215,000 | 245,100 | ||
BWAY Corp. 10% 10/15/10 | 105,000 | 110,775 | ||
Crown Cork & Seal, Inc. 8% 4/15/23 | 105,000 | 95,288 | ||
Crown European Holdings SA 9.5% 3/1/11 | 35,000 | 38,500 | ||
Graphic Packaging International, Inc.: | ||||
8.5% 8/15/11 | 220,000 | 237,600 | ||
9.5% 8/15/13 | 345,000 | 377,775 | ||
Jefferson Smurfit Corp. U.S.: | ||||
7.5% 6/1/13 | 30,000 | 29,700 | ||
8.25% 10/1/12 | 210,000 | 222,600 | ||
Owens-Brockway Glass Container, Inc.: | ||||
8.25% 5/15/13 | 15,000 | 15,750 | ||
8.875% 2/15/09 | 50,000 | 54,125 | ||
Owens-Illinois, Inc.: | ||||
7.15% 5/15/05 | 60,000 | 61,575 | ||
7.35% 5/15/08 | 50,000 | 50,500 | ||
7.5% 5/15/10 | 95,000 | 96,425 | ||
7.8% 5/15/18 | 45,000 | 42,750 | ||
8.1% 5/15/07 | 110,000 | 114,950 | ||
Sealed Air Corp.: | ||||
5.625% 7/15/13 (f) | 25,000 | 24,904 | ||
6.875% 7/15/33 (f) | 55,000 | 56,149 | ||
Silgan Holdings, Inc. 6.75% 11/15/13 | 100,000 | 98,500 | ||
1,972,966 | ||||
Metals & Mining - 0.3% | ||||
California Steel Industries, Inc. 6.125% 3/15/14 | 40,000 | 37,550 | ||
Corporacion Nacional del Cobre (Codelco): | ||||
5.5% 10/15/13 (f) | 165,000 | 166,086 | ||
6.375% 11/30/12 (f) | 335,000 | 360,210 | ||
CSN Islands VIII Corp. 9.75% 12/16/13 (f) | 75,000 | 71,531 | ||
Foundation Pennsylvania Coal Co. 7.25% 8/1/14 (f) | 50,000 | 50,500 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Freeport-McMoRan Copper & Gold, Inc.: | ||||
6.875% 2/1/14 | $ 75,000 | $ 70,219 | ||
10.125% 2/1/10 | 155,000 | 173,600 | ||
International Steel Group, Inc. 6.5% 4/15/14 (f) | 70,000 | 66,150 | ||
Massey Energy Co. 6.625% 11/15/10 | 40,000 | 40,400 | ||
Peabody Energy Corp. 6.875% 3/15/13 | 20,000 | 20,700 | ||
Phelps Dodge Corp. 8.75% 6/1/11 | 40,000 | 47,984 | ||
Wise Metals Group LLC/Alloys Finance 10.25% 5/15/12 (f) | 60,000 | 61,350 | ||
1,166,280 | ||||
Paper & Forest Products - 0.8% | ||||
Boise Cascade Corp. 8% 2/24/06 | 25,000 | 26,668 | ||
Buckeye Cellulose Corp. 9.25% 9/15/08 | 100,000 | 99,500 | ||
Buckeye Technologies, Inc. 8.5% 10/1/13 | 200,000 | 206,000 | ||
Georgia-Pacific Corp.: | ||||
7.375% 12/1/25 | 15,000 | 14,681 | ||
7.5% 5/15/06 | 50,000 | 53,000 | ||
7.75% 11/15/29 | 10,000 | 9,900 | ||
8% 1/15/24 | 130,000 | 136,013 | ||
8.125% 5/15/11 | 5,000 | 5,606 | ||
International Paper Co.: | ||||
4.25% 1/15/09 | 95,000 | 93,787 | ||
5.5% 1/15/14 | 235,000 | 233,286 | ||
Millar Western Forest Products Ltd. 7.75% 11/15/13 | 220,000 | 224,400 | ||
Norske Skog Canada Ltd. 7.375% 3/1/14 | 40,000 | 40,000 | ||
Riverside Forest Products Ltd. 7.875% 3/1/14 (f) | 40,000 | 41,200 | ||
Solo Cup Co. 8.5% 2/15/14 (f) | 145,000 | 134,850 | ||
Stone Container Corp.: | ||||
8.375% 7/1/12 | 200,000 | 209,000 | ||
9.75% 2/1/11 | 30,000 | 33,150 | ||
Weyerhaeuser Co.: | ||||
5.25% 12/15/09 | 1,000,000 | 1,024,844 | ||
7.375% 3/15/32 | 260,000 | 286,974 | ||
2,872,859 | ||||
TOTAL MATERIALS | 8,151,094 | |||
TELECOMMUNICATION SERVICES - 3.3% | ||||
Diversified Telecommunication Services - 1.8% | ||||
BellSouth Corp. 6.55% 6/15/34 | 1,800,000 | 1,817,555 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
British Telecommunications PLC: | ||||
8.375% 12/15/10 | $ 190,000 | $ 223,933 | ||
8.875% 12/15/30 | 145,000 | 182,590 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 | 30,000 | 26,400 | ||
Empresa Brasil de Telecomm SA 11% 12/15/08 (f) | 255,000 | 279,863 | ||
France Telecom SA 8.75% 3/1/11 | 815,000 | 950,916 | ||
Koninklijke KPN NV yankee 8% 10/1/10 | 500,000 | 581,609 | ||
KT Corp. 5.875% 6/24/14 (f) | 280,000 | 281,837 | ||
Level 3 Communications, Inc. 10.5% 12/1/08 | 255,000 | 188,700 | ||
MCI, Inc.: | ||||
5.908% 5/1/07 | 36,000 | 34,830 | ||
6.688% 5/1/09 | 36,000 | 33,210 | ||
NTL Cable PLC 8.75% 4/15/14 (f) | 120,000 | 124,200 | ||
Primus Telecommunications Group, Inc. 8% 1/15/14 | 90,000 | 64,800 | ||
Qwest Communications International, Inc.: | ||||
4.75% 2/15/09 (f)(h) | 40,000 | 38,000 | ||
7.5% 2/15/14 (f) | 160,000 | 149,200 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (f) | 220,000 | 252,450 | ||
14% 12/15/10 (f)(h) | 20,000 | 23,400 | ||
14.5% 12/15/14 (f)(h) | 210,000 | 251,475 | ||
Telefonica de Argentina SA 9.125% 11/7/10 | 55,000 | 54,313 | ||
Telefonica Europe BV 7.75% 9/15/10 | 700,000 | 808,804 | ||
Telenet Group Holding NV 0% 6/15/14 (d)(f) | 80,000 | 51,800 | ||
TELUS Corp. yankee 7.5% 6/1/07 | 180,000 | 196,475 | ||
U.S. West Communications 6.875% 9/15/33 | 165,000 | 136,125 | ||
6,752,485 | ||||
Wireless Telecommunication Services - 1.5% | ||||
America Movil SA de CV: | ||||
4.125% 3/1/09 (f) | 285,000 | 271,518 | ||
5.5% 3/1/14 (f) | 255,000 | 238,645 | ||
American Tower Corp. 7.5% 5/1/12 (f) | 105,000 | 103,163 | ||
AT&T Wireless Services, Inc.: | ||||
7.875% 3/1/11 | 455,000 | 522,951 | ||
8.75% 3/1/31 | 1,485,000 | 1,848,396 | ||
Centennial Communications Corp./Centennial Cellular Operating Co. LLC/Centennial Puerto Rico Operations Corp. 8.125% 2/1/14 (f) | 60,000 | 55,500 | ||
Cingular Wireless LLC 7.125% 12/15/31 | 1,500,000 | 1,593,024 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Wireless Telecommunication Services - continued | ||||
Crown Castle International Corp.: | ||||
7.5% 12/1/13 | $ 50,000 | $ 49,875 | ||
9.375% 8/1/11 | 65,000 | 73,288 | ||
DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 | 50,000 | 56,063 | ||
Globe Telecom, Inc. 9.75% 4/15/12 | 55,000 | 59,950 | ||
Millicom International Cellular SA 10% 12/1/13 (f) | 80,000 | 79,800 | ||
Nextel Communications, Inc.: | ||||
7.375% 8/1/15 | 150,000 | 157,125 | ||
9.5% 2/1/11 | 60,000 | 67,650 | ||
Nextel Partners, Inc. 8.125% 7/1/11 | 85,000 | 88,825 | ||
Rogers Wireless, Inc.: | ||||
6.375% 3/1/14 | 140,000 | 130,025 | ||
9.625% 5/1/11 | 56,000 | 62,720 | ||
Rural Cellular Corp. 8.25% 3/15/12 (f) | 60,000 | 61,500 | ||
Telemig Cellular SA/Amazonia Cellular SA 8.75% 1/20/09 (f) | 85,000 | 80,538 | ||
UbiquiTel Operating Co. 9.875% 3/1/11 | 50,000 | 50,000 | ||
Western Wireless Corp. 9.25% 7/15/13 | 80,000 | 81,600 | ||
5,732,156 | ||||
TOTAL TELECOMMUNICATION SERVICES | 12,484,641 | |||
UTILITIES - 2.3% | ||||
Electric Utilities - 1.7% | ||||
AES Gener SA 7.5% 3/25/14 (f) | 70,000 | 67,200 | ||
Allegheny Energy Supply Co. LLC: | ||||
7.8% 3/15/11 | 170,000 | 167,450 | ||
8.25% 4/15/12 (f) | 90,000 | 89,881 | ||
10.25% 11/15/07 (f) | 26,657 | 28,790 | ||
10.25% 11/15/07 (f)(h) | 3,339 | 3,381 | ||
Cleveland Electric Illuminating Co. 5.65% 12/15/13 (f) | 280,000 | 279,053 | ||
CMS Energy Corp.: | ||||
8.5% 4/15/11 | 45,000 | 47,363 | ||
9.875% 10/15/07 | 245,000 | 267,050 | ||
DTE Energy Co.: | ||||
6.375% 4/15/33 | 250,000 | 240,440 | ||
7.05% 6/1/11 | 50,000 | 54,784 | ||
Duke Capital LLC 6.75% 2/15/32 | 1,400,000 | 1,402,491 | ||
Edison International 6.875% 9/15/04 | 15,000 | 15,000 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
FirstEnergy Corp.: | ||||
6.45% 11/15/11 | $ 45,000 | $ 47,598 | ||
7.375% 11/15/31 | 330,000 | 356,597 | ||
Illinois Power Co. 11.5% 12/15/10 | 55,000 | 65,450 | ||
Nevada Power Co. 6.5% 4/15/12 (f) | 50,000 | 49,125 | ||
Oncor Electric Delivery Co.: | ||||
6.375% 5/1/12 | 45,000 | 48,669 | ||
6.375% 1/15/15 | 1,000,000 | 1,073,236 | ||
Pacific Gas & Electric Co.: | ||||
4.2% 3/1/11 | 100,000 | 96,544 | ||
4.8% 3/1/14 | 135,000 | 129,918 | ||
6.05% 3/1/34 | 490,000 | 472,044 | ||
Progress Energy, Inc. 7.1% 3/1/11 | 1,000,000 | 1,102,509 | ||
Southern California Edison Co.: | ||||
4.65% 4/1/15 | 35,000 | 33,120 | ||
5% 1/15/14 | 30,000 | 29,631 | ||
TECO Energy, Inc. 7% 5/1/12 | 80,000 | 80,300 | ||
6,247,624 | ||||
Gas Utilities - 0.1% | ||||
ANR Pipeline, Inc. 9.625% 11/1/21 | 100,000 | 113,500 | ||
El Paso Energy Corp. 6.75% 5/15/09 | 25,000 | 23,156 | ||
Sonat, Inc.: | ||||
6.625% 2/1/08 | 20,000 | 18,650 | ||
6.75% 10/1/07 | 15,000 | 14,269 | ||
6.875% 6/1/05 | 85,000 | 85,531 | ||
255,106 | ||||
Multi-Utilities & Unregulated Power - 0.5% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 85,000 | 85,106 | ||
8.5% 11/1/07 | 40,000 | 40,950 | ||
8.75% 6/15/08 | 2,000 | 2,100 | ||
8.75% 5/15/13 (f) | 30,000 | 32,738 | ||
8.875% 2/15/11 | 282,000 | 298,568 | ||
9% 5/15/15 (f) | 30,000 | 32,700 | ||
9.375% 9/15/10 | 7,000 | 7,595 | ||
9.5% 6/1/09 | 19,000 | 20,710 | ||
10% 12/12/05 (f) | 5,919 | 6,037 | ||
Constellation Energy Group, Inc. 7.6% 4/1/32 | 1,000,000 | 1,120,016 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Multi-Utilities & Unregulated Power - continued | ||||
Dominion Resources, Inc. 8.125% 6/15/10 | $ 145,000 | $ 168,844 | ||
NRG Energy, Inc. 8% 12/15/13 (f) | 220,000 | 223,300 | ||
2,038,664 | ||||
TOTAL UTILITIES | 8,541,394 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $106,650,403) | 106,588,811 | |||
U.S. Government and Government Agency Obligations - 18.0% | ||||
U.S. Government Agency Obligations - 5.0% | ||||
Fannie Mae: | ||||
4.375% 7/17/13 | 2,205,000 | 2,088,283 | ||
4.625% 10/15/13 | 3,000,000 | 2,929,911 | ||
5.5% 7/18/12 | 500,000 | 506,561 | ||
6.25% 3/22/12 | 300,000 | 306,883 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 8,000,000 | 7,921,344 | ||
5.125% 8/20/12 | 2,418,000 | 2,420,844 | ||
5.25% 11/5/12 | 280,000 | 278,119 | ||
5.875% 3/21/11 | 2,095,000 | 2,226,369 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 18,678,314 | |||
U.S. Treasury Obligations - 13.0% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 945,000 | 1,053,859 | ||
6.375% 8/15/27 | 210,000 | 240,196 | ||
8% 11/15/21 | 6,000,000 | 7,955,862 | ||
9% 11/15/18 | 200,000 | 282,242 | ||
9.875% 11/15/15 | 3,000,000 | 4,361,250 | ||
U.S. Treasury Notes: | ||||
1.625% 2/28/06 | 6,000,000 | 5,923,596 | ||
2.375% 8/15/06 | 9,591,000 | 9,529,560 | ||
4% 11/15/12 | 9,840,000 | 9,627,830 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
U.S. Treasury Obligations - continued | ||||
U.S. Treasury Notes: - continued | ||||
5% 8/15/11 | $ 4,482,000 | $ 4,718,354 | ||
6.5% 2/15/10 | 4,500,000 | 5,093,613 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 48,786,362 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $68,399,874) | 67,464,676 | |||
U.S. Government Agency - Mortgage Securities - 33.8% | ||||
Fannie Mae - 33.7% | ||||
4% 8/1/19 (g) | 5,895,592 | 5,656,084 | ||
4.5% 5/1/18 to 9/1/33 | 20,633,906 | 20,069,157 | ||
4.5% 8/1/19 (g) | 4,000,000 | 3,933,750 | ||
5% 8/1/34 (g) | 42,609,899 | 41,557,945 | ||
5.5% 11/1/16 to 10/1/17 | 535,424 | 551,271 | ||
5.5% 8/1/34 (g) | 5,997,798 | 6,016,541 | ||
6.5% 5/1/08 to 2/1/33 | 7,143,018 | 7,550,964 | ||
6.5% 8/1/19 (g) | 5,755,122 | 6,080,646 | ||
7% 5/1/18 to 12/1/33 (g) | 32,622,591 | 34,537,337 | ||
TOTAL FANNIE MAE | 125,953,695 | |||
Government National Mortgage Association - 0.1% | ||||
7% 7/15/31 to 12/15/32 | 384,649 | 408,788 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $126,730,435) | 126,362,483 | |||
Asset-Backed Securities - 2.8% | ||||
ACE Securities Corp.: | ||||
Series 2003-FM1 Class M2, 3.3% 11/25/32 (h) | 40,000 | 40,732 | ||
Series 2004-HE1: | ||||
Class M1, 1.95% 2/25/34 (h) | 125,000 | 125,013 | ||
Class M2, 2.55% 2/25/34 (h) | 125,000 | 125,028 | ||
American Express Credit Account Trust Series 2004-C Class C, 1.88% 2/15/12 (f)(h) | 1,800,000 | 1,801,125 | ||
AmeriCredit Automobile Receivables Trust Series 2004-1 Class D, 5.07% 7/6/10 | 290,000 | 291,373 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Ameriquest Mortgage Securities, Inc. Series 2004-R2: | ||||
Class M1, 1.88% 4/25/34 (h) | $ 65,000 | $ 64,998 | ||
Class M2, 1.93% 4/25/34 (h) | 50,000 | 49,998 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2003-HE2 Class A2, 1.76% 4/15/33 (h) | 46,566 | 46,631 | ||
Series 2003-HE7 Class A3, 1.74% 12/15/33 (h) | 183,830 | 184,253 | ||
Bank One Issuance Trust Series 2002-C1 Class C1, 2.34% 12/15/09 (h) | 425,000 | 430,659 | ||
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 1.9119% 2/28/44 (h) | 470,031 | 471,243 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2003-B2 Class B2, 3.5% 2/17/09 | 60,000 | 60,329 | ||
Series 2003-B1 Class B1, 2.55% 2/17/09 (h) | 120,000 | 121,862 | ||
Series 2003-B4 Class B4, 2.18% 7/15/11 (h) | 90,000 | 91,626 | ||
CDC Mortgage Capital Trust Series 2003-HE2 Class M2, 3.35% 10/25/33 (h) | 30,000 | 30,888 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.73% 2/15/11 (h) | 230,000 | 231,436 | ||
Chase Credit Card Owner Trust Series 2004-1 Class B, 1.58% 5/15/09 (h) | 220,000 | 219,987 | ||
Citibank Credit Card Issuance Trust: | ||||
Series 2000-C2 Class C2, 2.25% 10/15/07 (h) | 1,000,000 | 1,002,635 | ||
Series 2002-B1 Class B1, 1.9% 6/25/09 (h) | 475,000 | 476,309 | ||
Series 2003-C1 Class C1, 2.24% 4/7/10 (h) | 305,000 | 311,971 | ||
Countrywide Home Loans, Inc.: | ||||
Series 2004-2 Class M1, 1.95% 5/25/34 (h) | 275,000 | 274,991 | ||
Series 2004-3 Class M1, 1.95% 6/25/34 (h) | 75,000 | 75,077 | ||
First Franklin Mortgage Loan Trust Series 2004-FF2: | ||||
Class M3, 2% 3/25/34 (h) | 25,000 | 24,999 | ||
Class M4, 2.35% 3/25/34 (h) | 25,000 | 24,999 | ||
Class M6, 2.7% 3/25/34 (h) | 25,000 | 24,786 | ||
Fremont Home Loan Trust Series 2004-A: | ||||
Class M1, 2% 1/25/34 (h) | 225,000 | 224,993 | ||
Class M2, 2.6% 1/25/34 (h) | 275,000 | 274,991 | ||
GSAMP Trust Series 2004-FM2 Class M1, 1.95% 1/25/34 (h) | 250,000 | 249,990 | ||
Home Equity Asset Trust: | ||||
Series 2003-2: | ||||
Class A2, 1.83% 8/25/33 (h) | 10,662 | 10,693 | ||
Class M1, 2.33% 8/25/33 (h) | 25,000 | 25,325 | ||
Series 2003-4: | ||||
Class M1, 2.25% 10/25/33 (h) | 40,000 | 40,385 | ||
Class M2, 3.35% 10/25/33 (h) | 45,000 | 45,854 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Home Equity Asset Trust: - continued | ||||
Series 2004-3: | ||||
Class M2, 2.65% 8/25/34 (h) | $ 120,000 | $ 119,996 | ||
Class M3, 2.9% 8/25/34 (h) | 50,000 | 49,998 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-4N Class A, 8% 5/27/33 (f) | 23,154 | 23,212 | ||
Series 2003-2N Class A, 8% 9/27/33 (f) | 11,828 | 11,887 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (f) | 12,903 | 12,967 | ||
Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (f) | 200,000 | 179,000 | ||
Long Beach Mortgage Loan Trust Series 2003-3 Class M2, 3.3% 7/25/33 (h) | 45,000 | 46,184 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2003-B2 Class B2, 1.77% 10/15/10 (h) | 80,000 | 80,441 | ||
Series 2003-B3 Class B3, 1.755% 1/18/11 (h) | 285,000 | 285,715 | ||
Series 2003-B5 Class B5, 1.75% 2/15/11 (h) | 240,000 | 241,731 | ||
Meritage Mortgage Loan Trust Series 2004-1: | ||||
Class M1, 1.95% 7/25/34 (h) | 100,000 | 99,997 | ||
Class M2, 2% 7/25/34 (h) | 25,000 | 24,999 | ||
Class M3, 2.4% 7/25/34 (h) | 50,000 | 49,998 | ||
Class M4, 2.55% 7/25/34 (h) | 25,000 | 24,999 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-HE3 Class M1, 2.55% 12/27/32 (h) | 90,000 | 91,496 | ||
Series 2003-HE1 Class M2, 3.35% 5/25/33 (h) | 55,000 | 56,018 | ||
Series 2003-NC8 Class M1, 2.15% 9/25/33 (h) | 35,000 | 35,170 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4 Class M1, 2.45% 1/25/32 (h) | 40,000 | 40,635 | ||
Series 2002-NC1 Class M1, 2.25% 2/25/32 (f)(h) | 170,000 | 171,652 | ||
Series 2002-NC3 Class M1, 2.17% 8/25/32 (h) | 75,000 | 75,687 | ||
Series 2003-NC2 Class M2, 3.45% 2/25/33 (h) | 40,000 | 40,967 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (f) | 22,776 | 22,854 | ||
National Collegiate Funding LLC Series 2004-GT1 Class IO1, 7.87% 6/24/10 (f)(i) | 455,000 | 185,595 | ||
New Century Home Equity Loan Trust Series 2003-2 Class A2, 1.88% 1/25/33 (h) | 36,596 | 36,666 | ||
NovaStar Home Equity Loan Series 2004-1: | ||||
Class M1, 1.9% 6/25/34 (h) | 75,000 | 75,070 | ||
Class M4, 2.425% 6/25/34 (h) | 125,000 | 125,185 | ||
Sears Credit Account Master Trust II Series 2002-4 Class A, 1.51% 8/18/09 (h) | 100,000 | 100,120 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
SLM Private Credit Student Loan Trust Series 2004-A Class C, 2.47% 6/15/33 (h) | $ 260,000 | $ 261,270 | ||
WFS Financial 2004-3 Owner Trust Series 2004 3 Class D, 4.07% 2/17/12 | 365,000 | 365,000 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $10,381,179) | 10,409,688 | |||
Collateralized Mortgage Obligations - 3.5% | ||||
Private Sponsor - 3.1% | ||||
Bank of America Mortgage Securities, Inc.: | ||||
Series 2003-K: | ||||
Class 1A1, 3.3875% 12/25/33 (h) | 299,399 | 299,591 | ||
Class 2A1, 4.2187% 12/25/33 (h) | 386,959 | 382,492 | ||
Series 2003-L Class 2A1, 4.0362% 1/25/34 (h) | 2,209,348 | 2,191,998 | ||
Series 2004-B: | ||||
Class 1A1, 3.4463% 3/25/34 (h) | 1,004,893 | 1,001,164 | ||
Class 2A2, 4.16% 3/25/34 (h) | 249,195 | 247,747 | ||
Series 2004-C Class 1A1, 3.4381% 4/25/34 (h) | 592,642 | 586,067 | ||
Series 2004-D: | ||||
Class 1A1, 3.6061% 5/25/34 (h) | 636,390 | 629,454 | ||
Class 2A2, 4.2274% 5/25/34 (h) | 687,289 | 677,006 | ||
Series 2004-G Class 2A7, 4.6636% 8/25/34 (h) | 800,000 | 799,996 | ||
CS First Boston Mortgage Securities Corp. floater: | ||||
Series 2004-AR3 Class 6A2, 1.82% 3/25/34 (h) | 251,005 | 251,593 | ||
Series 2004-AR6 Class 9A2, 1.82% 7/25/34 (h) | 384,503 | 384,503 | ||
Granite Mortgages PLC floater Series 2004-2 Class 1C, 2.0681% 6/20/44 (h) | 235,000 | 235,000 | ||
Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34 | 94,850 | 98,133 | ||
Master Seasoned Securitization Trust Series 2004 1 Class 1A1, 6.343% 10/25/17 (g) | 620,000 | 640,150 | ||
Merrill Lynch Mortgage Investors, Inc.: | ||||
Series 2003-E Class XA1, 1% 10/25/28 (h)(i) | 2,049,661 | 30,042 | ||
Series 2003-G Class XA1, 1% 1/25/29 (i) | 2,887,874 | 49,861 | ||
Series 2003-H Class XA1, 1% 1/25/29 (f)(i) | 2,319,771 | 36,784 | ||
Merrill Lynch Trust XXIX Series 29 Class A, 5/1/13 (j) | 45,549 | 41,459 | ||
Residential Asset Mortgage Products, Inc. sequential pay: | ||||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 928,335 | 961,842 | ||
Series 2004-SL2 Class A1, 6.5% 11/25/16 | 117,206 | 121,217 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
Private Sponsor - continued | ||||
Residential Finance LP/Residential Finance Development Corp. floater: | ||||
Series 2003-CB1: | ||||
Class B3, 2.8131% 6/10/35 (f)(h) | $ 44,204 | $ 44,872 | ||
Class B4, 3.0131% 6/10/35 (f)(h) | 39,292 | 39,880 | ||
Class B5, 3.6131% 6/10/35 (f)(h) | 29,469 | 30,006 | ||
Class B6, 4.1131% 6/10/35 (f)(h) | 14,735 | 14,997 | ||
Series 2004-B: | ||||
Class B4, 2.4631% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Class B5, 2.9131% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Class B6, 3.3631% 2/10/36 (f)(h) | 99,771 | 99,771 | ||
Resix Finance Ltd. floater: | ||||
Series 2004-A Class B8, 6.5631% 2/10/36 (f)(h) | 828,248 | 828,244 | ||
Series 2004-B Class B8, 6.1131% 2/10/36 (f)(h) | 199,542 | 199,542 | ||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (f)(i) | 5,597,713 | 59,913 | ||
Washington Mutual Mortgage Securities Corp. sequential pay: | ||||
Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 95,330 | 100,677 | ||
Series 2004-RA2 Class 2A, 7% 7/25/33 | 250,105 | 259,025 | ||
TOTAL PRIVATE SPONSOR | 11,542,568 | |||
U.S. Government Agency - 0.4% | ||||
Fannie Mae sequential pay Series 1999-10 Class MZ, 6.5% 9/17/38 | 731,648 | 769,117 | ||
Fannie Mae guaranteed REMIC pass thru certificates planned amortization class Series 2001-53 Class OH, 6.5% 6/25/30 | 5,768 | 5,798 | ||
Freddie Mac planned amortization class Series 2355 Class CD, 6.5% 6/15/30 | 7,732 | 7,790 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
sequential pay Series 2750 Class ZT, 5% 2/15/34 | 372,668 | 301,099 | ||
Series 2749 Class MZ, 5% 2/15/24 | 59,468 | 59,458 | ||
Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.8704% 10/16/23 (h) | 25,000 | 26,402 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class Series 2003-75 Class LI, 5.5% 10/20/21 (i) | $ 5,845,087 | $ 168,640 | ||
sequential pay Series 2003-59 Class D, 3.654% 10/16/27 | 115,000 | 106,832 | ||
TOTAL U.S. GOVERNMENT AGENCY | 1,445,136 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $13,072,698) | 12,987,704 | |||
Commercial Mortgage Securities - 1.6% | ||||
Banc of America Large Loan, Inc. floater Series 2003-BBA2: | ||||
Class C, 1.85% 11/15/15 (f)(h) | 50,000 | 50,246 | ||
Class D, 1.93% 11/15/15 (f)(h) | 80,000 | 80,462 | ||
Class F, 2.28% 11/15/15 (f)(h) | 60,000 | 60,502 | ||
Class H, 2.78% 11/15/15 (f)(h) | 50,000 | 50,372 | ||
Class J, 3.33% 11/15/15 (f)(h) | 55,000 | 55,864 | ||
Class K, 2.8103% 11/15/15 (f)(h) | 50,000 | 50,510 | ||
Bayview Commercial Asset Trust: | ||||
floater: | ||||
Series 2004-1 Class A, 1.66% 4/25/34 (f)(h) | 390,139 | 389,895 | ||
Series 2004-2 Class M1, 1.82% 8/25/34 (f)(h) | 399,063 | 399,063 | ||
Series 2004-1 Class IO, 1.25% 4/25/34 (f)(i) | 4,175,558 | 279,893 | ||
Bear Stearns Commercial Mortgage Securities, Inc.: | ||||
floater: | ||||
Series 2003-BA1A Class A1, 1.4913% 4/14/15 (f)(h) | 292,813 | 292,789 | ||
Series 2004-ESA Class A2, 1.67% 5/14/16 (f)(h) | 350,000 | 350,174 | ||
sequential pay Series 2004-ESA Class A3, 4.741% 5/14/16 (f) | 180,000 | 182,054 | ||
Series 2004-ESA: | ||||
Class B, 4.888% 5/14/16 (f) | 325,000 | 327,184 | ||
Class C, 4.937% 5/14/16 (f) | 205,000 | 206,548 | ||
Class D, 4.986% 5/14/16 (f) | 75,000 | 75,471 | ||
Class E, 5.064% 5/14/16 (f) | 230,000 | 231,150 | ||
Class F, 5.182% 5/14/16 (f) | 55,000 | 55,516 | ||
COMM floater Series 2002-FL7: | ||||
Class A2, 1.73% 11/15/14 (f)(h) | 47,937 | 47,942 | ||
Class D, 1.95% 11/15/14 (f)(h) | 125,000 | 125,233 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
CS First Boston Mortgage Securities Corp. Series 2003-TFLA Class G, 1.9433% 4/15/13 (f)(h) | $ 105,000 | $ 100,801 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-22 Class B, 3.963% 5/16/32 | 60,000 | 57,958 | ||
Series 2003-36 Class C, 4.254% 2/16/31 | 55,000 | 53,478 | ||
Series 2003-47 Class C, 4.227% 10/16/27 | 105,000 | 102,157 | ||
Series 2003-47 Class XA, 0.2454% 6/16/43 (h)(i) | 6,632,656 | 336,813 | ||
GS Mortgage Securities Corp. II sequential pay: | ||||
Series 2001-LIBA Class A2, 6.615% 2/14/16 (f) | 315,000 | 341,622 | ||
Series 2003-C1 Class A2A, 3.59% 1/10/40 | 65,000 | 64,404 | ||
Host Marriot Pool Trust sequential pay Series 1999-HMTA Class D, 7.97% 8/3/15 (f) | 110,000 | 123,170 | ||
Trizechahn Office Properties Trust Series 2001-TZHA: | ||||
Class C3, 6.522% 3/15/13 (f) | 25,000 | 26,785 | ||
Class C4, 6.893% 5/15/16 (f) | 500,000 | 557,006 | ||
Class E3, 7.253% 3/15/13 (f) | 235,000 | 248,367 | ||
Wachovia Bank Commercial Mortgage Trust sequential pay Series 2003-C8 Class A3, 4.445% 11/15/35 | 785,000 | 773,322 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $6,308,252) | 6,096,751 | |||
Foreign Government and Government Agency Obligations - 3.0% | ||||
Argentine Republic 1.2138% 8/3/12 (h) | 105,000 | 70,872 | ||
Bogota Distrito Capital 9.5% 12/12/06 (Reg. S) | 95,000 | 103,550 | ||
Brazilian Federative Republic: | ||||
Brady: | ||||
capitalization bond 8% 4/15/14 | 1,149,315 | 1,083,948 | ||
new money bond L 7.6875% 4/15/09 (Reg.) (h) | 14,707 | 13,714 | ||
new money bond L, 2.11% 4/15/09 (Bearer) (h) | 44,120 | 41,141 | ||
par Z-L 6% 4/15/24 | 265,000 | 214,650 | ||
11% 8/17/40 | 385,000 | 378,070 | ||
11.25% 7/26/07 | 125,000 | 137,750 | ||
11.5% 3/12/08 | 95,000 | 104,500 | ||
12% 4/15/10 | 55,000 | 60,638 | ||
12.25% 3/6/30 | 70,000 | 75,600 | ||
12.75% 1/15/20 | 45,000 | 49,950 | ||
Central Bank of Nigeria promissory note 5.092% 1/5/10 | 76,333 | 69,825 | ||
Chilean Republic: | ||||
5.625% 7/23/07 | 100,000 | 104,875 | ||
7.125% 1/11/12 | 1,250,000 | 1,404,688 | ||
Foreign Government and Government Agency | ||||
Principal | Value | |||
City of Kiev 8.75% 8/8/08 | $ 200,000 | $ 203,000 | ||
Colombian Republic: | ||||
9.75% 4/23/09 | 200,000 | 220,500 | ||
10.75% 1/15/13 | 160,000 | 179,200 | ||
11.75% 2/25/20 | 95,000 | 109,131 | ||
Dominican Republic: | ||||
Brady 2% 8/30/09 (h) | 142,083 | 94,841 | ||
9.5% 9/27/06 (Reg. S) | 15,000 | 11,325 | ||
Ecuador Republic: | ||||
12% 11/15/12 (Reg. S) | 235,000 | 221,488 | ||
euro par 4.75% 2/28/25 (e) | 5,000 | 2,931 | ||
Hong Kong Gov Spl Admin Reg 5.125% 8/1/14 (f) | 1,185,000 | 1,177,589 | ||
Jamaican Government 10.625% 6/20/17 | 10,000 | 9,625 | ||
Lebanese Republic 10.125% 8/6/08 | 55,000 | 60,775 | ||
Panamanian Republic: | ||||
9.625% 2/8/11 | 25,000 | 28,000 | ||
10.75% 5/15/20 | 60,000 | 69,600 | ||
Peruvian Republic 9.125% 2/21/12 | 135,000 | 141,750 | ||
Philippine Republic: | ||||
Brady principal collateralized interest reduction bond 6.5% 12/1/17 | 45,000 | 43,875 | ||
8.375% 2/15/11 | 445,000 | 449,450 | ||
8.875% 3/17/15 | 40,000 | 40,300 | ||
9.875% 1/15/19 | 145,000 | 150,075 | ||
Quebec Province 7.5% 9/15/29 | 100,000 | 122,711 | ||
Russian Federation: | ||||
5% 3/31/30 (Reg. S) (e) | 1,192,000 | 1,093,660 | ||
8.25% 3/31/10 (Reg. S) | 165,000 | 177,169 | ||
euro 10% 6/26/07 | 105,000 | 117,994 | ||
South African Republic 6.5% 6/2/14 | 255,000 | 261,375 | ||
State of Israel 4.625% 6/15/13 | 20,000 | 18,725 | ||
Turkish Republic: | ||||
10.5% 1/13/08 | 170,000 | 187,850 | ||
11% 1/14/13 | 100,000 | 115,250 | ||
11.75% 6/15/10 | 255,000 | 298,988 | ||
12.375% 6/15/09 | 90,000 | 107,213 | ||
United Mexican States: | ||||
4.625% 10/8/08 | 160,000 | 159,360 | ||
7.5% 1/14/12 | 100,000 | 110,000 | ||
Uruguay Republic 7.25% 2/15/11 | 70,000 | 61,338 | ||
Venezuelan Republic: | ||||
Discount A, 2.1325% 3/31/20 (h) | 250,000 | 213,125 | ||
Foreign Government and Government Agency | ||||
Principal | Value | |||
Venezuelan Republic: - continued | ||||
5.375% 8/7/10 | $ 35,000 | $ 28,963 | ||
9.25% 9/15/27 | 150,000 | 133,125 | ||
10.75% 9/19/13 | 380,000 | 394,250 | ||
13.625% 8/15/18 | 65,000 | 73,938 | ||
euro Brady: | ||||
debt conversion bond 2.75% 12/18/07 (h) | 249,990 | 241,397 | ||
par W-B 6.75% 3/31/20 | 250,000 | 228,750 | ||
Vietnamese Socialist Republic Brady par 3.75% 3/12/28 (e) | 90,000 | 61,650 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $11,084,149) | 11,334,057 | |||
Common Stocks - 0.0% | ||||
Shares | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Multiline Retail - 0.0% | ||||
Barneys, Inc. warrants 4/1/08 (a) | 20 | 1,200 | ||
CONSUMER STAPLES - 0.0% | ||||
Personal Products - 0.0% | ||||
Revlon, Inc. Class A (a) | 18,648 | 42,890 | ||
TOTAL COMMON STOCKS (Cost $36,503) | 44,090 | |||
Nonconvertible Preferred Stocks - 0.0% | ||||
CONSUMER DISCRETIONARY - 0.0% | ||||
Media - 0.0% | ||||
PRIMEDIA, Inc.: | ||||
Series D, 10.00% | 425 | 39,950 | ||
Series H, 8.625% | 1,000 | 84,000 | ||
123,950 | ||||
TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $133,738) | 123,950 | |||
Sovereign Loan Participations - 0.1% | ||||
Principal | Value | |||
Indonesian Republic loan participation: | ||||
Credit Suisse First Boston 2.0625% 3/28/13 (h) | $ 124,405 | $ 106,988 | ||
Deutsche Bank: | ||||
2.0625% 3/28/13 (h) | 14,643 | 12,593 | ||
2.5625% 3/21/05 (h) | 15,000 | 14,588 | ||
Salomon Brothers 2.5625% 3/21/05 (h) | 15,000 | 14,588 | ||
TOTAL SOVEREIGN LOAN PARTICIPATIONS (Cost $147,490) | 148,757 | |||
Fixed-Income Funds - 9.1% | ||||
Shares | ||||
Fidelity Ultra-Short Central Fund (b) | 341,900 | 34,039,564 | ||
Cash Equivalents - 15.8% | ||||
Maturity | ||||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 59,230,746 | 59,224,000 | ||
TOTAL INVESTMENT PORTFOLIO - 116.2% (Cost $436,168,709) | 434,824,531 | |||
NET OTHER ASSETS - (16.2)% | (60,573,776) | |||
NET ASSETS - 100% | $ 374,250,755 |
Swap Agreements | |||||
Expiration | Notional | Value | |||
Credit Default Swap | |||||
Receive quarterly notional amount multilpied by .43% and pay Bank of America upon default event of Apache Corp., par value of the notional amount of Apache Corp. 6.25% 4/15/12 | Sept. 2014 | $ 400,000 | $ (181) | ||
Receive quarterly notional amount multiplied by .35% and pay Goldman Sachs upon default event of Devon Energy Corp., par value of the notional amount of Devon Energy Corp. 7.95% 4/15/32 | June 2006 | 200,000 | 8 | ||
Receive quarterly notional amount multiplied by .53% and pay Deutsche Bank upon default event of SBC Communications, Inc., par value of the notional amount of SBC Communications, Inc. 6.25% 3/15/11 | March 2009 | 300,000 | 1,452 | ||
Receive quarterly notional amount multiplied by .53% and pay Lehman Brothers, Inc., upon default event of SBC Communications, Inc., par value of the notional amount of SBC Communications, Inc. 6.25% 3/15/11 | March 2009 | 200,000 | 594 | ||
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. 1.12% 7/25/35 | August 2007 | 25,000 | 316 | ||
TOTAL CREDIT DEFAULT SWAP | 1,125,000 | 2,189 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.857% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2008 | 3,000,000 | (25,221) | ||
Receive quarterly a fixed rate equal to 4.135% and pay quarterly a floating rate based on 3-month LIBOR with Merrill Lynch, Inc. | June 2006 | 8,000,000 | 36,964 | ||
Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | July 2014 | 1,135,000 | (1,932) | ||
TOTAL INTEREST RATE SWAP | 12,135,000 | 9,811 | |||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Total Return Swap | |||||
Receive monthly a return equal to Lehman Brothers CMBS AAA 8.5+ and pay monthly a floating rate based on 1-month LIBOR minus 65 basis points with Lehman Brothers, Inc. | Oct. 2004 | $ 1,000,000 | $ 15,634 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 50 basis points with Lehman Brothers, Inc. | August 2004 | 630,000 | 6,082 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 50 basis points with Lehman Brothers, Inc. | Sept. 2004 | 600,000 | 5,793 | ||
Receive monthly a return equal to Lehman Brothers CMBS Erisa Eligible and pay monthly a floating rate based on 1-month LIBOR minus 55 basis points with Deutsche Bank | Dec. 2004 | 500,000 | 5,069 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 72 basis points with Bank of America | Jan. 2005 | 1,000,000 | 445 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage-Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 70 basis points with Bank of America | Dec. 2004 | 1,000,000 | 26,163 | ||
Receive quarterly a return equal to Banc of America Securities LLC AAA 10Yr Commercial Mortgage-Backed Securities Daily Index and pay quarterly a floating rate based on 3-month LIBOR minus 80 basis points with Bank of America | Nov. 2004 | 2,000,000 | 28,594 | ||
TOTAL TOTAL RETURN SWAP | 6,730,000 | 87,780 | |||
$ 19,990,000 | $ 99,780 |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(f) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $25,398,709 or 6.8% of net assets. |
(g) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(j) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(k) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$59,224,000 due 8/2/04 at 1.37% | |
Bank of America, National Association | $ 9,951,645 |
Banc of America Securities LLC | 21,905,332 |
Bear Stearns & Co. Inc. | 2,487,911 |
BNP Paribas Securities Corp. | 2,487,911 |
Goldman, Sachs & Co. | 2,487,911 |
Morgan Stanley & Co. Incorporated | 19,903,290 |
$ 59,224,000 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.5% |
Cayman Islands | 1.3% |
United Kingdom | 1.3% |
Netherlands | 1.0% |
Others (individually less than 1%) | 6.9% |
100.0% |
Income Tax Information |
The fund hereby designates approximately $346,000 as a 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, 2004 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $59,224,000) (cost $436,168,709) - See accompanying schedule | $ 434,824,531 | |
Cash | 274,348 | |
Receivable for investments sold | 355,713 | |
Receivable for fund shares sold | 292,929 | |
Dividends receivable | 1,063 | |
Interest receivable | 3,569,415 | |
Swap agreements, at value | 99,780 | |
Prepaid expenses | 239 | |
Receivable from investment adviser for expense reductions | 31,093 | |
Total assets | 439,449,111 | |
Liabilities | ||
Payable for investments purchased | $ 648,329 | |
Delayed delivery | 64,162,395 | |
Payable for fund shares redeemed | 105,811 | |
Distributions payable | 36,647 | |
Accrued management fee | 131,425 | |
Distribution fees payable | 228 | |
Other affiliated payables | 67,193 | |
Other payables and accrued expenses | 46,328 | |
Total liabilities | 65,198,356 | |
Net Assets | $ 374,250,755 | |
Net Assets consist of: | ||
Paid in capital | $ 374,446,491 | |
Undistributed net investment income | 79,241 | |
Accumulated undistributed net realized gain (loss) on investments | 969,421 | |
Net unrealized appreciation (depreciation) on investments | (1,244,398) | |
Net Assets | $ 374,250,755 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2004 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 10.46 | |
Maximum offering price per share (100/95.25 of $10.46) | $ 10.98 | |
Class T: | $ 10.46 | |
Maximum offering price per share (100/96.50 of $10.46) | $ 10.84 | |
Class B: | $ 10.46 | |
Class C: | $ 10.46 | |
Fidelity Total Bond: | $ 10.46 | |
Institutional Class: | $ 10.46 |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2004 | ||
Investment Income | ||
Dividends | $ 19,783 | |
Interest | 10,504,723 | |
Total income | 10,524,506 | |
Expenses | ||
Management fee | $ 1,152,050 | |
Transfer agent fees | 535,569 | |
Distribution fees | 337 | |
Accounting fees and expenses | 114,560 | |
Non-interested trustees' compensation | 1,181 | |
Custodian fees and expenses | 23,733 | |
Registration fees | 140,491 | |
Audit | 38,827 | |
Legal | 4,405 | |
Miscellaneous | 16,445 | |
Total expenses before reductions | 2,027,598 | |
Expense reductions | (275,019) | 1,752,579 |
Net investment income (loss) | 8,771,927 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 1,044,604 | |
Swap agreements | (106,905) | |
Total net realized gain (loss) | 937,699 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 744,733 | |
Swap agreements | 101,024 | |
Delayed delivery commitments | (138,750) | |
Total change in net unrealized appreciation (depreciation) | 707,007 | |
Net gain (loss) | 1,644,706 | |
Net increase (decrease) in net assets resulting from operations | $ 10,416,633 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | October 15, 2002 | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 8,771,927 | $ 1,155,369 |
Net realized gain (loss) | 937,699 | 1,196,805 |
Change in net unrealized appreciation (depreciation) | 707,007 | (1,951,405) |
Net increase (decrease) in net assets resulting | 10,416,633 | 400,769 |
Distributions to shareholders from net investment income | (8,644,971) | (1,105,904) |
Distributions to shareholders from net realized gain | (461,703) | - |
Total distributions | (9,106,674) | (1,105,904) |
Share transactions - net increase (decrease) | 292,125,223 | 81,520,708 |
Total increase (decrease) in net assets | 293,435,182 | 80,815,573 |
Net Assets | ||
Beginning of period | 80,815,573 | - |
End of period (including undistributed net investment income of $79,241 and undistributed net investment income of $48,177, respectively) | $ 374,250,755 | $ 80,815,573 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .046 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .191 |
Distributions from net investment income | (.041) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.85% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | .87%A |
Expenses net of voluntary waivers, if any | .80%A |
Expenses net of all reductions | .80%A |
Net investment income (loss) | 3.51%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .045 |
Net realized and unrealized gain (loss) | .144 |
Total from investment operations | .189 |
Distributions from net investment income | (.039) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.84% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | .96%A |
Expenses net of voluntary waivers, if any | .90%A |
Expenses net of all reductions | .90%A |
Net investment income (loss) | 3.41%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .036 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .181 |
Distributions from net investment income | (.031) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.76% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 1.62%A |
Expenses net of voluntary waivers, if any | 1.55%A |
Expenses net of all reductions | 1.55%A |
Net investment income (loss) | 2.76%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 104 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Year ended July 31, | 2004F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)E | .035 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .180 |
Distributions from net investment income | (.030) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C,D | 1.74% |
Ratios to Average Net AssetsG | |
Expenses before expense reductions | 1.74%A |
Expenses net of voluntary waivers, if any | 1.65%A |
Expenses net of all reductions | 1.65%A |
Net investment income (loss) | 2.66%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 142 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Total Bond
Years ended July 31, | 2004 | 2003F |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 10.28 | $ 10.00 |
Income from Investment Operations | ||
Net investment income (loss)D | .340 | .232 |
Net realized and unrealized gain (loss) | .237 | .269E |
Total from investment operations | .577 | .501 |
Distributions from net investment income | (.337) | (.221) |
Distributions from net realized gain | (.060) | - |
Total distributions | (.397) | (.221) |
Net asset value, end of period | $ 10.46 | $ 10.28 |
Total ReturnB,C | 5.68% | 5.01% |
Ratios to Average Net AssetsG | ||
Expenses before expense reductions | .75% | 1.01%A |
Expenses net of voluntary waivers, if any | .65% | .65%A |
Expenses net of all reductions | .65% | .65%A |
Net investment income (loss) | 3.25% | 2.83%A |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 373,699 | $ 80,816 |
Portfolio turnover rate | 251% | 423%A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E 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 class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Year ended July 31, | 2004E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.31 |
Income from Investment Operations | |
Net investment income (loss)D | .048 |
Net realized and unrealized gain (loss) | .145 |
Total from investment operations | .193 |
Distributions from net investment income | (.043) |
Net asset value, end of period | $ 10.46 |
Total ReturnB,C | 1.87% |
Ratios to Average Net AssetsF | |
Expenses before expense reductions | .71%A |
Expenses net of voluntary waivers, if any | .65%A |
Expenses net of all reductions | .65%A |
Net investment income (loss) | 3.66%A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 102 |
Portfolio turnover rate | 251% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2004
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 fund offers Class A, Class T, Class B, Class C, Fidelity Total Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
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, including restricted 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 valuation models. Equity securities, including restricted 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 prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, 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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from net investment income and realized gain for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to swap agreements, market discount, non-taxable dividends, financing transactions and losses deferred due to wash sales.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 2,516,785 | |
Unrealized depreciation | (3,578,968) | |
Net unrealized appreciation (depreciation) | (1,062,183) | |
Undistributed ordinary income | 1,657,054 | |
Undistributed long-term capital gain | 169,658 | |
Cost for federal income tax purposes | $ 435,886,714 |
The tax character of distributions paid was as follows:
July 31, 2004 | July 31, 2003 | |
Ordinary Income | $ 9,106,674 | $ 1,105,904 |
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 by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - 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 at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Total return swaps are agreements to exchange the return generated by one instrument for the return generated by another instrument, for example, the agreement to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the index exceeds the offsetting interest obligation, the fund will receive a payment from the counterparty. To the extent it is less, the fund will make a payment to the counterparty. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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. Periodic payments and premiums received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
Annual Report
2. Operating Policies - continued
Swap Agreements - continued
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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
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 may 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 sale 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. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $190,553,218 and $50,166,230, respectively.
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
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 20 | $ 20 |
Class T | 0% | .25% | 32 | 32 |
Class B | .65% | .25% | 115 | 115 |
Class C | .75% | .25% | 170 | 129 |
$ 337 | $ 296 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, no sales charges were retained by FDC.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the fund, except for Fidelity Total Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, , is the transfer agent for Fidelity Total Bond shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of shareholder
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
Amount | % of | |
Class A | $ 20 | .16 |
Class T | 20 | .16 |
Class B | 20 | .16 |
Class C | 29 | .17 |
Fidelity Total Bond | 535,460 | .20 |
Institutional Class | 20 | .16 |
$ 535,569 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month.
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 $440,328 for the period.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
6. Expense Reductions.
FMR agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | .80% | $ 9 |
Class T | .90% | 8 |
Class B | 1.55% | 8 |
Class C | 1.65% | 15 |
Fidelity Total Bond | .65% | 273,223 |
Institutional Class | .65% | 8 |
$ 273,271 |
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 $1,748.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2004A | 2003B |
From net investment income | ||
Class A | $ 394 | $ - |
Class T | 382 | - |
Class B | 301 | - |
Class C | 386 | - |
Fidelity Total Bond | 8,643,095 | 1,105,904 |
Institutional Class | 413 | - |
Total | $ 8,644,971 | $ 1,105,904 |
From net realized gain | ||
Fidelity Total Bond | $ 461,703 | $ - |
A Distributions for Class A, Class T, Class B, Class C and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Distributions for Fidelity Total Bond are for the period October 15, 2002 (commencement of operations) to July 31, 2003.
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2004A | 2003B | 2004A | 2003B |
Class A | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 38 | - | 394 | - |
Net increase (decrease) | 9,737 | - | $ 100,394 | $ - |
Class T | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 37 | - | 382 | - |
Net increase (decrease) | 9,736 | - | $ 100,382 | $ - |
Class B | ||||
Shares sold | 9,950 | - | $ 102,625 | $ - |
Reinvestment of distributions | 29 | - | 301 | - |
Net increase (decrease) | 9,979 | - | $ 102,926 | $ - |
Class C | ||||
Shares sold | 13,566 | - | $ 140,062 | $ - |
Reinvestment of distributions | 37 | - | 386 | - |
Net increase (decrease) | 13,603 | - | $ 140,448 | $ - |
Fidelity Total Bond | ||||
Shares sold | 34,227,901 | 14,730,271 | $ 358,024,636 | $ 153,496,596 |
Reinvestment of distributions | 845,761 | 98,006 | 8,865,286 | 1,022,553 |
Shares redeemed | (7,201,869) | (6,966,063) | (75,309,262) | (72,998,441) |
Net increase (decrease) | 27,871,793 | 7,862,214 | $ 291,580,660 | $ 81,520,708 |
Institutional Class | ||||
Shares sold | 9,699 | - | $ 100,000 | $ - |
Reinvestment of distributions | 40 | - | 413 | - |
Net increase (decrease) | 9,739 | - | $ 100,413 | $ - |
A Share transactions for Class A, Class T, Class B, Class C, and Institutional Class are for the period June 16, 2004 (commencement of sales of shares) to July 31, 2004.
B Share transactions for Fidelity Total Bond are for the period October 15, 2002 (commencement of operations) to July 31, 2003.
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Income Fund and the Shareholders of Fidelity Total Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Total Bond Fund (a fund of Fidelity Income Fund) at July 31, 2004 and the results of its operations, the changes in its 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 Total Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 293 funds advised by FMR or an affiliate. Mr. McCoy oversees 295 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
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 (50) | |
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 (52) | |
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998, retired as Chairman May 1999, and 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. He is a member of the Executive Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 and the University of Notre Dame Advisory Council for the College of Science. |
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
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 (43) | |
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. | |
Kevin E. Grant (44) | |
Year of Election or Appointment: 2002 Vice President of Total Bond. Mr. Grant also serves as 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 (55) | |
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 (44) | |
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. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of Total Bond. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Total Bond. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Total Bond. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
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. (57) | |
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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Total Bond. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
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. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Total Bond. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
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 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:
Pay Date | Record Date | Capital Gains | |
Fidelity Total Bond | 9/07/04 | 9/03/04 | $0.02 |
A total of 16.67% 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 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | 7,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.496 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
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
Focused High Income Fund
Ginnie Mae
Government Income
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Inflation-Protected Bond
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Intermediate Government Income
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Total Bond
Ultra-Short Bond
U.S. Bond Index
The Fidelity Telephone Connection
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Fidelity Advisor
Ultra-Short Bond
Fund - Class A and Class T
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Class A and Class T
are classes of
Fidelity® Ultra-Short Bond Fund
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR 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.
Commencing with the fiscal quarter ending October 31, 2004, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. The fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the fund's portfolio holdings, view the fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
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 class' 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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Life of | |
Class A (incl. 1.50% | -0.02% | 0.99% | |
Class T (incl. 1.50% | -0.03% | 0.99% |
A Since August 29, 2002
B Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Ultra-Short Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
C Class T shares bear a 0.15% 12b-1 fee. The initial offering of Class T shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Ultra-Short Bond, the original retail class of the fund, which does not bear a 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to June 16, 2004 would have been lower.
Annual Report
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Ultra-Short Bond Fund - Class T on August 29, 2002, when the fund started, and the current 1.50% sales charge was paid. 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 Advisor Ultra-Short Bond Fund
Investment-grade debt had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
The fund's Class A and Class T shares both rose 1.50% during the past year, versus 1.06% for the Lehman Brothers 6 Month Swap Index. Sector selection was the main driver of performance, as the fund was well-positioned to exploit opportunities throughout the ultra-short-term bond space, while keeping its interest rate risk at a minimum. I invested in high-quality, higher-yielding spread sectors - including corporate bonds and securitized products such as asset-backed securities (ABS), collateralized mortgage obligations (CMOs) and mortgage pass-through securities - all of which outpaced comparable-duration Treasuries. This strategy played directly into Fidelity's research strengths, which also gave us an advantage in terms of security selection. The fund benefited a lot from its focus on attractively valued home equity ABS and CMOs, both of which did especially well. Elsewhere, modest positions in several middle- and lower-quality investment-grade corporates paid off in the first half of the period amid a bullish climate for riskier assets. Conversely, yield-curve positioning was a slight drag on performance. My strategy of owning securities with more evenly distributed cash flows relative to a single "bullet" maturity index proved ineffective during the period as the short end of the curve steepened.
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
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A (dagger) | |||
Actual | $ 1,000.00 | $ 1,002.40 | $ .88 |
Hypothetical A | $ 1,000.00 | $ 1,005.42 | $ .88 |
Class T(dagger) | |||
Actual | $ 1,000.00 | $ 1,002.30 | $ .88 |
Hypothetical A | $ 1,000.00 | $ 1,005.42 | $ .88 |
Beginning | Ending | Expenses Paid | |
Fidelity Ultra-Short Bond | |||
Actual | $ 1,000.00 | $ 1,005.20 | $ 2.74 |
Hypothetical A | $ 1,000.00 | $ 1,022.23 | $ 2.77 |
Institutional Class(dagger) | |||
Actual | $ 1,000.00 | $ 1,002.50 | $ .69 |
Hypothetical A | $ 1,000.00 | $ 1,005.61 | $ .69 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Class A | .70% |
Class T | .70% |
Fidelity Ultra-Short Bond | .55% |
Institutional Class | .55% |
* Calculated by multiplying by 46/366 to reflect the period June 16, 2004 to July 31, 2004.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2004 | As of January 31, 2004 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 20.4% | ![]() | AAA 21.6% | ||||
![]() | AA 7.1% | ![]() | AA 8.2% | ||||
![]() | A 12.4% | ![]() | A 15.4% | ||||
![]() | BBB 9.1% | ![]() | BBB 8.4% | ||||
![]() | BB and Below 0.2% | ![]() | BB and Below 0.6% | ||||
![]() | Not Rated 3.7% | ![]() | Not Rated 1.8% | ||||
![]() | 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, 2004 | ||
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, 2004 | ||
6 months ago | ||
Years | 0.5 | 0.5 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Corporate Bonds 5.4% | ![]() | Corporate Bonds 7.8% | ||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 15.4% | ![]() | CMOs and Other Mortgage Related Securities 12.5% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 4.1% | ** Foreign investments | 2.9% | ||||
* Futures and Swaps | 14.6% | ** Futures and Swaps | 15.0% |
Percentages are adjusted for the effect of futures contracts and swap contracts, if applicable. The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investment of Fidelity's fixed-income central fund. |
Annual Report
Investments July 31, 2004
Showing Percentage of Net Assets
Nonconvertible Bonds - 3.8% | |||
Principal | Value | ||
CONSUMER DISCRETIONARY - 0.8% | |||
Auto Components - 0.2% | |||
DaimlerChrysler NA Holding Corp.: | |||
1.87% 5/24/06 (e) | $ 800,000 | $ 802,894 | |
2.18% 8/8/06 (e) | 600,000 | 606,178 | |
1,409,072 | |||
Media - 0.6% | |||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 900,000 | 970,826 | |
Continental Cablevision, Inc. 8.3% 5/15/06 | 450,000 | 488,301 | |
Cox Communications, Inc. 7.5% 8/15/04 | 500,000 | 500,825 | |
Liberty Media Corp. 3.02% 9/17/06 (e) | 1,350,000 | 1,370,480 | |
3,330,432 | |||
TOTAL CONSUMER DISCRETIONARY | 4,739,504 | ||
CONSUMER STAPLES - 0.2% | |||
Food & Staples Retailing - 0.1% | |||
Safeway, Inc. 2.5% 11/1/05 | 820,000 | 816,672 | |
Tobacco - 0.1% | |||
Philip Morris Companies, Inc. 7% 7/15/05 | 300,000 | 310,332 | |
TOTAL CONSUMER STAPLES | 1,127,004 | ||
ENERGY - 0.0% | |||
Oil & Gas - 0.0% | |||
Pemex Project Funding Master Trust 3.0775% 1/7/05 (a)(e) | 150,000 | 150,780 | |
FINANCIALS - 1.7% | |||
Capital Markets - 0.1% | |||
State Street Capital Trust II 1.75% 2/15/08 (e) | 300,000 | 301,843 | |
Consumer Finance - 0.2% | |||
General Motors Acceptance Corp.: | |||
2.88% 10/20/05 (e) | 1,000,000 | 1,006,607 | |
6.75% 1/15/06 | 230,000 | 240,859 | |
John Deere Capital Corp. 2.16% 9/17/04 (e) | 50,000 | 50,023 | |
1,297,489 | |||
Diversified Financial Services - 1.0% | |||
Bombardier Capital, Inc. 7.5% 10/17/05 (a) | 1,000,000 | 1,028,321 | |
Deutsche Telekom International Finance BV 8.25% 6/15/05 | 1,500,000 | 1,572,759 | |
Nonconvertible Bonds - continued | |||
Principal | Value | ||
FINANCIALS - continued | |||
Diversified Financial Services - continued | |||
NiSource Finance Corp. 7.625% 11/15/05 | $ 675,000 | $ 714,064 | |
Powergen US Funding LLC 4.5% 10/15/04 | 335,000 | 336,692 | |
Sprint Capital Corp.: | |||
4.78% 8/17/06 | 1,000,000 | 1,023,258 | |
7.125% 1/30/06 | 500,000 | 528,821 | |
Tyco International Group SA yankee 6.375% 2/15/06 | 800,000 | 839,753 | |
6,043,668 | |||
Insurance - 0.1% | |||
St. Paul Travelers Companies, Inc. 7.875% 4/15/05 | 405,000 | 419,941 | |
Real Estate - 0.2% | |||
Arden Realty LP 8.875% 3/1/05 | 500,000 | 517,705 | |
Duke Realty LP 6.875% 3/15/05 | 300,000 | 308,161 | |
Regency Centers LP 7.125% 7/15/05 | 400,000 | 415,688 | |
1,241,554 | |||
Thrifts & Mortgage Finance - 0.1% | |||
Countrywide Home Loans, Inc. 1.795% 6/2/06 (e) | 500,000 | 502,492 | |
TOTAL FINANCIALS | 9,806,987 | ||
INFORMATION TECHNOLOGY - 0.2% | |||
Communications Equipment - 0.2% | |||
Motorola, Inc. 6.75% 2/1/06 | 1,000,000 | 1,057,432 | |
MATERIALS - 0.0% | |||
Paper & Forest Products - 0.0% | |||
Boise Cascade Corp. 7.35% 10/11/04 | 270,000 | 270,626 | |
TELECOMMUNICATION SERVICES - 0.8% | |||
Diversified Telecommunication Services - 0.6% | |||
British Telecommunications PLC 7.875% 12/15/05 | 950,000 | 1,013,074 | |
France Telecom SA 8.2% 3/1/06 | 800,000 | 855,781 | |
GTE Corp. 6.36% 4/15/06 | 1,000,000 | 1,051,875 | |
Telefonica Europe BV 7.35% 9/15/05 | 500,000 | 525,821 | |
3,446,551 | |||
Wireless Telecommunication Services - 0.2% | |||
AT&T Wireless Services, Inc. 7.35% 3/1/06 | 900,000 | 959,012 | |
TOTAL TELECOMMUNICATION SERVICES | 4,405,563 | ||
Nonconvertible Bonds - continued | |||
Principal | Value | ||
UTILITIES - 0.1% | |||
Electric Utilities - 0.1% | |||
Progress Energy, Inc. 6.75% 3/1/06 | $ 605,000 | $ 636,358 | |
TOTAL NONCONVERTIBLE BONDS (Cost $22,161,171) | 22,194,254 | ||
U.S. Government Agency Obligations - 5.5% | |||
Fannie Mae 1.55% 5/4/05 | 10,000,000 | 9,952,484 | |
Federal Home Loan Bank: | |||
1.265% 3/15/05 | 10,000,000 | 9,948,060 | |
1.35% 4/29/05 | 10,000,000 | 9,939,380 | |
Freddie Mac 0% 10/19/04 (c) | 2,000,000 | 1,993,674 | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $31,993,687) | 31,833,598 | ||
U.S. Government Agency - Mortgage Securities - 1.7% | |||
Fannie Mae - 1.7% | |||
5.5% 11/1/16 to 2/1/19 | 6,667,973 | 6,861,962 | |
6.5% 7/1/16 to 8/1/32 | 696,502 | 731,842 | |
7% 8/1/17 to 5/1/32 | 2,265,677 | 2,401,869 | |
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $10,013,200) | 9,995,673 | ||
Asset-Backed Securities - 18.9% | |||
Accredited Mortgage Loan Trust Series 2004-2 Class A2, 1.75% 7/25/34 (e) | 939,157 | 939,128 | |
ACE Securities Corp.: | |||
Series 2002-HE2 Class M1, 2.3% 8/25/32 (e) | 175,000 | 176,415 | |
Series 2003-FM1 Class M2, 3.3% 11/25/32 (e) | 145,000 | 147,655 | |
Series 2003-HE1: | |||
Class A2, 1.86% 11/25/33 (e) | 609,586 | 611,435 | |
Class M1 2.1% 11/25/33 (e) | 120,000 | 120,644 | |
Class M2, 3.15% 11/25/33 (e) | 75,000 | 76,192 | |
Series 2003-HS1: | |||
Class M1, 2.2% 6/25/33 (e) | 50,000 | 50,237 | |
Class M2, 3.2% 6/25/33 (e) | 50,000 | 50,719 | |
Series 2003-NC1 Class M1, 2.23% 7/25/33 (e) | 100,000 | 101,050 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
ACE Securities Corp.: - continued | |||
Series 2003-TC1 Class A2, 1.84% 6/25/33 (e) | $ 79,084 | $ 79,253 | |
Series 2004-HE1: | |||
Class M1, 1.95% 2/25/34 (e) | 150,000 | 150,016 | |
Class M2, 2.55% 2/25/34 (e) | 175,000 | 175,040 | |
American Express Credit Account Master Trust | 410,000 | 410,690 | |
American Express Credit Account Trust Series 2004-C Class C, 1.88% 2/15/12 (a)(e) | 1,200,000 | 1,200,750 | |
AmeriCredit Automobile Receivables Trust: | |||
Series 2000-D Class A4, 1.57% 9/12/07 (e) | 289,712 | 289,988 | |
Series 2001-D Class A3, 1.66% 9/12/06 (e) | 94,389 | 94,403 | |
Series 2002-A Class A3, 1.56% 10/12/06 (e) | 104,570 | 104,582 | |
Series 2003-AM Class A4B, 1.83% 11/6/09 (e) | 600,000 | 603,745 | |
Series 2003-BX Class A4B, 1.74% 1/6/10 (e) | 140,000 | 140,960 | |
Series 2003-CF Class A3, 2.75% 10/9/07 | 1,000,000 | 1,001,604 | |
Series 2004-1 Class A3, 3.22% 7/6/08 | 365,000 | 365,573 | |
Ameriquest Mortgage Securities, Inc.: | |||
Series 2002-4: | |||
Class A2, 1.89% 2/25/33 (e) | 59,252 | 59,463 | |
Class M1, 2.45% 2/25/33 (e) | 105,000 | 105,836 | |
Series 2002-AR1: | |||
Class A2, 1.77% 9/25/32 (e) | 41,652 | 41,672 | |
Class M2, 2.75% 9/25/32 (e) | 490,000 | 492,705 | |
Series 2003-1: | |||
Class A2, 1.86% 2/25/33 (e) | 106,091 | 106,431 | |
Class M1, 2.35% 2/25/33 (e) | 100,000 | 101,343 | |
Series 2003-3 Class M1, 2.25% 3/25/33 (e) | 75,000 | 75,328 | |
Series 2003-6: | |||
Class AV3, 1.77% 8/25/33 (e) | 255,193 | 255,600 | |
Class S, 5% 5/25/33 (h) | 4,022,099 | 179,895 | |
Series 2003-7 Class M1, 2.3% 8/25/33 (e) | 140,000 | 141,795 | |
Series 2003-AR1 Class M1, 2.6% 1/25/33 (e) | 500,000 | 504,215 | |
Series 2004-R2: | |||
Class M1, 1.88% 4/25/34 (e) | 85,000 | 84,997 | |
Class M2, 1.93% 4/25/34 (e) | 75,000 | 74,998 | |
Amortizing Residential Collateral Trust: | |||
Series 2002-BC6 Class M1, 2.2% 8/25/32 (e) | 100,000 | 100,741 | |
Series 2002-BC7: | |||
Class M1, 2.25% 10/25/32 (e) | 450,000 | 452,531 | |
Class M2, 2.35% 10/25/32 (e) | 300,000 | 302,403 | |
Series 2002-BC9 Class A2, 1.93% 12/25/32 (e) | 112,982 | 113,557 | |
Series 2003-BC1 Class M2, 2.55% 1/25/32 (e) | 175,000 | 175,380 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
AQ Finance NIMS Trust Series 2003-N6A Class NOTE, 1.75% 5/25/10 (a)(e) | $ 108,271 | $ 108,204 | |
Argent Securities, Inc.: | |||
Series 2003-W3 Class M2, 3.25% 9/25/33 (e) | 800,000 | 821,739 | |
Series 2003-W6 Class AV2, 1.82% 1/25/34 (e) | 743,294 | 745,337 | |
Series 2004-W7: | |||
Class M1, 2% 5/25/34 (e) | 305,000 | 304,990 | |
Class M2, 2.05% 5/25/34 (e) | 250,000 | 249,992 | |
Asset Backed Securities Corp. Series 2002-HE2 Class M2, 2.51% 8/15/32 (e) | 100,000 | 100,168 | |
Asset Backed Securities Corp. Home Equity Loan Trust: | |||
Series 2002-HE3 Class 2A, 1.78% 10/15/32 (e) | 53,493 | 53,640 | |
Series 2003-HE2: | |||
Class A2, 1.76% 4/15/33 (e) | 153,668 | 153,884 | |
Class M1, 2.28% 4/15/33 (e) | 1,000,000 | 1,009,979 | |
Series 2003-HE3 Class A2, 1.73% 6/15/33 (e) | 55,384 | 55,400 | |
Series 2003-HE4: | |||
Class A3, 1.6% 8/15/33 (e) | 146,187 | 146,169 | |
Class M2, 3.38% 8/15/33 (e) | 285,000 | 290,537 | |
Series 2003-HE5 Class A2A, 1.74% 8/15/33 (e) | 293,315 | 293,935 | |
Series 2003-HE6 Class M1, 2.1% 11/25/33 (e) | 215,000 | 216,116 | |
Series 2003-HE7 Class A3, 1.74% 12/15/33 (e) | 603,442 | 604,831 | |
Series 2004-HE6 Series A2, 2.03% 9/25/34 (b)(e) | 2,640,000 | 2,637,938 | |
Associates Automobile Receivables Trust Series 2000-1 | 187,894 | 189,888 | |
Bank One Issuance Trust: | |||
Series 2002-B1 Class B1, 1.76% 12/15/09 (e) | 465,000 | 467,094 | |
Series 2002-B2 Class B2, 1.72% 5/15/08 (e) | 100,000 | 100,255 | |
Series 2002-B3 Class B, 1.74% 8/15/08 (e) | 500,000 | 501,489 | |
Series 2002-C1 Class C1, 2.34% 12/15/09 (e) | 675,000 | 683,988 | |
Series 2002-C2 Class C2, 2.37% 5/15/08 (e) | 2,850,000 | 2,868,528 | |
Bayview Financial Asset Trust Series 2000-F Class A, 1.9619% 9/28/43 (e) | 365,815 | 367,501 | |
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 1.9119% 2/28/44 (e) | 657,173 | 658,867 | |
Capital Auto Receivables Asset Trust Series 2003-1 Class B, 1.85% 6/15/10 (a)(e) | 287,287 | 288,372 | |
Capital One Auto Finance Trust Series 2003-A Class A4B, 1.66% 1/15/10 (e) | 425,000 | 426,990 | |
Capital One Master Trust: | |||
Series 2001-1 Class B, 1.89% 12/15/10 (e) | 500,000 | 503,625 | |
Series 2001-8A Class B, 1.93% 8/17/09 (e) | 405,000 | 408,185 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
Capital One Multi-Asset Execution Trust: | |||
Series 2002-B1 Class B1, 2.06% 7/15/08 (e) | $ 1,035,000 | $ 1,039,978 | |
Series 2003-B1 Class B1, 2.55% 2/17/09 (e) | 1,135,000 | 1,152,607 | |
Series 2003-B6 Class B6, 1.91% 9/15/11 (e) | 1,125,000 | 1,134,836 | |
Series 2004-B1 Class B1, 1.82% 11/15/11 (e) | 1,180,000 | 1,183,000 | |
Capital Trust Ltd. Series 2004-1: | |||
Class A2, 1.7% 7/20/39 (a)(e) | 265,000 | 265,000 | |
Class B, 1.85% 7/20/39 (a)(e) | 140,000 | 140,000 | |
Class C, 2.15% 7/20/39 (a)(e) | 180,000 | 180,000 | |
CDC Mortgage Capital Trust: | |||
Series 2001-HE1 Class A, 1.79% 1/25/32 (e) | 46,411 | 46,430 | |
Series 2002-HE3: | |||
Class M1, 2.55% 3/25/33 (e) | 299,999 | 305,872 | |
Class M2, 3.7% 3/25/33 (e) | 489,999 | 497,677 | |
Series 2003-HE1 Class M2, 3.4% 8/25/33 (e) | 215,000 | 219,361 | |
Series 2003-HE2 Class A, 1.8% 10/25/33 (e) | 379,917 | 380,671 | |
Series 2003-HE3: | |||
Class M1, 2.15% 11/25/33 (e) | 104,999 | 105,892 | |
Class M2, 3.2% 11/25/33 (e) | 80,000 | 80,800 | |
Series 2003-HE4 Class A2, 1.68% 3/25/34 (e) | 948,098 | 948,576 | |
Series 2004-HE2 Class M2, 2.65% 7/26/34 (e) | 175,000 | 174,994 | |
Chase Credit Card Owner Trust: | |||
Series 2001-6 Class B, 1.86% 3/16/09 (e) | 200,000 | 201,310 | |
Series 2002-2 Class C, 2.28% 7/16/07 (e) | 1,170,000 | 1,174,108 | |
Series 2002-6 Class B, 1.73% 1/15/08 (e) | 150,000 | 150,394 | |
Series 2004-1 Class B, 1.58% 5/15/09 (e) | 295,000 | 294,983 | |
Citibank Credit Card Issuance Trust: | |||
Series 2000-C2 Class C2, 2.25% 10/15/07 (e) | 900,000 | 902,372 | |
Series 2001-B2 Class B2, 1.88% 12/10/08 (e) | 615,000 | 618,735 | |
Series 2002-B1 Class B1, 1.9% 6/25/09 (e) | 655,000 | 656,806 | |
Series 2002-C1 Class C1, 2.17% 2/9/09 (e) | 900,000 | 912,709 | |
Series 2003-C1 Class C1, 2.24% 4/7/10 (e) | 1,685,000 | 1,723,510 | |
Countrywide Home Loans, Inc.: | |||
Series 2000-2 Class MV2, 2.35% 6/25/31 (e) | 166,833 | 167,112 | |
Series 2002-6 Class AV1, 1.88% 5/25/33 (e) | 211,371 | 211,810 | |
Series 2003-BC1 Class M2, 3.45% 9/25/32 (e) | 1,025,000 | 1,052,669 | |
Series 2003-SD3 Class A1, 1.87% 12/25/32 (a)(e) | 148,572 | 149,165 | |
Series 2004-2 Class M1, 1.95% 5/25/34 (e) | 375,000 | 374,988 | |
Series 2004-3: | |||
Class 3A4, 1.7% 8/25/34 (e) | 9,328,000 | 9,261,372 | |
Class M1, 1.95% 6/25/34 (e) | 100,000 | 100,103 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 2002-HE16 Class M2, 2.95% 10/25/32 (e) | 75,000 | 75,875 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
CS First Boston Mortgage Securities Corp.: - continued | |||
Series 2003-8 Class A2, 1.84% 4/25/34 (e) | $ 514,436 | $ 515,979 | |
Series 2004-FRE1: | |||
Class A2, 1.96% 4/25/34 (b)(e) | 825,000 | 825,000 | |
Class B1, 3.41% 4/25/34 (b)(e) | 605,000 | 605,000 | |
Class M3, 2.26% 4/25/34 (b)(e) | 610,000 | 610,000 | |
Discover Card Master Trust I Series 2003-4 Class B1, 1.71% 5/16/11 (e) | 550,000 | 551,846 | |
Fannie Mae guaranteed REMIC pass thru certificates | 661,207 | 22,026 | |
Fieldstone Mortgage Investment Corp.: | |||
Series 2003-1 Class M1, 2.13% 11/25/33 (e) | 100,000 | 100,876 | |
Series 2004-1 Class 2A, 1.74% 1/25/35 (b)(e) | 3,541,473 | 3,540,658 | |
Series 2004-1 Class M2, 2.55% 1/25/35 (e) | 300,000 | 300,100 | |
First Franklin Mortgage Loan Trust Series 2004-FF2: | |||
Class M3, 2% 3/25/34 (e) | 25,000 | 24,999 | |
Class M4, 2.35% 3/25/34 (e) | 25,000 | 24,999 | |
Class M6, 2.7% 3/25/34 (e) | 25,000 | 24,786 | |
First USA Secured Note Trust Series 2001-3 Class C, 2.46% 11/19/08 (a)(e) | 785,000 | 790,397 | |
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 270,000 | 270,735 | |
Ford Credit Auto Owner Trust Series 2003-B Class B2, 1.81% 10/15/07 (e) | 650,000 | 653,152 | |
Fremont Home Loan Trust Series 2004-A Class M2, 2.6% 1/25/34 (e) | 375,000 | 374,988 | |
GE Business Loan Trust Series 2003-1 Class A, 1.81% 4/15/31 (a)(e) | 320,717 | 321,118 | |
Gracechurch Card Funding PLC: | |||
Series 5: | |||
Class B, 1.4688% 8/15/08 (e) | 80,000 | 79,950 | |
Class C, 2.1688% 8/15/08 (e) | 295,000 | 295,553 | |
Series 6 Class B, 1.4288% 2/17/09 (e) | 75,000 | 74,953 | |
GS Mortgage Securities Corp.: | |||
Series 2003-FM1 Class M1, 2.1% 3/20/33 (e) | 750,000 | 758,467 | |
Series 2004-FF3 Class M2, 2.59% 5/25/34 (e) | 370,000 | 369,993 | |
Series 2004-FM1: | |||
Class M1, 2.1% 11/25/33 (e) | 195,000 | 194,994 | |
Class M2, 2.85% 11/25/33 (e) | 135,000 | 135,538 | |
5.5% 11/25/32 (a) | 503,558 | 502,802 | |
GSAMP Trust: | |||
Series 2002-NC1 Class A2, 1.77% 7/25/32 (e) | 213,315 | 214,127 | |
Series 2004-FM2 Class M1, 1.95% 1/25/34 (e) | 250,000 | 249,990 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
GSAMP Trust: - continued | |||
Series 2004-HE1: | |||
Class M1, 2% 5/25/34 (e) | $ 320,000 | $ 319,990 | |
Class M2, 2.6% 5/25/34 (e) | 150,000 | 148,711 | |
Class M3, 2.85% 5/25/34 (e) | 100,000 | 99,154 | |
Home Equity Asset Trust: | |||
Series 2002-3 Class A5, 1.89% 2/25/33 (e) | 35,459 | 35,513 | |
Series 2002-4: | |||
Class A3, 1.93% 3/25/33 (e) | 317,953 | 319,030 | |
Class M2, 3.5% 3/25/33 (e) | 125,000 | 126,876 | |
Series 2002-5: | |||
Class A3, 1.97% 5/25/33 (e) | 414,468 | 417,046 | |
Class M1, 2.65% 5/25/33 (e) | 200,000 | 204,487 | |
Series 2003-1: | |||
Class A2, 1.92% 6/25/33 (e) | 772,460 | 774,827 | |
Class M1, 2.45% 6/25/33 (e) | 300,000 | 302,306 | |
Series 2003-2: | |||
Class A2, 1.83% 8/25/33 (e) | 45,315 | 45,443 | |
Class M1, 2.33% 8/25/33 (e) | 80,000 | 81,040 | |
Series 2003-3: | |||
Class A2, 1.81% 8/25/33 (e) | 223,601 | 224,089 | |
Class M1, 2.31% 8/25/33 (e) | 330,000 | 334,244 | |
Series 2003-4: | |||
Class M1, 2.25% 10/25/33 (e) | 170,000 | 171,636 | |
Class M2, 3.35% 10/25/33 (e) | 200,000 | 203,796 | |
Series 2003-5: | |||
Class A2, 1.8% 12/25/33 (e) | 676,850 | 678,166 | |
Class M1, 2.15% 12/25/33 (e) | 160,000 | 161,180 | |
Class M2, 3.18% 12/25/33 (e) | 70,000 | 71,291 | |
Series 2003-7 Class A2, 1.83% 3/25/34 (e) | 1,332,595 | 1,336,263 | |
Series 2003-8 Class M1, 2.17% 4/25/34 (e) | 260,000 | 261,488 | |
Series 2004-4 Class A2, 1.68% 10/25/34 (e) | 1,188,753 | 1,190,137 | |
Home Equity Asset Trust NIMS Trust Series 2002-4N Class A, 8% 5/27/33 (a) | 23,154 | 23,212 | |
Household Affinity Credit Card Master Note Trust I | 500,000 | 500,581 | |
Household Credit Card Master Trust I Series 2002-1 Class B, 2.03% 7/15/08 (e) | 300,000 | 301,886 | |
Household Home Equity Loan Trust: | |||
Series 2002-3 Class A, 1.73% 7/20/32 (e) | 101,126 | 101,314 | |
Series 2003-1 Class M, 1.91% 10/20/32 (e) | 83,838 | 84,030 | |
Series 2003-2: | |||
Asset-Backed Securities - continued | |||
Principal | Value | ||
Household Home Equity Loan Trust: - continued | |||
Class A, 1.75% 9/20/33 (e) | $ 440,445 | $ 441,398 | |
Class M, 2% 9/20/33 (e) | 129,169 | 129,628 | |
Series 2004-1 Class M, 1.93% 9/20/33 (e) | 480,000 | 480,000 | |
Household Mortgage Loan Trust: | |||
Series 2002-HC1: | |||
Class A, 1.72% 5/20/32 (e) | 199,402 | 199,899 | |
Class M, 2.07% 5/20/32 (e) | 95,237 | 95,365 | |
Series 2003-HC1: | |||
Class A, 1.77% 2/20/33 (e) | 364,323 | 365,078 | |
Class M, 2.07% 2/20/33 (e) | 192,571 | 193,549 | |
Series 2003-HC2: | |||
Class A2, 1.75% 6/20/33 (e) | 390,541 | 391,274 | |
Class M, 2.02% 6/20/33 (e) | 329,858 | 327,038 | |
Household Private Label Credit Card Master Note Trust I: | |||
Series 2002-2 Class A, 1.55% 1/18/11 (e) | 1,000,000 | 1,001,242 | |
Series 2002-3 Class B, 2.63% 9/15/09 (e) | 150,000 | 151,664 | |
Ikon Receivables Funding LLC Series 2003-1 Class A3A, 1.62% 12/17/07 (e) | 429,930 | 430,124 | |
Keycorp Student Loan Trust Series 1999-A Class A2, 1.9163% 12/27/09 (e) | 360,360 | 361,368 | |
Long Beach Mortgage Loan Trust: | |||
Series 2001-4 Class 2M1, 2.4% 3/25/32 (e) | 765,000 | 772,561 | |
Series 2003-1: | |||
Class A2, 1.85% 3/25/33 (e) | 111,602 | 111,797 | |
Class M1, 2.37% 3/25/33 (e) | 300,000 | 303,630 | |
Series 2003-2 Class M1, 2.27% 6/25/33 (e) | 500,000 | 503,366 | |
Series 2003-3 Class M1, 2.2% 7/25/33 (e) | 340,000 | 342,947 | |
MASTR ABS NIMS Trust: | |||
Series 2002-OPT1 Class NOTE, 2% 11/26/07 (a)(e) | 405 | 405 | |
Series 2003-OPT1 Class NOTE, 1.83% 2/26/08 (a)(e) | 25,054 | 25,062 | |
MASTR Asset Backed Securities Trust Series 2004 FRE1 Class M1, 2.02% 7/25/34 (e) | 485,000 | 485,000 | |
MBNA Asset Backed Note Trust Series 2000-K Class C, 2.18% 3/17/08 (a)(e) | 1,000,000 | 1,003,600 | |
MBNA Credit Card Master Note Trust: | |||
Series 2001-B1 Class B1, 1.755% 10/15/08 (e) | 1,250,000 | 1,253,165 | |
Series 2001-B2 Class B2, 1.74% 1/15/09 (e) | 1,000,000 | 1,003,604 | |
Series 2002-B2 Class B2, 1.76% 10/15/09 (e) | 1,034,000 | 1,038,792 | |
Series 2002-B4 Class B4, 1.88% 3/15/10 (e) | 630,000 | 635,343 | |
Series 2003-B2 Class B2, 1.77% 10/15/10 (e) | 125,000 | 125,690 | |
Series 2003-B3 Class B3, 1.755% 1/18/11 (e) | 75,000 | 75,188 | |
Series 2003-B5 Class B5, 1.75% 2/15/11 (e) | 485,000 | 488,499 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
MBNA Master Credit Card Trust II: | |||
Series 1997-J Class B, 1.68% 2/15/07 (e) | $ 500,000 | $ 500,114 | |
Series 1998-E Class B, 1.47% 9/15/10 (e) | 200,000 | 201,002 | |
Series 1998-G Class B, 1.78% 2/17/09 (e) | 500,000 | 501,346 | |
Meritage Mortgage Loan Trust Series 2004-1: | |||
Class M1, 1.95% 7/25/34 (e) | 150,000 | 149,995 | |
Class M2, 2% 7/25/34 (e) | 25,000 | 24,999 | |
Class M3, 2.4% 7/25/34 (e) | 50,000 | 49,998 | |
Class M4, 2.55% 7/25/34 (e) | 50,000 | 49,998 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
Series 2002-HE1N Class N1, 2.05% 11/25/09 (a)(e) | 34,457 | 34,445 | |
Series 2003-HE1 Class A1, 1.9% 7/25/34 (e) | 857,761 | 858,690 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-HE3 Class M1, 2.55% 12/27/32 (e) | 125,000 | 127,078 | |
Series 2003-HE1 Class M2, 3.35% 5/25/33 (e) | 325,000 | 331,014 | |
Series 2003-NC10 Class M1, 2.13% 10/25/33 (e) | 830,000 | 835,240 | |
Series 2003-NC5 Class M2, 3.45% 4/25/33 (e) | 200,000 | 203,368 | |
Series 2003-NC6 Class M2, 3.4% 6/27/33 (e) | 630,000 | 643,366 | |
Series 2003-NC8 Class M1, 2.15% 9/25/33 (e) | 120,000 | 120,583 | |
Series 2004-HE6 Class A2, 1.96% 8/25/34 (b)(e) | 2,000,000 | 2,000,000 | |
Series 2004-NC6 Class A2, 1.8019% 9/25/34 (e) | 630,000 | 630,000 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-AM1: | |||
Class M1, 2.3% 2/25/32 (e) | 800,000 | 810,842 | |
Class M2, 2.85% 2/25/32 (e) | 500,000 | 504,138 | |
Series 2001-NC1 Class M2, 2.52% 10/25/31 (e) | 100,000 | 100,352 | |
Series 2001-NC3 Class M2, 2.95% 10/25/31 (e) | 225,000 | 227,405 | |
Series 2001-NC4: | |||
Class M1, 2.45% 1/25/32 (e) | 140,000 | 142,223 | |
Class M2, 3.1% 1/25/32 (e) | 105,000 | 106,575 | |
Series 2002-AM3 Class A3, 1.94% 2/25/33 (e) | 109,916 | 110,301 | |
Series 2002-HE1 Class M1, 2.05% 7/25/32 (e) | 145,000 | 145,693 | |
Series 2002-HE2 Class M2, 2.7% 8/25/32 (e) | 100,000 | 100,552 | |
Series 2002-NC3 Class M1, 2.17% 8/25/32 (e) | 100,000 | 100,916 | |
Series 2002-NC4 Class M2, 3.05% 9/25/32 (e) | 75,000 | 75,685 | |
Series 2002-OP1 Class M1, 2.2% 9/25/32 (e) | 95,000 | 95,746 | |
Series 2003-NC1 Class M2, 3.5% 11/25/32 (e) | 130,000 | 131,910 | |
Series 2003-NC2 Class M2, 3.45% 2/25/33 (e) | 165,000 | 168,989 | |
Navistar Financial Corp. Owner Trust Series 2001-B Class B, 4.83% 11/17/08 | 565,284 | 571,600 | |
New Century Finance NIMS Trust Series 2003-A | 173,685 | 174,825 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
New Century Home Equity Loan Trust Series 2003-2: | |||
Class A2, 1.88% 1/25/33 (e) | $ 129,049 | $ 129,296 | |
Class AIO, 4.5% 3/25/05 (e)(h) | 13,302,840 | 295,323 | |
Nissan Auto Lease Trust Series 2003-A Class A3A, 1.3788% 6/15/09 (e) | 1,000,000 | 1,001,226 | |
NovaStar Home Equity Loan Series 2004-1: | |||
Class M1, 1.9% 6/25/34 (e) | 100,000 | 100,094 | |
Class M4, 2.425% 6/25/34 (e) | 170,000 | 170,252 | |
NovaStar Mortgage Funding Trust Series 2003-3 Class A3, 1.9% 12/25/33 (e) | 743,128 | 743,751 | |
Onyx Acceptance Owner Trust Series 2003-D Class A3, 2.4% 12/15/07 | 470,000 | 468,919 | |
Option One Mortgage Loan Trust Series 2003-6 Class M1, 2.1% 11/25/33 (e) | 1,025,000 | 1,030,353 | |
Park Place Securities, Inc.: | |||
Series 2004 WCW Class M1, 2.17% 8/25/34 (b)(e) | 270,000 | 270,000 | |
Series 2004 WCW1: | |||
Class M2, 2.22% 8/25/34 (b)(e) | 470,000 | 470,000 | |
Class M3, 2.79% 8/25/34 (b)(e) | 435,000 | 435,000 | |
Providian Gateway Master Trust Series 2002-B Class A, 2.08% 6/15/09 (a)(e) | 400,000 | 400,967 | |
Residential Asset Mortgage Products, Inc.: | |||
Series 2003-RP2 Class A1, 1.95% 9/25/33 (a)(e) | 353,313 | 354,417 | |
Series 2004-RS6: | |||
Class 2M2, 2.63% 6/25/34 (e) | 250,000 | 249,992 | |
Class 2M3, 2.78% 6/25/34 (e) | 250,000 | 249,992 | |
Salomon Brothers Mortgage Securities VII, Inc. | 113,137 | 113,501 | |
Saxon Asset Securities Trust Series 2004 2 Class MV1, 2.03% 10/25/34 (e) | 415,000 | 415,000 | |
Sears Credit Account Master Trust II: | |||
Series 1998-2 Class A, 5.25% 10/16/08 | 62,500 | 62,786 | |
Series 2002-4: | |||
Class A, 1.51% 8/18/09 (e) | 800,000 | 800,960 | |
Class B, 1.805% 8/18/09 (e) | 1,080,000 | 1,082,710 | |
Series 2002-5 Class B, 2.63% 11/17/09 (e) | 500,000 | 501,326 | |
Specialty Underwriting & Residential Finance Series 2003-BC3 Class M1, 2.1% 8/25/34 (e) | 1,000,000 | 1,004,421 | |
Structured Asset Securities Corp. Series 2004-GEL1 Class A, 1.81% 2/25/34 (e) | 142,829 | 142,824 | |
Superior Wholesale Inventory Financing Trust VII | 675,000 | 675,527 | |
Terwin Mortgage Trust: | |||
Series 2003-8HE, Class A, 1.92% 12/25/34 (e) | 374,496 | 374,719 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
Terwin Mortgage Trust: - continued | |||
Series 2003-4HE Class A1, 1.88% 9/25/34 (e) | $ 778,582 | $ 781,835 | |
Series 2003-6HE Class A1, 1.92% 11/25/33 (e) | 285,723 | 287,179 | |
Series 2004-1HE Class A1, 1.96% 2/25/35 (a)(e) | 368,633 | 368,633 | |
Triad Auto Receivables Owner Trust Series 2002-A Class A3, 2.62% 2/12/07 | 403,706 | 404,855 | |
WFS Financial 2004-3 Owner Trust Series 2004 3 Class D, 4.07% 2/17/12 | 660,000 | 660,000 | |
TOTAL ASSET-BACKED SECURITIES (Cost $109,646,377) | 109,962,209 | ||
Collateralized Mortgage Obligations - 9.6% | |||
Private Sponsor - 5.7% | |||
Countrywide Home Loans, Inc.: | |||
floater Series 2004 16 Class A1, 1.7688% 8/25/34 (e) | 1,250,000 | 1,250,000 | |
sequential pay Series 2002-5 Class 2A1, 6% 4/25/17 | 161,939 | 161,675 | |
CS First Boston Mortgage Securities Corp.: | |||
floater: | |||
Series 2004-AR7 Class 6A2, 1.85% 8/25/34 (e) | 1,025,000 | 1,025,000 | |
Series 2004-AR2 Class 6A1, 1.85% 3/25/34 (e) | 852,587 | 851,317 | |
Series 2004-AR3 Class 6A2, 1.82% 3/25/34 (e) | 339,077 | 339,872 | |
Series 2004-AR5 Class 11A2, 1.82% 6/25/34 (e) | 501,440 | 500,361 | |
Series 2004-AR6 Class 9A2, 1.82% 7/25/34 (e) | 610,398 | 610,398 | |
Series 2003-TFLA Class F, 1.9433% 4/15/13 (a)(e) | 235,000 | 236,780 | |
Granite Mortgages PLC floater: | |||
Series 2004-1: | |||
Class 1B, 1.76% 3/20/44 (e) | 95,000 | 95,089 | |
Class 1C, 2.45% 3/20/44 (e) | 280,000 | 280,788 | |
Class 1M, 1.96% 3/20/44 (e) | 130,000 | 130,163 | |
Series 2004-2: | |||
Class 1A2, 1.4381% 6/20/28 (e) | 500,000 | 500,000 | |
Class 1B, 1.5381% 6/20/44 (e) | 100,000 | 100,000 | |
Class 1C, 2.0681% 6/20/44 (e) | 365,000 | 365,000 | |
Class 1M, 1.6481% 6/20/44 (e) | 185,000 | 185,000 | |
Holmes Financing PLC floater: | |||
Series 7 Class 2M, 2.4% 7/15/40 (e) | 195,000 | 197,541 | |
Series 8: | |||
Class 1B, 1.73% 7/15/40 (e) | 145,000 | 145,000 | |
Class 1C, 2.22% 7/15/40 (e) | 1,040,000 | 1,040,325 | |
Class 2A, 1.68% 4/15/11 (e) | 1,400,000 | 1,400,109 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
Private Sponsor - continued | |||
Holmes Financing PLC floater: - continued | |||
Series 8: | |||
Class 2B, 1.77% 7/15/40 (e) | $ 190,000 | $ 190,000 | |
Class 2C, 2.32% 7/15/40 (e) | 775,000 | 775,242 | |
Impac CMB Trust floater Series 2004 6 Class 1A2, 1.84% 10/25/34 (e) | 504,116 | 503,620 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
floater: | |||
Series 2003-A: | |||
Class 2A1, 1.84% 3/25/28 (e) | 447,161 | 448,552 | |
Class 2A2, 1.59% 3/25/28 (e) | 159,700 | 160,827 | |
Series 2003-B Class A1, 1.79% 4/25/28 (e) | 411,755 | 413,100 | |
Series 2003-E Class A2, 1.51% 10/25/28 (e) | 870,224 | 869,459 | |
Series 2003-F Class A2, 1.49% 10/25/28 (e) | 899,961 | 903,301 | |
Series 2004-A Class A2, 1.4% 4/25/29 (e) | 1,118,446 | 1,113,769 | |
Series 2004-B Class A2, 1.8525% 6/25/29 (e) | 1,142,977 | 1,139,649 | |
Series 2004-C Class A2, 2.1506% 7/25/29 (e) | 1,536,888 | 1,536,708 | |
Series 2003-G Class XA1, 1% 1/25/29 (h) | 4,012,587 | 69,280 | |
Permanent Financing PLC floater: | |||
Series 3: | |||
Class 1C, 2.36% 6/10/42 (e) | 1,000,000 | 1,001,037 | |
Class 2C, 2.46% 6/10/42 (e) | 205,000 | 206,025 | |
Series 4 Class 2C, 2.13% 6/10/42 (e) | 1,145,000 | 1,144,730 | |
Series 5: | |||
Class 1C, 1.9878% 6/10/42 (e) | 260,000 | 260,000 | |
Class 2C, 2.1378% 6/10/42 (e) | 390,000 | 390,000 | |
Class 3C, 2.2878% 6/10/42 (e) | 825,000 | 825,000 | |
Residential Asset Mortgage Products, Inc.: | |||
sequential pay: | |||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 535,158 | 554,474 | |
Series 2004-SL2 Class A1, 6.5% 11/25/16 | 210,971 | 218,191 | |
Series 2003-RP1 Class A, 1.95% 4/25/34 (e) | 302,025 | 303,440 | |
Residential Finance LP/Residential Finance Development Corp. floater: | |||
Series 2002-A: | |||
Class B4, 3.1631% 10/10/34 (a)(e) | 97,895 | 99,423 | |
Class B5, 3.7131% 10/10/34 (a)(e) | 97,895 | 99,179 | |
Class B6, 4.2131% 10/10/34 (a)(e) | 97,895 | 99,852 | |
Series 2003-A: | |||
Class B4, 3.1631% 3/10/35 (a)(e) | 98,057 | 99,507 | |
Class B5, 3.7131% 3/10/35 (a)(e) | 98,057 | 100,052 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
Private Sponsor - continued | |||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (a)(h) | $ 14,724,128 | $ 157,594 | |
Sequoia Mortgage Trust: | |||
floater: | |||
Series 2003-5 Class A2, 1.5% 9/20/33 (e) | 866,753 | 863,898 | |
Series 2003-7 Class A2, 1.8788% 1/20/34 (e) | 448,491 | 448,079 | |
Series 2004-6 Class A3B, 2.3063% 7/20/34 (e) | 1,968,357 | 1,960,975 | |
Series 2004-7 Class A3A, 2.285% 8/20/34 (e) | 1,030,000 | 1,030,000 | |
Series 2004-1 Class A, 1.47% 2/20/34 (e) | 622,928 | 621,654 | |
Series 2004-4 Class A, 1.6081% 5/20/34 (e) | 494,060 | 491,934 | |
Series 2004-5 Class A3, 1.8625% 6/20/34 (e) | 785,590 | 785,590 | |
Series 2004-6 Class A3A, 2.1638% 6/20/35 (e) | 984,178 | 984,178 | |
Series 2004-7 Class A3B, 2.53% 7/20/34 (e) | 2,000,000 | 2,000,000 | |
Structured Asset Securities Corp. floater Series 2004 NP1 | 491,185 | 491,185 | |
WAMU Mortgage pass thru certificates sequential pay | 307,287 | 311,082 | |
Washington Mutual Mortgage Securities Corp. sequential pay Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 127,106 | 134,236 | |
TOTAL PRIVATE SPONSOR | 33,219,240 | ||
U.S. Government Agency - 3.9% | |||
Fannie Mae: | |||
floater Series 2002-89 Class F, 1.75% 1/25/33 (e) | 253,528 | 253,747 | |
planned amortization class: | |||
Series 1994-81 Class PJ, 8% 7/25/23 | 167,594 | 169,186 | |
Series 2002-81 Class PU, 4.5% 5/25/20 | 2,280,000 | 2,315,511 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
floater: | |||
Series 2002-11 Class QF, 1.95% 3/25/32 (e) | 310,453 | 312,377 | |
Series 2002-36 Class FT, 1.95% 6/25/32 (e) | 283,736 | 286,215 | |
Series 2002-64 Class FE, 1.76% 10/18/32 (e) | 166,702 | 167,459 | |
Series 2002-74 Class FV, 1.9% 11/25/32 (e) | 187,464 | 188,841 | |
Series 2003-11: | |||
Class DF, 1.9% 2/25/33 (e) | 236,047 | 237,000 | |
Class EF, 1.9% 2/25/33 (e) | 198,423 | 198,909 | |
planned amortization class: | |||
Series 2001-62 Class PG, 6.5% 10/25/30 | 200,739 | 204,985 | |
Series 2002-52 Class PA, 6% 4/25/31 | 46,468 | 47,279 | |
Series 2002-55 Class QB, 5.5% 8/25/12 | 38,458 | 38,481 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | |||
planned amortization class: | |||
Series 2002-8 Class PD, 6.5% 7/25/30 | $ 821,128 | $ 842,593 | |
Series 2003-17 Class PQ, 4.5% 3/25/16 | 855,000 | 864,768 | |
sequential pay Series 2001-15 Class VA, 6% 6/25/10 | 51,073 | 51,213 | |
Series 2002-50 Class LE, 7% 12/25/29 | 275,508 | 281,897 | |
Series 2004-31 Class IA, 4.5% 6/25/10 (h) | 635,000 | 44,906 | |
Freddie Mac planned amortization class: | |||
Series 2091 Class PP, 6% 2/15/27 | 653,693 | 661,064 | |
Series 2256 Class MB, 7.25% 5/15/30 | 332,440 | 337,008 | |
Series 2360 Class PW, 6% 11/15/14 | 130,992 | 131,149 | |
Series 2517 Class TL, 4.5% 4/15/26 | 205,714 | 205,657 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
floater: | |||
Series 2526 Class FC, 1.78% 11/15/32 (e) | 70,321 | 70,592 | |
Series 2538 Class FB, 1.78% 12/15/32 (e) | 325,696 | 326,966 | |
Series 2551 Class FH, 1.83% 1/15/33 (e) | 177,370 | 177,960 | |
planned amortization class: | |||
Series 1675 Class H, 6.375% 10/15/22 | 43,799 | 43,870 | |
Series 1732 Class H, 6.5% 11/15/22 | 27,529 | 27,510 | |
Series 2293 Class WD, 6.5% 12/15/29 | 320,072 | 320,233 | |
Series 2368 Class PQ, 6.5% 8/15/30 | 172,631 | 173,985 | |
Series 2376 Class JC, 5.5% 2/15/14 | 543,459 | 546,033 | |
Series 2394 Class ND, 6% 6/15/27 | 643,115 | 658,652 | |
Series 2398 Class DK, 6.5% 1/15/31 | 365,048 | 370,058 | |
Series 2420 Class BE, 6.5% 12/15/30 | 848,802 | 870,546 | |
Series 2430 Class OB, 6% 10/15/26 | 6,740 | 6,732 | |
Series 2435: | |||
Class EL, 6% 9/15/27 | 206,268 | 206,192 | |
Class GD, 6.5% 2/15/30 | 239,369 | 241,011 | |
Series 2443 Class TD, 6.5% 10/15/30 | 785,280 | 807,271 | |
Series 2461 Class PG, 6.5% 1/15/31 | 645,371 | 662,074 | |
Series 2466 Class EC, 6% 10/15/27 | 378,177 | 381,128 | |
Series 2473 Class JB, 5.5% 2/15/29 | 385,275 | 386,876 | |
Series 2483 Class DC, 5.5% 7/15/14 | 1,112,604 | 1,133,179 | |
Series 2490 Class PM, 6% 7/15/28 | 579,932 | 590,707 | |
Series 2496 Class OC, 5.5% 9/15/14 | 2,675,257 | 2,734,940 | |
Series 2557 Class MA, 4.5% 7/15/16 | 190,980 | 193,259 | |
Series 2748 Class IB, 4.5% 3/15/10 (h) | 1,572,500 | 102,616 | |
Series 2776 Class UJ, 4.5% 5/15/20 (h) | 755,951 | 58,608 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Freddie Mac Multi-class participation certificates guaranteed: - continued | |||
sequential pay: | |||
Series 2129 Class VM, 6% 1/15/06 | $ 510,367 | $ 510,020 | |
Series 2445 Class BD, 6.5% 6/15/30 | 51,013 | 51,138 | |
Series 2448 Class D, 5.5% 5/15/12 | 87,370 | 87,406 | |
Series 2480 Class QW, 5.75% 2/15/30 | 380,851 | 384,624 | |
Series 1803 Class A, 6% 12/15/08 | 317,256 | 328,627 | |
Series 2749 Class MZ, 5% 2/15/24 | 79,291 | 79,277 | |
Series 2802 Class Z, 5.5% 4/15/33 | 325,227 | 325,117 | |
Series 2807: | |||
Class TZ, 6% 12/15/31 | 160,907 | 161,724 | |
Class ZK, 6% 12/15/31 | 81,474 | 81,321 | |
Series FHR 2762 Class BZ, 5% 3/15/34 | 865,976 | 866,165 | |
Series FHR 2809 Class WZ, 5% 3/15/34 | 534,209 | 534,286 | |
Ginnie Mae guaranteed REMIC pass thru securities: | |||
floater Series 2001-21 Class FB, 1.79% 1/16/27 (e) | 199,523 | 200,704 | |
planned amortization class: | |||
Series 1999-17 Class PC, 6.5% 10/16/27 | 31,352 | 31,358 | |
Series 2002-57 Class PJ, 6% 1/20/29 | 45,768 | 46,026 | |
TOTAL U.S. GOVERNMENT AGENCY | 22,619,036 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $55,886,665) | 55,838,276 | ||
Commercial Mortgage Securities - 3.8% | |||
Banc of America Large Loan, Inc. floater: | |||
Series 2002-FL2A Class A2, 1.6713% 9/8/14 (a)(e) | 64,481 | 64,482 | |
Series 2003-BBA2: | |||
Class A3, 1.7% 11/15/15 (a)(e) | 340,000 | 340,052 | |
Class C, 1.85% 11/15/15 (a)(e) | 70,000 | 70,344 | |
Class D, 1.93% 11/15/15 (a)(e) | 110,000 | 110,635 | |
Class F, 2.28% 11/15/15 (a)(e) | 80,000 | 80,669 | |
Class H, 2.78% 11/15/15 (a)(e) | 70,000 | 70,520 | |
Class J, 3.33% 11/15/15 (a)(e) | 70,000 | 71,100 | |
Class K, 2.8103% 11/15/15 (a)(e) | 65,000 | 65,663 | |
Bayview Commercial Asset Trust floater: | |||
Series 2003-1 Class A, 1.88% 8/25/33 (a)(e) | 425,279 | 427,672 | |
Series 2003-2 Class A, 2.03% 12/25/33 (a)(e) | 1,052,882 | 1,054,724 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Bayview Commercial Asset Trust floater: - continued | |||
Series 2004 2 Class M1: | |||
1.82% 8/25/34 (a)(e) | $ 638,502 | $ 638,502 | |
1.97% 8/25/34 (a)(e) | 204,520 | 204,520 | |
Series 2004-1: | |||
Class A, 1.66% 4/25/34 (a)(e) | 585,208 | 584,842 | |
Class B, 3.35% 4/25/34 (a)(e) | 97,535 | 97,474 | |
Bear Stearns Commercial Mortgage Securities, Inc. floater: | |||
Series 2003-BA1A Class A1, 1.4913% 4/14/15 (a)(e) | 683,229 | 683,175 | |
Series 2003-WEST Class A, 1.9613% 1/3/15 (a)(e) | 369,643 | 371,201 | |
Series 2004-BBA3 Class E, 2.15% 6/15/17 (a)(e) | 960,000 | 960,000 | |
Series 2004-ESA Class A2, 1.67% 5/14/16 (a)(e) | 565,000 | 565,282 | |
Series 2004-HS2A: | |||
Class E, 2.1113% 1/14/16 (a)(e) | 125,000 | 125,572 | |
Class F, 2.2613% 1/14/16 (a)(e) | 75,000 | 75,331 | |
Calwest Industrial Trust floater Series 2002-CALW | 800,000 | 800,658 | |
COMM floater: | |||
Series 2000-FL3A Class C, 2.14% 11/15/12 (a)(e) | 559,444 | 558,905 | |
Series 2002-FL6: | |||
Class K4M, 3.38% 6/14/14 (a)(e) | 100,000 | 100,545 | |
Class L4M, 3.68% 6/14/14 (a)(e) | 100,000 | 100,638 | |
Class M4M, 4.13% 6/14/14 (a)(e) | 100,000 | 99,980 | |
Series 2002-FL7: | |||
Class A2, 1.73% 11/15/14 (a)(e) | 161,243 | 161,258 | |
Class C, 1.88% 11/15/14 (a)(e) | 555,000 | 555,091 | |
Class F, 2.68% 11/15/14 (a)(e) | 1,000,000 | 1,005,862 | |
Class H, 3.63% 11/15/14 (a)(e) | 150,000 | 149,309 | |
Series 2003-FL9 Class B, 1.88% 11/15/15 (a)(e) | 1,195,000 | 1,197,991 | |
Commercial Mortgage Pass Through Certificates floater | |||
Class B, 1.84% 7/15/16 (a)(e) | 55,000 | 55,000 | |
Class D, 1.94% 7/15/16 (a)(e) | 120,000 | 120,000 | |
Class E, 2.14% 7/15/16 (a)(e) | 85,000 | 85,000 | |
Class F, 2.19% 7/15/16 (a)(e) | 90,000 | 90,000 | |
Class H, 2.69% 7/15/16 (a)(e) | 265,000 | 265,000 | |
Class J, 2.84% 7/15/16 (a)(e) | 100,000 | 100,000 | |
Class K, 3.74% 7/15/16 (a)(e) | 115,000 | 115,000 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
CS First Boston Mortgage Securities Corp.: | |||
floater: | |||
Series 2002-TFLA Class C, 1.8238% 11/18/12 (a)(e) | $ 255,000 | $ 255,279 | |
Series 2003-TF2A Class A2, 1.7% 11/15/14 (a)(e) | 700,000 | 700,155 | |
Series 2004-FL1 Class B, 1.6888% 5/15/14 (a)(e) | 1,000,000 | 1,000,000 | |
Series 2004-TFL1: | |||
Class A2, 1.57% 2/15/14 (a)(e) | 505,000 | 504,817 | |
Class E, 1.93% 2/15/14 (a)(e) | 200,000 | 200,888 | |
Class F, 1.98% 2/15/14 (a)(e) | 175,000 | 175,835 | |
Class G, 2.23% 2/15/14 (a)(e) | 125,000 | 125,515 | |
Class H, 2.48% 2/15/14 (a)(e) | 100,000 | 100,416 | |
Class J, 2.78% 2/15/14 (a)(e) | 50,000 | 50,265 | |
Series 2003-TFLA Class G, 1.9433% 4/15/13 (a)(e) | 145,000 | 139,201 | |
Greenwich Capital Commercial Funding Corp. floater | 127,697 | 127,697 | |
GS Mortgage Securities Corp. II floater Series 2000-GSFL Class A, 1.66% 8/15/12 (a)(e) | 274,884 | 274,875 | |
John Hancock Tower Mortgage Trust floater Series 2003-C5A Class B, 3.8516% 4/10/15 (a)(e) | 420,000 | 415,178 | |
KSL Resorts floater Series 2003-1A: | |||
Class A, 1.93% 5/15/13 (a)(e) | 200,000 | 200,068 | |
Class B, 2.08% 5/15/13 (a)(e) | 200,000 | 200,068 | |
Class K, 4.03% 5/15/13 (a)(e) | 200,000 | 200,985 | |
Class L, 4.23% 5/15/13 (a)(e) | 200,000 | 200,984 | |
Lehman Brothers Floating Rate Commercial Mortgage Trust floater: | |||
Series 2001-LLFA: | |||
Class A, 1.4513% 8/16/13 (a)(e) | 17,596 | 17,595 | |
Class C, 1.5613% 8/16/13 (a)(e) | 300,000 | 299,992 | |
Series 2003-C4A Class H, 4.3631% 7/11/15 (a)(e) | 933,108 | 933,108 | |
Series 2003-LLFA: | |||
Class A2, 1.6013% 12/16/14 (a)(e) | 490,000 | 491,393 | |
Class C, 1.9113% 12/16/14 (a)(e) | 110,000 | 111,065 | |
Morgan Stanley Dean Witter Capital I Trust floater Series 2001-XLF: | |||
Class A2, 1.91% 10/7/13 (a)(e) | 410,145 | 410,104 | |
Class F, 3.3% 10/7/13 (a)(e) | 740,458 | 733,299 | |
Salomon Brothers Mortgage Securities VII, Inc. floater | |||
Class HBST, 2.98% 2/15/15 (a)(e) | 80,000 | 80,100 | |
Class HEXB, 3.28% 2/15/15 (a)(e) | 30,000 | 30,038 | |
Class JBST, 3.18% 2/15/15 (a)(e) | 60,000 | 60,075 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Salomon Brothers Mortgage Securities VII, Inc. floater | |||
Class JEXB, 3.48% 2/15/15 (a)(e) | $ 50,000 | $ 50,063 | |
Class KBST, 3.53% 2/15/15 (a)(e) | 35,000 | 35,044 | |
Class KEXB, 3.88% 2/15/15 (a)(e) | 40,000 | 40,050 | |
SDG Macerich Properties LP floater Series 2000-1 Class A3, 1.5788% 5/15/09 (a)(e) | 500,000 | 500,797 | |
STRIPs III Ltd./STRIPs III Corp. floater Series 2004-1A Class A, 1.7713% 3/24/18 (a)(e) | 652,638 | 652,638 | |
Wachovia Bank Commercial Mortgage Trust floater Series 2004-WHL3: | |||
Class A2, 1.56% 3/15/14 (a)(e) | 255,000 | 255,173 | |
Class E, 1.88% 3/15/14 (a)(e) | 160,000 | 160,717 | |
Class F, 1.93% 3/15/14 (a)(e) | 130,000 | 130,567 | |
Class G, 2.16% 3/15/14 (a)(e) | 65,000 | 65,287 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $22,090,796) | 22,151,328 | ||
Municipal Securities - 0.2% | |||
Lowndes County Solid Waste Disp. Rev. (Weyerhaeuser Co. Proj.) Series 1999, 1.75%, VRDN (e)(g) | 1,000,000 | 1,000,000 | |
Commercial Paper - 0.4% | |||
Comcast Corp. 1.86% 9/22/04 (a) | 2,000,000 | 1,994,976 | |
Fixed-Income Funds - 34.3% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (f) | 2,003,403 | 199,458,843 | |
Cash Equivalents - 17.2% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 99,906,380 | $ 99,895,000 | |
TOTAL INVESTMENT PORTFOLIO - 95.4% (Cost $553,780,835) | 554,324,157 | ||
NET OTHER ASSETS - 4.6% | 26,898,005 | ||
NET ASSETS - 100% | $ 581,222,162 |
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
46 Eurodollar 90 Day Index Contracts | Sept. 2004 | $ 45,776,900 | $ (7,163) | ||
93 Eurodollar 90 Day Index Contracts | Dec. 2004 | 92,451,300 | (10,544) | ||
89 Eurodollar 90 Day Index Contracts | March 2005 | 88,385,900 | (70,493) | ||
88 Eurodollar 90 Day Index Contracts | June 2005 | 87,311,400 | (107,352) | ||
89 Eurodollar 90 Day Index Contracts | Sept. 2005 | 88,227,925 | (63,906) | ||
44 Eurodollar 90 Day Index Contracts | Dec. 2005 | 43,512,802 | 35,974 | ||
TOTAL EURODOLLAR CONTRACTS | 445,666,227 | (223,484) | |||
Sold | |||||
Eurodollar Contracts | |||||
2 Eurodollar 90 Day Index Contracts | March 2006 | $ 1,980,000 | $ (2,385) | ||
2 Eurodollar 90 Day Index Contracts | June 2006 | 1,979,075 | (2,735) | ||
1 Eurodollar 90 Day Index Contracts | Sept. 2006 | 989,113 | (1,643) | ||
TOTAL EURODOLLAR CONTRACTS | 4,948,188 | (6,763) | |||
$ 450,614,415 | $ (230,247) | ||||
Swap Agreements | |||||
Expiration | Notional | Value | |||
Credit Default Swap | |||||
Receive annually a fixed rate of .6% multiplied by the notional amount and pay to Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 2, par value of the proportional notional amount (d) | Sept. 2009 | $ 2,000,000 | $ (1,860) | ||
Receive quarterly notional amount multiplied by .21% and pay Goldman Sachs upon default event of Consolidated Natural Gas Co., par value of the notional amount of Consolidated Natural Gas Co. 7.25% 10/1/04 | August 2004 | 1,000,000 | 86 | ||
Receive quarterly notional amount multiplied by .69% and pay Bank of America upon default event of Cox Communications, Inc., par value of the notional amount of Cox Communications, Inc. 7.75% 11/1/10 | Sept. 2009 | 2,500,000 | 142 | ||
Receive quarterly notional amount multiplied by .75% and pay Lehman Brothers, Inc. upon default event of AOL Time Warner, Inc., par value of the notional amount of AOL Time Warner, Inc. 6.875% 5/1/12 | Sept. 2009 | 2,000,000 | 919 | ||
$ 7,500,000 | $ (713) |
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 $33,715,878 or 5.8% 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 $1,993,674. |
(d) Dow Jones CDX N.A. Investment Grade 2 is a tradable index of credit default swaps on investment grade debt of U.S. companies. |
(e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(f) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(g) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
(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. |
(i) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$99,895,000 due 8/2/04 at 1.37% | |
Banc of America Securities LLC. | $ 36,948,418 |
Bank of America, National Association | 16,785,755 |
Bear Stearns & Co. Inc. | 4,196,439 |
BNP Paribas Securities Corp. | 4,196,439 |
Goldman, Sachs & Co. | 4,196,439 |
Morgan Stanley & Co. Incorporated. | 33,571,510 |
$ 99,895,000 |
Income Tax Information |
The fund hereby designates approximately $611,000 as a 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, 2004 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $99,895,000) (cost $553,780,835) - See accompanying schedule | $ 554,324,157 | |
Cash | 12,057 | |
Receivable for investments sold | 39,775,969 | |
Receivable for fund shares sold | 1,096,050 | |
Interest receivable | 1,230,060 | |
Receivable for daily variation on futures contracts | 96,463 | |
Prepaid expenses | 465 | |
Receivable from investment adviser for expense reductions | 22,285 | |
Other affiliated receivables | 30 | |
Total assets | 596,557,536 | |
Liabilities | ||
Payable for investments purchased | $ 2,621,522 | |
Delayed delivery | 11,392,993 | |
Payable for fund shares redeemed | 964,388 | |
Distributions payable | 68,141 | |
Swap agreements, at value | 713 | |
Accrued management fee | 196,099 | |
Distribution fees payable | 49 | |
Other affiliated payables | 62,346 | |
Other payables and accrued expenses | 29,123 | |
Total liabilities | 15,335,374 | |
Net Assets | $ 581,222,162 | |
Net Assets consist of: | ||
Paid in capital | $ 580,775,927 | |
Distributions in excess of net investment income | (122,365) | |
Accumulated undistributed net realized gain (loss) on investments | 256,050 | |
Net unrealized appreciation (depreciation) on investments | 312,550 | |
Net Assets | $ 581,222,162 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2004 | ||
Calculation of Maximum Offering Price | $ 10.05 | |
Maximum offering price per share (100/98.50 of $10.05) | $ 10.20 | |
Class T: | $ 10.05 | |
Maximum offering price per share (100/98.50 of $10.05) | $ 10.20 | |
Fidelity Ultra-Short Bond: | $ 10.05 | |
Institutional Class: | $ 10.05 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2004 | ||
Investment Income | ||
Interest | $ 6,831,755 | |
Expenses | ||
Management fee | $ 1,655,296 | |
Transfer agent fees | 495,131 | |
Distribution fees | 63 | |
Accounting fees and expenses | 101,861 | |
Non-interested trustees' compensation | 1,713 | |
Custodian fees and expenses | 9,529 | |
Registration fees | 111,089 | |
Audit | 29,534 | |
Legal | 3,297 | |
Miscellaneous | 11,827 | |
Total expenses before reductions | 2,419,340 | |
Expense reductions | (289,859) | 2,129,481 |
Net investment income (loss) | 4,702,274 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 151,236 | |
Futures contracts | 165,064 | |
Swap agreements | 11,402 | |
Total net realized gain (loss) | 327,702 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 401,779 | |
Futures contracts | (303,545) | |
Swap agreements | (3,720) | |
Total change in net unrealized appreciation (depreciation) | 94,514 | |
Net gain (loss) | 422,216 | |
Net increase (decrease) in net assets resulting from operations | $ 5,124,490 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | August 29, 2002 (commencement of | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 4,702,274 | $ 1,708,506 |
Net realized gain (loss) | 327,702 | 61,931 |
Change in net unrealized appreciation (depreciation) | 94,514 | 218,036 |
Net increase (decrease) in net assets resulting | 5,124,490 | 1,988,473 |
Distributions to shareholders from net investment income | (4,708,387) | (1,913,077) |
Share transactions - net increase (decrease) | 355,546,941 | 225,077,055 |
Redemption fees | 56,247 | 50,420 |
Total increase (decrease) in net assets | 356,019,291 | 225,202,871 |
Net Assets | ||
Beginning of period | 225,202,871 | - |
End of period (including distributions in excess of net investment income of $122,365 and distributions in excess of net investment income of $69,342, respectively) | $ 581,222,162 | $ 225,202,871 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Year ended July 31, | 2004 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) E | .013 |
Net realized and unrealized gain (loss) | .011 |
Total from investment operations | .024 |
Distributions from net investment income | (.014) |
Redemption fees added to paid in capital E, H | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C, D | .24% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | .85% A |
Expenses net of voluntary waivers, if any | .70% A |
Expenses net of all reductions | .70% A |
Net investment income (loss) | 1.11% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 316 |
Portfolio turnover rate | 53% |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
H Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Year ended July 31, | 2004 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) E | .013 |
Net realized and unrealized gain (loss) | .010 |
Total from investment operations | .023 |
Distributions from net investment income | (.013) |
Redemption fees added to paid in capital E, H | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C, D | .23% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | .86% A |
Expenses net of voluntary waivers, if any | .70% A |
Expenses net of all reductions | .70% A |
Net investment income (loss) | 1.11% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 356 |
Portfolio turnover rate | 53% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
H Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Ultra-Short Bond
Years ended July 31, | 2004 | 2003 E |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 10.02 | $ 10.00 |
Income from Investment Operations | ||
Net investment income (loss) D | .122 | .137 |
Net realized and unrealized gain (loss) | .029 | .052 |
Total from investment operations | .151 | .189 |
Distributions from net investment income | (.122) | (.173) |
Redemption fees added to paid in capital D | .001 | .004 |
Net asset value, end of period | $ 10.05 | $ 10.02 |
Total Return B, C | 1.52% | 1.94% |
Ratios to Average Net Assets F | ||
Expenses before expense reductions | .62% | .70% A |
Expenses net of voluntary waivers, if any | .55% | .55% A |
Expenses net of all reductions | .55% | .55% A |
Net investment income (loss) | 1.21% | 1.50% A |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 580,174 | $ 225,203 |
Portfolio turnover rate | 53% | 39% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period August 29, 2002 (commencement of operations) to July 31, 2003.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Year ended July 31, | 2004 E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) D | .015 |
Net realized and unrealized gain (loss) | .010 |
Total from investment operations | .025 |
Distributions from net investment income | (.015) |
Redemption fees added to paid in capital D, G | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C | .25% |
Ratios to Average Net Assets F | |
Expenses before expense reductions | .67% A |
Expenses net of voluntary waivers, if any | .55% A |
Expenses net of all reductions | .55% A |
Net investment income (loss) | 1.26% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 376 |
Portfolio turnover rate | 53% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2004
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 fund offers Class A, Class T, Fidelity Ultra Short Bond, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
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, including restricted 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 valuation models. If prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, 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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to losses deferred due to futures transactions, swap agreements, market discount and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,097,028 | |
Unrealized depreciation | (543,865) | |
Net unrealized appreciation (depreciation) | 553,163 | |
Undistributed ordinary income | 464,338 | |
Cost for federal income tax purposes | $ 553,770,994 |
The tax character of distributions paid was as follows:
July 31, 2004 | July 31, 2003 | |
Ordinary Income | $ 4,708,387 | $ 1,857,271 |
Long-term Capital Gains | - | 55,806 |
Total | $ 4,708,387 | $ 1,913,077 |
Annual Report
1. Significant Accounting Policies - continued
Short-Term Trading (Redemption) Fees. Shares purchased and held in the fund less than 60 days are subject to a redemption fee equal to .25% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by Fidelity Management & Research Company (FMR), are retained by the fund and accounted for as an addition to paid in capital.
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. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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's terms, 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
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Notes to Financial Statements - continued
2. Operating Policies - continued
Futures Contracts - continued
"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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
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. Periodic payments and premiums received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
Annual Report
2. Operating Policies - 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 may 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 sale 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. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $249,049,133 and $49,994,219, respectively.
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 annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period,
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 28 | $ 17 |
Class T | 0% | .15% | 35 | 25 |
$ 63 | $ 42 |
Sales Load. FDC receives a front-end sales charge of up to 1.50% for selling Class A and Class T shares, some of which is paid to financial intermediaries for selling shares of the fund. FDC receives the proceeds of a contingent deferred sales charges levied on Class A and Class T redemptions. These charges depend on the holding period. The deferred sales charges are .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 207 |
Class T | 91 |
$ 298 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the fund, except for Fidelity Ultra Short Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Ultra Short Bond shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
Amount | % of | |
Class A | $ 40 | .21* |
Class T | 52 | .22* |
Fidelity Ultra-Short Bond | 494,966 | .13 |
Institutional Class | 73 | .18* |
$ 495,131 |
* Annualized
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month.
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 $2,452,636 for the period.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | .70% | $ 30 |
Class T | .70% | 38 |
Fidelity Ultra-Short Bond | .55% | 288,280 |
Institutional Class | .55% | 51 |
$ 288,399 |
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 expense by $1,460.
Annual Report
Notes to Financial Statements - continued
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | ||
2004 A | 2003 B | |
From net investment income | ||
Class A | $ 200 | $ - |
Class T | 262 | - |
Fidelity Ultra-Short Bond | 4,707,454 | 1,913,077 |
Institutional Class | 471 | - |
Total | $ 4,708,387 | $ 1,913,077 |
A Distributions for Class A, Class T and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Distributions for Fidelity Ultra-Short Bond for the period August 29, 2002 (commencement of operations) to July 31, 2003.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2004 A | 2003 B | 2004 A | 2003 B | |
Class A | ||||
Shares sold | 31,506 | - | $ 316,495 | $ - |
Reinvestment of distributions | 19 | - | 195 | - |
Shares redeemed | (78) | - | (780) | - |
Net increase (decrease) | 31,447 | - | $ 315,910 | $ - |
Class T | ||||
Shares sold | 35,358 | - | $ 355,050 | $ - |
Reinvestment of distributions | 26 | - | 262 | - |
Net increase (decrease) | 35,384 | - | $ 355,312 | $ - |
Fidelity Ultra-Short Bond | ||||
Shares sold | 59,927,755 | 32,991,854 | $ 602,349,405 | $ 330,589,127 |
Reinvestment of distributions | 418,048 | 163,959 | 4,203,573 | 1,643,470 |
Shares redeemed | (25,071,625) | (10,686,601) | (252,053,274) | (107,155,542) |
Net increase (decrease) | 35,274,178 | 22,469,212 | $ 354,499,704 | $ 225,077,055 |
Institutional Class | ||||
Shares sold | 37,405 | - | $ 375,544 | $ - |
Reinvestment of distributions | 47 | - | 471 | - |
Net increase (decrease) | 37,452 | - | $ 376,015 | $ - |
A Share transactions for Class A, Class T and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Share transactions for Fidelity Ultra-Short Bond for the period August 29, 2002 (commencement of operations) to July 31, 2003.
Annual Report
Report of Independent Registered Public Accounting Firm
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, 2004 and the results of its operations, the changes in its 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 Ultra-Short Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 295 funds advised by FMR or an affiliate. Mr. McCoy oversees 297 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 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
Year of Election or Appointment: 2001 Senior Vice President of the fund (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 (50) | |
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 (52) | |
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998, retired as Chairman May 1999, and 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. He is a member of the Executive Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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 (43) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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 (39) | |
Year of Election or Appointment: 2002 Vice President of the fund 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 (55) | |
Year of Election or Appointment: 2002 Secretary of the fund. 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 (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of the fund. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the fund. 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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of the fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the fund. 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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of the fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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
A total of 1.64% 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 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | 7,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.496 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income, 2005, 2010, 2015, 2020, 2025, 2030, 2035, 2040 FundsSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mid Cap II Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Dividend & |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed Stock Fund |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Total Bond Fund |
Fidelity Advisor Ultra-Short Bond Fund |
Fidelity Advisor Value Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AUSB-UANN-0904
1.804587.100
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor
Ultra-Short Bond
Fund - Institutional Class
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Institutional Class
is a class of
Fidelity® Ultra-Short Bond Fund
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR 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.
Commencing with the fiscal quarter ending October 31, 2004, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. The fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the fund's portfolio holdings, view the fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
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 class' 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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Life of | |
Institutional Class B | 1.51% | 1.80% |
A From August 29, 2002
B Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. The initial offering of Institutional Class shares took place on June 16, 2004. Returns prior to June 16, 2004 are those of Fidelity Ultra-Short Bond, the original retail class of the fund.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Ultra-Short Bond Fund - Institutional Class 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 Advisor Ultra-Short Bond Fund
Investment-grade debt had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
The fund's Institutional Class shares rose 1.51% during the past year, versus 1.06% for the Lehman Brothers 6 Month Swap Index. Sector selection was the main driver of performance, as the fund was well-positioned to exploit opportunities throughout the ultra-short-term bond space, while keeping its interest rate risk at a minimum. I invested in high-quality, higher-yielding spread sectors - including corporate bonds and securitized products such as asset-backed securities (ABS), collateralized mortgage obligations (CMOs) and mortgage pass-through securities - all of which outpaced comparable-duration Treasuries. This strategy played directly into Fidelity's research strengths, which also gave us an advantage in terms of security selection. The fund benefited a lot from its focus on attractively valued home equity ABS and CMOs, both of which did especially well. Elsewhere, modest positions in several middle- and lower-quality investment-grade corporates paid off in the first half of the period amid a bullish climate for riskier assets. Conversely, yield-curve positioning was a slight drag on performance. My strategy of owning securities with more evenly distributed cash flows relative to a single "bullet" maturity index proved ineffective during the period as the short end of the curve steepened.
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
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A (dagger) | |||
Actual | $ 1,000.00 | $ 1,002.40 | $ .88 |
Hypothetical A | $ 1,000.00 | $ 1,005.42 | $ .88 |
Class T(dagger) | |||
Actual | $ 1,000.00 | $ 1,002.30 | $ .88 |
Hypothetical A | $ 1,000.00 | $ 1,005.42 | $ .88 |
Beginning | Ending | Expenses Paid | |
Fidelity Ultra-Short Bond | |||
Actual | $ 1,000.00 | $ 1,005.20 | $ 2.74 |
Hypothetical A | $ 1,000.00 | $ 1,022.23 | $ 2.77 |
Institutional Class(dagger) | |||
Actual | $ 1,000.00 | $ 1,002.50 | $ .69 |
Hypothetical A | $ 1,000.00 | $ 1,005.61 | $ .69 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Class A | .70% |
Class T | .70% |
Fidelity Ultra-Short Bond | .55% |
Institutional Class | .55% |
* Calculated by multiplying by 46/366 to reflect the period June 16, 2004 to July 31, 2004.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2004 | As of January 31, 2004 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 20.4% | ![]() | AAA 21.6% | ||||
![]() | AA 7.1% | ![]() | AA 8.2% | ||||
![]() | A 12.4% | ![]() | A 15.4% | ||||
![]() | BBB 9.1% | ![]() | BBB 8.4% | ||||
![]() | BB and Below 0.2% | ![]() | BB and Below 0.6% | ||||
![]() | Not Rated 3.7% | ![]() | Not Rated 1.8% | ||||
![]() | 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, 2004 | ||
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, 2004 | ||
6 months ago | ||
Years | 0.5 | 0.5 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Corporate Bonds 5.4% | ![]() | Corporate Bonds 7.8% | ||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 15.4% | ![]() | CMOs and Other Mortgage Related Securities 12.5% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 4.1% | ** Foreign investments | 2.9% | ||||
* Futures and Swaps | 14.6% | ** Futures and Swaps | 15.0% |
Percentages are adjusted for the effect of futures contracts and swap contracts, if applicable. The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investment of Fidelity's fixed-income central fund. |
Annual Report
Investments July 31, 2004
Showing Percentage of Net Assets
Nonconvertible Bonds - 3.8% | |||
Principal | Value | ||
CONSUMER DISCRETIONARY - 0.8% | |||
Auto Components - 0.2% | |||
DaimlerChrysler NA Holding Corp.: | |||
1.87% 5/24/06 (e) | $ 800,000 | $ 802,894 | |
2.18% 8/8/06 (e) | 600,000 | 606,178 | |
1,409,072 | |||
Media - 0.6% | |||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 900,000 | 970,826 | |
Continental Cablevision, Inc. 8.3% 5/15/06 | 450,000 | 488,301 | |
Cox Communications, Inc. 7.5% 8/15/04 | 500,000 | 500,825 | |
Liberty Media Corp. 3.02% 9/17/06 (e) | 1,350,000 | 1,370,480 | |
3,330,432 | |||
TOTAL CONSUMER DISCRETIONARY | 4,739,504 | ||
CONSUMER STAPLES - 0.2% | |||
Food & Staples Retailing - 0.1% | |||
Safeway, Inc. 2.5% 11/1/05 | 820,000 | 816,672 | |
Tobacco - 0.1% | |||
Philip Morris Companies, Inc. 7% 7/15/05 | 300,000 | 310,332 | |
TOTAL CONSUMER STAPLES | 1,127,004 | ||
ENERGY - 0.0% | |||
Oil & Gas - 0.0% | |||
Pemex Project Funding Master Trust 3.0775% 1/7/05 (a)(e) | 150,000 | 150,780 | |
FINANCIALS - 1.7% | |||
Capital Markets - 0.1% | |||
State Street Capital Trust II 1.75% 2/15/08 (e) | 300,000 | 301,843 | |
Consumer Finance - 0.2% | |||
General Motors Acceptance Corp.: | |||
2.88% 10/20/05 (e) | 1,000,000 | 1,006,607 | |
6.75% 1/15/06 | 230,000 | 240,859 | |
John Deere Capital Corp. 2.16% 9/17/04 (e) | 50,000 | 50,023 | |
1,297,489 | |||
Diversified Financial Services - 1.0% | |||
Bombardier Capital, Inc. 7.5% 10/17/05 (a) | 1,000,000 | 1,028,321 | |
Deutsche Telekom International Finance BV 8.25% 6/15/05 | 1,500,000 | 1,572,759 | |
Nonconvertible Bonds - continued | |||
Principal | Value | ||
FINANCIALS - continued | |||
Diversified Financial Services - continued | |||
NiSource Finance Corp. 7.625% 11/15/05 | $ 675,000 | $ 714,064 | |
Powergen US Funding LLC 4.5% 10/15/04 | 335,000 | 336,692 | |
Sprint Capital Corp.: | |||
4.78% 8/17/06 | 1,000,000 | 1,023,258 | |
7.125% 1/30/06 | 500,000 | 528,821 | |
Tyco International Group SA yankee 6.375% 2/15/06 | 800,000 | 839,753 | |
6,043,668 | |||
Insurance - 0.1% | |||
St. Paul Travelers Companies, Inc. 7.875% 4/15/05 | 405,000 | 419,941 | |
Real Estate - 0.2% | |||
Arden Realty LP 8.875% 3/1/05 | 500,000 | 517,705 | |
Duke Realty LP 6.875% 3/15/05 | 300,000 | 308,161 | |
Regency Centers LP 7.125% 7/15/05 | 400,000 | 415,688 | |
1,241,554 | |||
Thrifts & Mortgage Finance - 0.1% | |||
Countrywide Home Loans, Inc. 1.795% 6/2/06 (e) | 500,000 | 502,492 | |
TOTAL FINANCIALS | 9,806,987 | ||
INFORMATION TECHNOLOGY - 0.2% | |||
Communications Equipment - 0.2% | |||
Motorola, Inc. 6.75% 2/1/06 | 1,000,000 | 1,057,432 | |
MATERIALS - 0.0% | |||
Paper & Forest Products - 0.0% | |||
Boise Cascade Corp. 7.35% 10/11/04 | 270,000 | 270,626 | |
TELECOMMUNICATION SERVICES - 0.8% | |||
Diversified Telecommunication Services - 0.6% | |||
British Telecommunications PLC 7.875% 12/15/05 | 950,000 | 1,013,074 | |
France Telecom SA 8.2% 3/1/06 | 800,000 | 855,781 | |
GTE Corp. 6.36% 4/15/06 | 1,000,000 | 1,051,875 | |
Telefonica Europe BV 7.35% 9/15/05 | 500,000 | 525,821 | |
3,446,551 | |||
Wireless Telecommunication Services - 0.2% | |||
AT&T Wireless Services, Inc. 7.35% 3/1/06 | 900,000 | 959,012 | |
TOTAL TELECOMMUNICATION SERVICES | 4,405,563 | ||
Nonconvertible Bonds - continued | |||
Principal | Value | ||
UTILITIES - 0.1% | |||
Electric Utilities - 0.1% | |||
Progress Energy, Inc. 6.75% 3/1/06 | $ 605,000 | $ 636,358 | |
TOTAL NONCONVERTIBLE BONDS (Cost $22,161,171) | 22,194,254 | ||
U.S. Government Agency Obligations - 5.5% | |||
Fannie Mae 1.55% 5/4/05 | 10,000,000 | 9,952,484 | |
Federal Home Loan Bank: | |||
1.265% 3/15/05 | 10,000,000 | 9,948,060 | |
1.35% 4/29/05 | 10,000,000 | 9,939,380 | |
Freddie Mac 0% 10/19/04 (c) | 2,000,000 | 1,993,674 | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $31,993,687) | 31,833,598 | ||
U.S. Government Agency - Mortgage Securities - 1.7% | |||
Fannie Mae - 1.7% | |||
5.5% 11/1/16 to 2/1/19 | 6,667,973 | 6,861,962 | |
6.5% 7/1/16 to 8/1/32 | 696,502 | 731,842 | |
7% 8/1/17 to 5/1/32 | 2,265,677 | 2,401,869 | |
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $10,013,200) | 9,995,673 | ||
Asset-Backed Securities - 18.9% | |||
Accredited Mortgage Loan Trust Series 2004-2 Class A2, 1.75% 7/25/34 (e) | 939,157 | 939,128 | |
ACE Securities Corp.: | |||
Series 2002-HE2 Class M1, 2.3% 8/25/32 (e) | 175,000 | 176,415 | |
Series 2003-FM1 Class M2, 3.3% 11/25/32 (e) | 145,000 | 147,655 | |
Series 2003-HE1: | |||
Class A2, 1.86% 11/25/33 (e) | 609,586 | 611,435 | |
Class M1 2.1% 11/25/33 (e) | 120,000 | 120,644 | |
Class M2, 3.15% 11/25/33 (e) | 75,000 | 76,192 | |
Series 2003-HS1: | |||
Class M1, 2.2% 6/25/33 (e) | 50,000 | 50,237 | |
Class M2, 3.2% 6/25/33 (e) | 50,000 | 50,719 | |
Series 2003-NC1 Class M1, 2.23% 7/25/33 (e) | 100,000 | 101,050 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
ACE Securities Corp.: - continued | |||
Series 2003-TC1 Class A2, 1.84% 6/25/33 (e) | $ 79,084 | $ 79,253 | |
Series 2004-HE1: | |||
Class M1, 1.95% 2/25/34 (e) | 150,000 | 150,016 | |
Class M2, 2.55% 2/25/34 (e) | 175,000 | 175,040 | |
American Express Credit Account Master Trust | 410,000 | 410,690 | |
American Express Credit Account Trust Series 2004-C Class C, 1.88% 2/15/12 (a)(e) | 1,200,000 | 1,200,750 | |
AmeriCredit Automobile Receivables Trust: | |||
Series 2000-D Class A4, 1.57% 9/12/07 (e) | 289,712 | 289,988 | |
Series 2001-D Class A3, 1.66% 9/12/06 (e) | 94,389 | 94,403 | |
Series 2002-A Class A3, 1.56% 10/12/06 (e) | 104,570 | 104,582 | |
Series 2003-AM Class A4B, 1.83% 11/6/09 (e) | 600,000 | 603,745 | |
Series 2003-BX Class A4B, 1.74% 1/6/10 (e) | 140,000 | 140,960 | |
Series 2003-CF Class A3, 2.75% 10/9/07 | 1,000,000 | 1,001,604 | |
Series 2004-1 Class A3, 3.22% 7/6/08 | 365,000 | 365,573 | |
Ameriquest Mortgage Securities, Inc.: | |||
Series 2002-4: | |||
Class A2, 1.89% 2/25/33 (e) | 59,252 | 59,463 | |
Class M1, 2.45% 2/25/33 (e) | 105,000 | 105,836 | |
Series 2002-AR1: | |||
Class A2, 1.77% 9/25/32 (e) | 41,652 | 41,672 | |
Class M2, 2.75% 9/25/32 (e) | 490,000 | 492,705 | |
Series 2003-1: | |||
Class A2, 1.86% 2/25/33 (e) | 106,091 | 106,431 | |
Class M1, 2.35% 2/25/33 (e) | 100,000 | 101,343 | |
Series 2003-3 Class M1, 2.25% 3/25/33 (e) | 75,000 | 75,328 | |
Series 2003-6: | |||
Class AV3, 1.77% 8/25/33 (e) | 255,193 | 255,600 | |
Class S, 5% 5/25/33 (h) | 4,022,099 | 179,895 | |
Series 2003-7 Class M1, 2.3% 8/25/33 (e) | 140,000 | 141,795 | |
Series 2003-AR1 Class M1, 2.6% 1/25/33 (e) | 500,000 | 504,215 | |
Series 2004-R2: | |||
Class M1, 1.88% 4/25/34 (e) | 85,000 | 84,997 | |
Class M2, 1.93% 4/25/34 (e) | 75,000 | 74,998 | |
Amortizing Residential Collateral Trust: | |||
Series 2002-BC6 Class M1, 2.2% 8/25/32 (e) | 100,000 | 100,741 | |
Series 2002-BC7: | |||
Class M1, 2.25% 10/25/32 (e) | 450,000 | 452,531 | |
Class M2, 2.35% 10/25/32 (e) | 300,000 | 302,403 | |
Series 2002-BC9 Class A2, 1.93% 12/25/32 (e) | 112,982 | 113,557 | |
Series 2003-BC1 Class M2, 2.55% 1/25/32 (e) | 175,000 | 175,380 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
AQ Finance NIMS Trust Series 2003-N6A Class NOTE, 1.75% 5/25/10 (a)(e) | $ 108,271 | $ 108,204 | |
Argent Securities, Inc.: | |||
Series 2003-W3 Class M2, 3.25% 9/25/33 (e) | 800,000 | 821,739 | |
Series 2003-W6 Class AV2, 1.82% 1/25/34 (e) | 743,294 | 745,337 | |
Series 2004-W7: | |||
Class M1, 2% 5/25/34 (e) | 305,000 | 304,990 | |
Class M2, 2.05% 5/25/34 (e) | 250,000 | 249,992 | |
Asset Backed Securities Corp. Series 2002-HE2 Class M2, 2.51% 8/15/32 (e) | 100,000 | 100,168 | |
Asset Backed Securities Corp. Home Equity Loan Trust: | |||
Series 2002-HE3 Class 2A, 1.78% 10/15/32 (e) | 53,493 | 53,640 | |
Series 2003-HE2: | |||
Class A2, 1.76% 4/15/33 (e) | 153,668 | 153,884 | |
Class M1, 2.28% 4/15/33 (e) | 1,000,000 | 1,009,979 | |
Series 2003-HE3 Class A2, 1.73% 6/15/33 (e) | 55,384 | 55,400 | |
Series 2003-HE4: | |||
Class A3, 1.6% 8/15/33 (e) | 146,187 | 146,169 | |
Class M2, 3.38% 8/15/33 (e) | 285,000 | 290,537 | |
Series 2003-HE5 Class A2A, 1.74% 8/15/33 (e) | 293,315 | 293,935 | |
Series 2003-HE6 Class M1, 2.1% 11/25/33 (e) | 215,000 | 216,116 | |
Series 2003-HE7 Class A3, 1.74% 12/15/33 (e) | 603,442 | 604,831 | |
Series 2004-HE6 Series A2, 2.03% 9/25/34 (b)(e) | 2,640,000 | 2,637,938 | |
Associates Automobile Receivables Trust Series 2000-1 | 187,894 | 189,888 | |
Bank One Issuance Trust: | |||
Series 2002-B1 Class B1, 1.76% 12/15/09 (e) | 465,000 | 467,094 | |
Series 2002-B2 Class B2, 1.72% 5/15/08 (e) | 100,000 | 100,255 | |
Series 2002-B3 Class B, 1.74% 8/15/08 (e) | 500,000 | 501,489 | |
Series 2002-C1 Class C1, 2.34% 12/15/09 (e) | 675,000 | 683,988 | |
Series 2002-C2 Class C2, 2.37% 5/15/08 (e) | 2,850,000 | 2,868,528 | |
Bayview Financial Asset Trust Series 2000-F Class A, 1.9619% 9/28/43 (e) | 365,815 | 367,501 | |
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 1.9119% 2/28/44 (e) | 657,173 | 658,867 | |
Capital Auto Receivables Asset Trust Series 2003-1 Class B, 1.85% 6/15/10 (a)(e) | 287,287 | 288,372 | |
Capital One Auto Finance Trust Series 2003-A Class A4B, 1.66% 1/15/10 (e) | 425,000 | 426,990 | |
Capital One Master Trust: | |||
Series 2001-1 Class B, 1.89% 12/15/10 (e) | 500,000 | 503,625 | |
Series 2001-8A Class B, 1.93% 8/17/09 (e) | 405,000 | 408,185 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
Capital One Multi-Asset Execution Trust: | |||
Series 2002-B1 Class B1, 2.06% 7/15/08 (e) | $ 1,035,000 | $ 1,039,978 | |
Series 2003-B1 Class B1, 2.55% 2/17/09 (e) | 1,135,000 | 1,152,607 | |
Series 2003-B6 Class B6, 1.91% 9/15/11 (e) | 1,125,000 | 1,134,836 | |
Series 2004-B1 Class B1, 1.82% 11/15/11 (e) | 1,180,000 | 1,183,000 | |
Capital Trust Ltd. Series 2004-1: | |||
Class A2, 1.7% 7/20/39 (a)(e) | 265,000 | 265,000 | |
Class B, 1.85% 7/20/39 (a)(e) | 140,000 | 140,000 | |
Class C, 2.15% 7/20/39 (a)(e) | 180,000 | 180,000 | |
CDC Mortgage Capital Trust: | |||
Series 2001-HE1 Class A, 1.79% 1/25/32 (e) | 46,411 | 46,430 | |
Series 2002-HE3: | |||
Class M1, 2.55% 3/25/33 (e) | 299,999 | 305,872 | |
Class M2, 3.7% 3/25/33 (e) | 489,999 | 497,677 | |
Series 2003-HE1 Class M2, 3.4% 8/25/33 (e) | 215,000 | 219,361 | |
Series 2003-HE2 Class A, 1.8% 10/25/33 (e) | 379,917 | 380,671 | |
Series 2003-HE3: | |||
Class M1, 2.15% 11/25/33 (e) | 104,999 | 105,892 | |
Class M2, 3.2% 11/25/33 (e) | 80,000 | 80,800 | |
Series 2003-HE4 Class A2, 1.68% 3/25/34 (e) | 948,098 | 948,576 | |
Series 2004-HE2 Class M2, 2.65% 7/26/34 (e) | 175,000 | 174,994 | |
Chase Credit Card Owner Trust: | |||
Series 2001-6 Class B, 1.86% 3/16/09 (e) | 200,000 | 201,310 | |
Series 2002-2 Class C, 2.28% 7/16/07 (e) | 1,170,000 | 1,174,108 | |
Series 2002-6 Class B, 1.73% 1/15/08 (e) | 150,000 | 150,394 | |
Series 2004-1 Class B, 1.58% 5/15/09 (e) | 295,000 | 294,983 | |
Citibank Credit Card Issuance Trust: | |||
Series 2000-C2 Class C2, 2.25% 10/15/07 (e) | 900,000 | 902,372 | |
Series 2001-B2 Class B2, 1.88% 12/10/08 (e) | 615,000 | 618,735 | |
Series 2002-B1 Class B1, 1.9% 6/25/09 (e) | 655,000 | 656,806 | |
Series 2002-C1 Class C1, 2.17% 2/9/09 (e) | 900,000 | 912,709 | |
Series 2003-C1 Class C1, 2.24% 4/7/10 (e) | 1,685,000 | 1,723,510 | |
Countrywide Home Loans, Inc.: | |||
Series 2000-2 Class MV2, 2.35% 6/25/31 (e) | 166,833 | 167,112 | |
Series 2002-6 Class AV1, 1.88% 5/25/33 (e) | 211,371 | 211,810 | |
Series 2003-BC1 Class M2, 3.45% 9/25/32 (e) | 1,025,000 | 1,052,669 | |
Series 2003-SD3 Class A1, 1.87% 12/25/32 (a)(e) | 148,572 | 149,165 | |
Series 2004-2 Class M1, 1.95% 5/25/34 (e) | 375,000 | 374,988 | |
Series 2004-3: | |||
Class 3A4, 1.7% 8/25/34 (e) | 9,328,000 | 9,261,372 | |
Class M1, 1.95% 6/25/34 (e) | 100,000 | 100,103 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 2002-HE16 Class M2, 2.95% 10/25/32 (e) | 75,000 | 75,875 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
CS First Boston Mortgage Securities Corp.: - continued | |||
Series 2003-8 Class A2, 1.84% 4/25/34 (e) | $ 514,436 | $ 515,979 | |
Series 2004-FRE1: | |||
Class A2, 1.96% 4/25/34 (b)(e) | 825,000 | 825,000 | |
Class B1, 3.41% 4/25/34 (b)(e) | 605,000 | 605,000 | |
Class M3, 2.26% 4/25/34 (b)(e) | 610,000 | 610,000 | |
Discover Card Master Trust I Series 2003-4 Class B1, 1.71% 5/16/11 (e) | 550,000 | 551,846 | |
Fannie Mae guaranteed REMIC pass thru certificates | 661,207 | 22,026 | |
Fieldstone Mortgage Investment Corp.: | |||
Series 2003-1 Class M1, 2.13% 11/25/33 (e) | 100,000 | 100,876 | |
Series 2004-1 Class 2A, 1.74% 1/25/35 (b)(e) | 3,541,473 | 3,540,658 | |
Series 2004-1 Class M2, 2.55% 1/25/35 (e) | 300,000 | 300,100 | |
First Franklin Mortgage Loan Trust Series 2004-FF2: | |||
Class M3, 2% 3/25/34 (e) | 25,000 | 24,999 | |
Class M4, 2.35% 3/25/34 (e) | 25,000 | 24,999 | |
Class M6, 2.7% 3/25/34 (e) | 25,000 | 24,786 | |
First USA Secured Note Trust Series 2001-3 Class C, 2.46% 11/19/08 (a)(e) | 785,000 | 790,397 | |
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 270,000 | 270,735 | |
Ford Credit Auto Owner Trust Series 2003-B Class B2, 1.81% 10/15/07 (e) | 650,000 | 653,152 | |
Fremont Home Loan Trust Series 2004-A Class M2, 2.6% 1/25/34 (e) | 375,000 | 374,988 | |
GE Business Loan Trust Series 2003-1 Class A, 1.81% 4/15/31 (a)(e) | 320,717 | 321,118 | |
Gracechurch Card Funding PLC: | |||
Series 5: | |||
Class B, 1.4688% 8/15/08 (e) | 80,000 | 79,950 | |
Class C, 2.1688% 8/15/08 (e) | 295,000 | 295,553 | |
Series 6 Class B, 1.4288% 2/17/09 (e) | 75,000 | 74,953 | |
GS Mortgage Securities Corp.: | |||
Series 2003-FM1 Class M1, 2.1% 3/20/33 (e) | 750,000 | 758,467 | |
Series 2004-FF3 Class M2, 2.59% 5/25/34 (e) | 370,000 | 369,993 | |
Series 2004-FM1: | |||
Class M1, 2.1% 11/25/33 (e) | 195,000 | 194,994 | |
Class M2, 2.85% 11/25/33 (e) | 135,000 | 135,538 | |
5.5% 11/25/32 (a) | 503,558 | 502,802 | |
GSAMP Trust: | |||
Series 2002-NC1 Class A2, 1.77% 7/25/32 (e) | 213,315 | 214,127 | |
Series 2004-FM2 Class M1, 1.95% 1/25/34 (e) | 250,000 | 249,990 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
GSAMP Trust: - continued | |||
Series 2004-HE1: | |||
Class M1, 2% 5/25/34 (e) | $ 320,000 | $ 319,990 | |
Class M2, 2.6% 5/25/34 (e) | 150,000 | 148,711 | |
Class M3, 2.85% 5/25/34 (e) | 100,000 | 99,154 | |
Home Equity Asset Trust: | |||
Series 2002-3 Class A5, 1.89% 2/25/33 (e) | 35,459 | 35,513 | |
Series 2002-4: | |||
Class A3, 1.93% 3/25/33 (e) | 317,953 | 319,030 | |
Class M2, 3.5% 3/25/33 (e) | 125,000 | 126,876 | |
Series 2002-5: | |||
Class A3, 1.97% 5/25/33 (e) | 414,468 | 417,046 | |
Class M1, 2.65% 5/25/33 (e) | 200,000 | 204,487 | |
Series 2003-1: | |||
Class A2, 1.92% 6/25/33 (e) | 772,460 | 774,827 | |
Class M1, 2.45% 6/25/33 (e) | 300,000 | 302,306 | |
Series 2003-2: | |||
Class A2, 1.83% 8/25/33 (e) | 45,315 | 45,443 | |
Class M1, 2.33% 8/25/33 (e) | 80,000 | 81,040 | |
Series 2003-3: | |||
Class A2, 1.81% 8/25/33 (e) | 223,601 | 224,089 | |
Class M1, 2.31% 8/25/33 (e) | 330,000 | 334,244 | |
Series 2003-4: | |||
Class M1, 2.25% 10/25/33 (e) | 170,000 | 171,636 | |
Class M2, 3.35% 10/25/33 (e) | 200,000 | 203,796 | |
Series 2003-5: | |||
Class A2, 1.8% 12/25/33 (e) | 676,850 | 678,166 | |
Class M1, 2.15% 12/25/33 (e) | 160,000 | 161,180 | |
Class M2, 3.18% 12/25/33 (e) | 70,000 | 71,291 | |
Series 2003-7 Class A2, 1.83% 3/25/34 (e) | 1,332,595 | 1,336,263 | |
Series 2003-8 Class M1, 2.17% 4/25/34 (e) | 260,000 | 261,488 | |
Series 2004-4 Class A2, 1.68% 10/25/34 (e) | 1,188,753 | 1,190,137 | |
Home Equity Asset Trust NIMS Trust Series 2002-4N Class A, 8% 5/27/33 (a) | 23,154 | 23,212 | |
Household Affinity Credit Card Master Note Trust I | 500,000 | 500,581 | |
Household Credit Card Master Trust I Series 2002-1 Class B, 2.03% 7/15/08 (e) | 300,000 | 301,886 | |
Household Home Equity Loan Trust: | |||
Series 2002-3 Class A, 1.73% 7/20/32 (e) | 101,126 | 101,314 | |
Series 2003-1 Class M, 1.91% 10/20/32 (e) | 83,838 | 84,030 | |
Series 2003-2: | |||
Asset-Backed Securities - continued | |||
Principal | Value | ||
Household Home Equity Loan Trust: - continued | |||
Class A, 1.75% 9/20/33 (e) | $ 440,445 | $ 441,398 | |
Class M, 2% 9/20/33 (e) | 129,169 | 129,628 | |
Series 2004-1 Class M, 1.93% 9/20/33 (e) | 480,000 | 480,000 | |
Household Mortgage Loan Trust: | |||
Series 2002-HC1: | |||
Class A, 1.72% 5/20/32 (e) | 199,402 | 199,899 | |
Class M, 2.07% 5/20/32 (e) | 95,237 | 95,365 | |
Series 2003-HC1: | |||
Class A, 1.77% 2/20/33 (e) | 364,323 | 365,078 | |
Class M, 2.07% 2/20/33 (e) | 192,571 | 193,549 | |
Series 2003-HC2: | |||
Class A2, 1.75% 6/20/33 (e) | 390,541 | 391,274 | |
Class M, 2.02% 6/20/33 (e) | 329,858 | 327,038 | |
Household Private Label Credit Card Master Note Trust I: | |||
Series 2002-2 Class A, 1.55% 1/18/11 (e) | 1,000,000 | 1,001,242 | |
Series 2002-3 Class B, 2.63% 9/15/09 (e) | 150,000 | 151,664 | |
Ikon Receivables Funding LLC Series 2003-1 Class A3A, 1.62% 12/17/07 (e) | 429,930 | 430,124 | |
Keycorp Student Loan Trust Series 1999-A Class A2, 1.9163% 12/27/09 (e) | 360,360 | 361,368 | |
Long Beach Mortgage Loan Trust: | |||
Series 2001-4 Class 2M1, 2.4% 3/25/32 (e) | 765,000 | 772,561 | |
Series 2003-1: | |||
Class A2, 1.85% 3/25/33 (e) | 111,602 | 111,797 | |
Class M1, 2.37% 3/25/33 (e) | 300,000 | 303,630 | |
Series 2003-2 Class M1, 2.27% 6/25/33 (e) | 500,000 | 503,366 | |
Series 2003-3 Class M1, 2.2% 7/25/33 (e) | 340,000 | 342,947 | |
MASTR ABS NIMS Trust: | |||
Series 2002-OPT1 Class NOTE, 2% 11/26/07 (a)(e) | 405 | 405 | |
Series 2003-OPT1 Class NOTE, 1.83% 2/26/08 (a)(e) | 25,054 | 25,062 | |
MASTR Asset Backed Securities Trust Series 2004 FRE1 Class M1, 2.02% 7/25/34 (e) | 485,000 | 485,000 | |
MBNA Asset Backed Note Trust Series 2000-K Class C, 2.18% 3/17/08 (a)(e) | 1,000,000 | 1,003,600 | |
MBNA Credit Card Master Note Trust: | |||
Series 2001-B1 Class B1, 1.755% 10/15/08 (e) | 1,250,000 | 1,253,165 | |
Series 2001-B2 Class B2, 1.74% 1/15/09 (e) | 1,000,000 | 1,003,604 | |
Series 2002-B2 Class B2, 1.76% 10/15/09 (e) | 1,034,000 | 1,038,792 | |
Series 2002-B4 Class B4, 1.88% 3/15/10 (e) | 630,000 | 635,343 | |
Series 2003-B2 Class B2, 1.77% 10/15/10 (e) | 125,000 | 125,690 | |
Series 2003-B3 Class B3, 1.755% 1/18/11 (e) | 75,000 | 75,188 | |
Series 2003-B5 Class B5, 1.75% 2/15/11 (e) | 485,000 | 488,499 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
MBNA Master Credit Card Trust II: | |||
Series 1997-J Class B, 1.68% 2/15/07 (e) | $ 500,000 | $ 500,114 | |
Series 1998-E Class B, 1.47% 9/15/10 (e) | 200,000 | 201,002 | |
Series 1998-G Class B, 1.78% 2/17/09 (e) | 500,000 | 501,346 | |
Meritage Mortgage Loan Trust Series 2004-1: | |||
Class M1, 1.95% 7/25/34 (e) | 150,000 | 149,995 | |
Class M2, 2% 7/25/34 (e) | 25,000 | 24,999 | |
Class M3, 2.4% 7/25/34 (e) | 50,000 | 49,998 | |
Class M4, 2.55% 7/25/34 (e) | 50,000 | 49,998 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
Series 2002-HE1N Class N1, 2.05% 11/25/09 (a)(e) | 34,457 | 34,445 | |
Series 2003-HE1 Class A1, 1.9% 7/25/34 (e) | 857,761 | 858,690 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-HE3 Class M1, 2.55% 12/27/32 (e) | 125,000 | 127,078 | |
Series 2003-HE1 Class M2, 3.35% 5/25/33 (e) | 325,000 | 331,014 | |
Series 2003-NC10 Class M1, 2.13% 10/25/33 (e) | 830,000 | 835,240 | |
Series 2003-NC5 Class M2, 3.45% 4/25/33 (e) | 200,000 | 203,368 | |
Series 2003-NC6 Class M2, 3.4% 6/27/33 (e) | 630,000 | 643,366 | |
Series 2003-NC8 Class M1, 2.15% 9/25/33 (e) | 120,000 | 120,583 | |
Series 2004-HE6 Class A2, 1.96% 8/25/34 (b)(e) | 2,000,000 | 2,000,000 | |
Series 2004-NC6 Class A2, 1.8019% 9/25/34 (e) | 630,000 | 630,000 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-AM1: | |||
Class M1, 2.3% 2/25/32 (e) | 800,000 | 810,842 | |
Class M2, 2.85% 2/25/32 (e) | 500,000 | 504,138 | |
Series 2001-NC1 Class M2, 2.52% 10/25/31 (e) | 100,000 | 100,352 | |
Series 2001-NC3 Class M2, 2.95% 10/25/31 (e) | 225,000 | 227,405 | |
Series 2001-NC4: | |||
Class M1, 2.45% 1/25/32 (e) | 140,000 | 142,223 | |
Class M2, 3.1% 1/25/32 (e) | 105,000 | 106,575 | |
Series 2002-AM3 Class A3, 1.94% 2/25/33 (e) | 109,916 | 110,301 | |
Series 2002-HE1 Class M1, 2.05% 7/25/32 (e) | 145,000 | 145,693 | |
Series 2002-HE2 Class M2, 2.7% 8/25/32 (e) | 100,000 | 100,552 | |
Series 2002-NC3 Class M1, 2.17% 8/25/32 (e) | 100,000 | 100,916 | |
Series 2002-NC4 Class M2, 3.05% 9/25/32 (e) | 75,000 | 75,685 | |
Series 2002-OP1 Class M1, 2.2% 9/25/32 (e) | 95,000 | 95,746 | |
Series 2003-NC1 Class M2, 3.5% 11/25/32 (e) | 130,000 | 131,910 | |
Series 2003-NC2 Class M2, 3.45% 2/25/33 (e) | 165,000 | 168,989 | |
Navistar Financial Corp. Owner Trust Series 2001-B Class B, 4.83% 11/17/08 | 565,284 | 571,600 | |
New Century Finance NIMS Trust Series 2003-A | 173,685 | 174,825 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
New Century Home Equity Loan Trust Series 2003-2: | |||
Class A2, 1.88% 1/25/33 (e) | $ 129,049 | $ 129,296 | |
Class AIO, 4.5% 3/25/05 (e)(h) | 13,302,840 | 295,323 | |
Nissan Auto Lease Trust Series 2003-A Class A3A, 1.3788% 6/15/09 (e) | 1,000,000 | 1,001,226 | |
NovaStar Home Equity Loan Series 2004-1: | |||
Class M1, 1.9% 6/25/34 (e) | 100,000 | 100,094 | |
Class M4, 2.425% 6/25/34 (e) | 170,000 | 170,252 | |
NovaStar Mortgage Funding Trust Series 2003-3 Class A3, 1.9% 12/25/33 (e) | 743,128 | 743,751 | |
Onyx Acceptance Owner Trust Series 2003-D Class A3, 2.4% 12/15/07 | 470,000 | 468,919 | |
Option One Mortgage Loan Trust Series 2003-6 Class M1, 2.1% 11/25/33 (e) | 1,025,000 | 1,030,353 | |
Park Place Securities, Inc.: | |||
Series 2004 WCW Class M1, 2.17% 8/25/34 (b)(e) | 270,000 | 270,000 | |
Series 2004 WCW1: | |||
Class M2, 2.22% 8/25/34 (b)(e) | 470,000 | 470,000 | |
Class M3, 2.79% 8/25/34 (b)(e) | 435,000 | 435,000 | |
Providian Gateway Master Trust Series 2002-B Class A, 2.08% 6/15/09 (a)(e) | 400,000 | 400,967 | |
Residential Asset Mortgage Products, Inc.: | |||
Series 2003-RP2 Class A1, 1.95% 9/25/33 (a)(e) | 353,313 | 354,417 | |
Series 2004-RS6: | |||
Class 2M2, 2.63% 6/25/34 (e) | 250,000 | 249,992 | |
Class 2M3, 2.78% 6/25/34 (e) | 250,000 | 249,992 | |
Salomon Brothers Mortgage Securities VII, Inc. | 113,137 | 113,501 | |
Saxon Asset Securities Trust Series 2004 2 Class MV1, 2.03% 10/25/34 (e) | 415,000 | 415,000 | |
Sears Credit Account Master Trust II: | |||
Series 1998-2 Class A, 5.25% 10/16/08 | 62,500 | 62,786 | |
Series 2002-4: | |||
Class A, 1.51% 8/18/09 (e) | 800,000 | 800,960 | |
Class B, 1.805% 8/18/09 (e) | 1,080,000 | 1,082,710 | |
Series 2002-5 Class B, 2.63% 11/17/09 (e) | 500,000 | 501,326 | |
Specialty Underwriting & Residential Finance Series 2003-BC3 Class M1, 2.1% 8/25/34 (e) | 1,000,000 | 1,004,421 | |
Structured Asset Securities Corp. Series 2004-GEL1 Class A, 1.81% 2/25/34 (e) | 142,829 | 142,824 | |
Superior Wholesale Inventory Financing Trust VII | 675,000 | 675,527 | |
Terwin Mortgage Trust: | |||
Series 2003-8HE, Class A, 1.92% 12/25/34 (e) | 374,496 | 374,719 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
Terwin Mortgage Trust: - continued | |||
Series 2003-4HE Class A1, 1.88% 9/25/34 (e) | $ 778,582 | $ 781,835 | |
Series 2003-6HE Class A1, 1.92% 11/25/33 (e) | 285,723 | 287,179 | |
Series 2004-1HE Class A1, 1.96% 2/25/35 (a)(e) | 368,633 | 368,633 | |
Triad Auto Receivables Owner Trust Series 2002-A Class A3, 2.62% 2/12/07 | 403,706 | 404,855 | |
WFS Financial 2004-3 Owner Trust Series 2004 3 Class D, 4.07% 2/17/12 | 660,000 | 660,000 | |
TOTAL ASSET-BACKED SECURITIES (Cost $109,646,377) | 109,962,209 | ||
Collateralized Mortgage Obligations - 9.6% | |||
Private Sponsor - 5.7% | |||
Countrywide Home Loans, Inc.: | |||
floater Series 2004 16 Class A1, 1.7688% 8/25/34 (e) | 1,250,000 | 1,250,000 | |
sequential pay Series 2002-5 Class 2A1, 6% 4/25/17 | 161,939 | 161,675 | |
CS First Boston Mortgage Securities Corp.: | |||
floater: | |||
Series 2004-AR7 Class 6A2, 1.85% 8/25/34 (e) | 1,025,000 | 1,025,000 | |
Series 2004-AR2 Class 6A1, 1.85% 3/25/34 (e) | 852,587 | 851,317 | |
Series 2004-AR3 Class 6A2, 1.82% 3/25/34 (e) | 339,077 | 339,872 | |
Series 2004-AR5 Class 11A2, 1.82% 6/25/34 (e) | 501,440 | 500,361 | |
Series 2004-AR6 Class 9A2, 1.82% 7/25/34 (e) | 610,398 | 610,398 | |
Series 2003-TFLA Class F, 1.9433% 4/15/13 (a)(e) | 235,000 | 236,780 | |
Granite Mortgages PLC floater: | |||
Series 2004-1: | |||
Class 1B, 1.76% 3/20/44 (e) | 95,000 | 95,089 | |
Class 1C, 2.45% 3/20/44 (e) | 280,000 | 280,788 | |
Class 1M, 1.96% 3/20/44 (e) | 130,000 | 130,163 | |
Series 2004-2: | |||
Class 1A2, 1.4381% 6/20/28 (e) | 500,000 | 500,000 | |
Class 1B, 1.5381% 6/20/44 (e) | 100,000 | 100,000 | |
Class 1C, 2.0681% 6/20/44 (e) | 365,000 | 365,000 | |
Class 1M, 1.6481% 6/20/44 (e) | 185,000 | 185,000 | |
Holmes Financing PLC floater: | |||
Series 7 Class 2M, 2.4% 7/15/40 (e) | 195,000 | 197,541 | |
Series 8: | |||
Class 1B, 1.73% 7/15/40 (e) | 145,000 | 145,000 | |
Class 1C, 2.22% 7/15/40 (e) | 1,040,000 | 1,040,325 | |
Class 2A, 1.68% 4/15/11 (e) | 1,400,000 | 1,400,109 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
Private Sponsor - continued | |||
Holmes Financing PLC floater: - continued | |||
Series 8: | |||
Class 2B, 1.77% 7/15/40 (e) | $ 190,000 | $ 190,000 | |
Class 2C, 2.32% 7/15/40 (e) | 775,000 | 775,242 | |
Impac CMB Trust floater Series 2004 6 Class 1A2, 1.84% 10/25/34 (e) | 504,116 | 503,620 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
floater: | |||
Series 2003-A: | |||
Class 2A1, 1.84% 3/25/28 (e) | 447,161 | 448,552 | |
Class 2A2, 1.59% 3/25/28 (e) | 159,700 | 160,827 | |
Series 2003-B Class A1, 1.79% 4/25/28 (e) | 411,755 | 413,100 | |
Series 2003-E Class A2, 1.51% 10/25/28 (e) | 870,224 | 869,459 | |
Series 2003-F Class A2, 1.49% 10/25/28 (e) | 899,961 | 903,301 | |
Series 2004-A Class A2, 1.4% 4/25/29 (e) | 1,118,446 | 1,113,769 | |
Series 2004-B Class A2, 1.8525% 6/25/29 (e) | 1,142,977 | 1,139,649 | |
Series 2004-C Class A2, 2.1506% 7/25/29 (e) | 1,536,888 | 1,536,708 | |
Series 2003-G Class XA1, 1% 1/25/29 (h) | 4,012,587 | 69,280 | |
Permanent Financing PLC floater: | |||
Series 3: | |||
Class 1C, 2.36% 6/10/42 (e) | 1,000,000 | 1,001,037 | |
Class 2C, 2.46% 6/10/42 (e) | 205,000 | 206,025 | |
Series 4 Class 2C, 2.13% 6/10/42 (e) | 1,145,000 | 1,144,730 | |
Series 5: | |||
Class 1C, 1.9878% 6/10/42 (e) | 260,000 | 260,000 | |
Class 2C, 2.1378% 6/10/42 (e) | 390,000 | 390,000 | |
Class 3C, 2.2878% 6/10/42 (e) | 825,000 | 825,000 | |
Residential Asset Mortgage Products, Inc.: | |||
sequential pay: | |||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 535,158 | 554,474 | |
Series 2004-SL2 Class A1, 6.5% 11/25/16 | 210,971 | 218,191 | |
Series 2003-RP1 Class A, 1.95% 4/25/34 (e) | 302,025 | 303,440 | |
Residential Finance LP/Residential Finance Development Corp. floater: | |||
Series 2002-A: | |||
Class B4, 3.1631% 10/10/34 (a)(e) | 97,895 | 99,423 | |
Class B5, 3.7131% 10/10/34 (a)(e) | 97,895 | 99,179 | |
Class B6, 4.2131% 10/10/34 (a)(e) | 97,895 | 99,852 | |
Series 2003-A: | |||
Class B4, 3.1631% 3/10/35 (a)(e) | 98,057 | 99,507 | |
Class B5, 3.7131% 3/10/35 (a)(e) | 98,057 | 100,052 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
Private Sponsor - continued | |||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (a)(h) | $ 14,724,128 | $ 157,594 | |
Sequoia Mortgage Trust: | |||
floater: | |||
Series 2003-5 Class A2, 1.5% 9/20/33 (e) | 866,753 | 863,898 | |
Series 2003-7 Class A2, 1.8788% 1/20/34 (e) | 448,491 | 448,079 | |
Series 2004-6 Class A3B, 2.3063% 7/20/34 (e) | 1,968,357 | 1,960,975 | |
Series 2004-7 Class A3A, 2.285% 8/20/34 (e) | 1,030,000 | 1,030,000 | |
Series 2004-1 Class A, 1.47% 2/20/34 (e) | 622,928 | 621,654 | |
Series 2004-4 Class A, 1.6081% 5/20/34 (e) | 494,060 | 491,934 | |
Series 2004-5 Class A3, 1.8625% 6/20/34 (e) | 785,590 | 785,590 | |
Series 2004-6 Class A3A, 2.1638% 6/20/35 (e) | 984,178 | 984,178 | |
Series 2004-7 Class A3B, 2.53% 7/20/34 (e) | 2,000,000 | 2,000,000 | |
Structured Asset Securities Corp. floater Series 2004 NP1 | 491,185 | 491,185 | |
WAMU Mortgage pass thru certificates sequential pay | 307,287 | 311,082 | |
Washington Mutual Mortgage Securities Corp. sequential pay Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 127,106 | 134,236 | |
TOTAL PRIVATE SPONSOR | 33,219,240 | ||
U.S. Government Agency - 3.9% | |||
Fannie Mae: | |||
floater Series 2002-89 Class F, 1.75% 1/25/33 (e) | 253,528 | 253,747 | |
planned amortization class: | |||
Series 1994-81 Class PJ, 8% 7/25/23 | 167,594 | 169,186 | |
Series 2002-81 Class PU, 4.5% 5/25/20 | 2,280,000 | 2,315,511 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
floater: | |||
Series 2002-11 Class QF, 1.95% 3/25/32 (e) | 310,453 | 312,377 | |
Series 2002-36 Class FT, 1.95% 6/25/32 (e) | 283,736 | 286,215 | |
Series 2002-64 Class FE, 1.76% 10/18/32 (e) | 166,702 | 167,459 | |
Series 2002-74 Class FV, 1.9% 11/25/32 (e) | 187,464 | 188,841 | |
Series 2003-11: | |||
Class DF, 1.9% 2/25/33 (e) | 236,047 | 237,000 | |
Class EF, 1.9% 2/25/33 (e) | 198,423 | 198,909 | |
planned amortization class: | |||
Series 2001-62 Class PG, 6.5% 10/25/30 | 200,739 | 204,985 | |
Series 2002-52 Class PA, 6% 4/25/31 | 46,468 | 47,279 | |
Series 2002-55 Class QB, 5.5% 8/25/12 | 38,458 | 38,481 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | |||
planned amortization class: | |||
Series 2002-8 Class PD, 6.5% 7/25/30 | $ 821,128 | $ 842,593 | |
Series 2003-17 Class PQ, 4.5% 3/25/16 | 855,000 | 864,768 | |
sequential pay Series 2001-15 Class VA, 6% 6/25/10 | 51,073 | 51,213 | |
Series 2002-50 Class LE, 7% 12/25/29 | 275,508 | 281,897 | |
Series 2004-31 Class IA, 4.5% 6/25/10 (h) | 635,000 | 44,906 | |
Freddie Mac planned amortization class: | |||
Series 2091 Class PP, 6% 2/15/27 | 653,693 | 661,064 | |
Series 2256 Class MB, 7.25% 5/15/30 | 332,440 | 337,008 | |
Series 2360 Class PW, 6% 11/15/14 | 130,992 | 131,149 | |
Series 2517 Class TL, 4.5% 4/15/26 | 205,714 | 205,657 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
floater: | |||
Series 2526 Class FC, 1.78% 11/15/32 (e) | 70,321 | 70,592 | |
Series 2538 Class FB, 1.78% 12/15/32 (e) | 325,696 | 326,966 | |
Series 2551 Class FH, 1.83% 1/15/33 (e) | 177,370 | 177,960 | |
planned amortization class: | |||
Series 1675 Class H, 6.375% 10/15/22 | 43,799 | 43,870 | |
Series 1732 Class H, 6.5% 11/15/22 | 27,529 | 27,510 | |
Series 2293 Class WD, 6.5% 12/15/29 | 320,072 | 320,233 | |
Series 2368 Class PQ, 6.5% 8/15/30 | 172,631 | 173,985 | |
Series 2376 Class JC, 5.5% 2/15/14 | 543,459 | 546,033 | |
Series 2394 Class ND, 6% 6/15/27 | 643,115 | 658,652 | |
Series 2398 Class DK, 6.5% 1/15/31 | 365,048 | 370,058 | |
Series 2420 Class BE, 6.5% 12/15/30 | 848,802 | 870,546 | |
Series 2430 Class OB, 6% 10/15/26 | 6,740 | 6,732 | |
Series 2435: | |||
Class EL, 6% 9/15/27 | 206,268 | 206,192 | |
Class GD, 6.5% 2/15/30 | 239,369 | 241,011 | |
Series 2443 Class TD, 6.5% 10/15/30 | 785,280 | 807,271 | |
Series 2461 Class PG, 6.5% 1/15/31 | 645,371 | 662,074 | |
Series 2466 Class EC, 6% 10/15/27 | 378,177 | 381,128 | |
Series 2473 Class JB, 5.5% 2/15/29 | 385,275 | 386,876 | |
Series 2483 Class DC, 5.5% 7/15/14 | 1,112,604 | 1,133,179 | |
Series 2490 Class PM, 6% 7/15/28 | 579,932 | 590,707 | |
Series 2496 Class OC, 5.5% 9/15/14 | 2,675,257 | 2,734,940 | |
Series 2557 Class MA, 4.5% 7/15/16 | 190,980 | 193,259 | |
Series 2748 Class IB, 4.5% 3/15/10 (h) | 1,572,500 | 102,616 | |
Series 2776 Class UJ, 4.5% 5/15/20 (h) | 755,951 | 58,608 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Freddie Mac Multi-class participation certificates guaranteed: - continued | |||
sequential pay: | |||
Series 2129 Class VM, 6% 1/15/06 | $ 510,367 | $ 510,020 | |
Series 2445 Class BD, 6.5% 6/15/30 | 51,013 | 51,138 | |
Series 2448 Class D, 5.5% 5/15/12 | 87,370 | 87,406 | |
Series 2480 Class QW, 5.75% 2/15/30 | 380,851 | 384,624 | |
Series 1803 Class A, 6% 12/15/08 | 317,256 | 328,627 | |
Series 2749 Class MZ, 5% 2/15/24 | 79,291 | 79,277 | |
Series 2802 Class Z, 5.5% 4/15/33 | 325,227 | 325,117 | |
Series 2807: | |||
Class TZ, 6% 12/15/31 | 160,907 | 161,724 | |
Class ZK, 6% 12/15/31 | 81,474 | 81,321 | |
Series FHR 2762 Class BZ, 5% 3/15/34 | 865,976 | 866,165 | |
Series FHR 2809 Class WZ, 5% 3/15/34 | 534,209 | 534,286 | |
Ginnie Mae guaranteed REMIC pass thru securities: | |||
floater Series 2001-21 Class FB, 1.79% 1/16/27 (e) | 199,523 | 200,704 | |
planned amortization class: | |||
Series 1999-17 Class PC, 6.5% 10/16/27 | 31,352 | 31,358 | |
Series 2002-57 Class PJ, 6% 1/20/29 | 45,768 | 46,026 | |
TOTAL U.S. GOVERNMENT AGENCY | 22,619,036 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $55,886,665) | 55,838,276 | ||
Commercial Mortgage Securities - 3.8% | |||
Banc of America Large Loan, Inc. floater: | |||
Series 2002-FL2A Class A2, 1.6713% 9/8/14 (a)(e) | 64,481 | 64,482 | |
Series 2003-BBA2: | |||
Class A3, 1.7% 11/15/15 (a)(e) | 340,000 | 340,052 | |
Class C, 1.85% 11/15/15 (a)(e) | 70,000 | 70,344 | |
Class D, 1.93% 11/15/15 (a)(e) | 110,000 | 110,635 | |
Class F, 2.28% 11/15/15 (a)(e) | 80,000 | 80,669 | |
Class H, 2.78% 11/15/15 (a)(e) | 70,000 | 70,520 | |
Class J, 3.33% 11/15/15 (a)(e) | 70,000 | 71,100 | |
Class K, 2.8103% 11/15/15 (a)(e) | 65,000 | 65,663 | |
Bayview Commercial Asset Trust floater: | |||
Series 2003-1 Class A, 1.88% 8/25/33 (a)(e) | 425,279 | 427,672 | |
Series 2003-2 Class A, 2.03% 12/25/33 (a)(e) | 1,052,882 | 1,054,724 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Bayview Commercial Asset Trust floater: - continued | |||
Series 2004 2 Class M1: | |||
1.82% 8/25/34 (a)(e) | $ 638,502 | $ 638,502 | |
1.97% 8/25/34 (a)(e) | 204,520 | 204,520 | |
Series 2004-1: | |||
Class A, 1.66% 4/25/34 (a)(e) | 585,208 | 584,842 | |
Class B, 3.35% 4/25/34 (a)(e) | 97,535 | 97,474 | |
Bear Stearns Commercial Mortgage Securities, Inc. floater: | |||
Series 2003-BA1A Class A1, 1.4913% 4/14/15 (a)(e) | 683,229 | 683,175 | |
Series 2003-WEST Class A, 1.9613% 1/3/15 (a)(e) | 369,643 | 371,201 | |
Series 2004-BBA3 Class E, 2.15% 6/15/17 (a)(e) | 960,000 | 960,000 | |
Series 2004-ESA Class A2, 1.67% 5/14/16 (a)(e) | 565,000 | 565,282 | |
Series 2004-HS2A: | |||
Class E, 2.1113% 1/14/16 (a)(e) | 125,000 | 125,572 | |
Class F, 2.2613% 1/14/16 (a)(e) | 75,000 | 75,331 | |
Calwest Industrial Trust floater Series 2002-CALW | 800,000 | 800,658 | |
COMM floater: | |||
Series 2000-FL3A Class C, 2.14% 11/15/12 (a)(e) | 559,444 | 558,905 | |
Series 2002-FL6: | |||
Class K4M, 3.38% 6/14/14 (a)(e) | 100,000 | 100,545 | |
Class L4M, 3.68% 6/14/14 (a)(e) | 100,000 | 100,638 | |
Class M4M, 4.13% 6/14/14 (a)(e) | 100,000 | 99,980 | |
Series 2002-FL7: | |||
Class A2, 1.73% 11/15/14 (a)(e) | 161,243 | 161,258 | |
Class C, 1.88% 11/15/14 (a)(e) | 555,000 | 555,091 | |
Class F, 2.68% 11/15/14 (a)(e) | 1,000,000 | 1,005,862 | |
Class H, 3.63% 11/15/14 (a)(e) | 150,000 | 149,309 | |
Series 2003-FL9 Class B, 1.88% 11/15/15 (a)(e) | 1,195,000 | 1,197,991 | |
Commercial Mortgage Pass Through Certificates floater | |||
Class B, 1.84% 7/15/16 (a)(e) | 55,000 | 55,000 | |
Class D, 1.94% 7/15/16 (a)(e) | 120,000 | 120,000 | |
Class E, 2.14% 7/15/16 (a)(e) | 85,000 | 85,000 | |
Class F, 2.19% 7/15/16 (a)(e) | 90,000 | 90,000 | |
Class H, 2.69% 7/15/16 (a)(e) | 265,000 | 265,000 | |
Class J, 2.84% 7/15/16 (a)(e) | 100,000 | 100,000 | |
Class K, 3.74% 7/15/16 (a)(e) | 115,000 | 115,000 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
CS First Boston Mortgage Securities Corp.: | |||
floater: | |||
Series 2002-TFLA Class C, 1.8238% 11/18/12 (a)(e) | $ 255,000 | $ 255,279 | |
Series 2003-TF2A Class A2, 1.7% 11/15/14 (a)(e) | 700,000 | 700,155 | |
Series 2004-FL1 Class B, 1.6888% 5/15/14 (a)(e) | 1,000,000 | 1,000,000 | |
Series 2004-TFL1: | |||
Class A2, 1.57% 2/15/14 (a)(e) | 505,000 | 504,817 | |
Class E, 1.93% 2/15/14 (a)(e) | 200,000 | 200,888 | |
Class F, 1.98% 2/15/14 (a)(e) | 175,000 | 175,835 | |
Class G, 2.23% 2/15/14 (a)(e) | 125,000 | 125,515 | |
Class H, 2.48% 2/15/14 (a)(e) | 100,000 | 100,416 | |
Class J, 2.78% 2/15/14 (a)(e) | 50,000 | 50,265 | |
Series 2003-TFLA Class G, 1.9433% 4/15/13 (a)(e) | 145,000 | 139,201 | |
Greenwich Capital Commercial Funding Corp. floater | 127,697 | 127,697 | |
GS Mortgage Securities Corp. II floater Series 2000-GSFL Class A, 1.66% 8/15/12 (a)(e) | 274,884 | 274,875 | |
John Hancock Tower Mortgage Trust floater Series 2003-C5A Class B, 3.8516% 4/10/15 (a)(e) | 420,000 | 415,178 | |
KSL Resorts floater Series 2003-1A: | |||
Class A, 1.93% 5/15/13 (a)(e) | 200,000 | 200,068 | |
Class B, 2.08% 5/15/13 (a)(e) | 200,000 | 200,068 | |
Class K, 4.03% 5/15/13 (a)(e) | 200,000 | 200,985 | |
Class L, 4.23% 5/15/13 (a)(e) | 200,000 | 200,984 | |
Lehman Brothers Floating Rate Commercial Mortgage Trust floater: | |||
Series 2001-LLFA: | |||
Class A, 1.4513% 8/16/13 (a)(e) | 17,596 | 17,595 | |
Class C, 1.5613% 8/16/13 (a)(e) | 300,000 | 299,992 | |
Series 2003-C4A Class H, 4.3631% 7/11/15 (a)(e) | 933,108 | 933,108 | |
Series 2003-LLFA: | |||
Class A2, 1.6013% 12/16/14 (a)(e) | 490,000 | 491,393 | |
Class C, 1.9113% 12/16/14 (a)(e) | 110,000 | 111,065 | |
Morgan Stanley Dean Witter Capital I Trust floater Series 2001-XLF: | |||
Class A2, 1.91% 10/7/13 (a)(e) | 410,145 | 410,104 | |
Class F, 3.3% 10/7/13 (a)(e) | 740,458 | 733,299 | |
Salomon Brothers Mortgage Securities VII, Inc. floater | |||
Class HBST, 2.98% 2/15/15 (a)(e) | 80,000 | 80,100 | |
Class HEXB, 3.28% 2/15/15 (a)(e) | 30,000 | 30,038 | |
Class JBST, 3.18% 2/15/15 (a)(e) | 60,000 | 60,075 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Salomon Brothers Mortgage Securities VII, Inc. floater | |||
Class JEXB, 3.48% 2/15/15 (a)(e) | $ 50,000 | $ 50,063 | |
Class KBST, 3.53% 2/15/15 (a)(e) | 35,000 | 35,044 | |
Class KEXB, 3.88% 2/15/15 (a)(e) | 40,000 | 40,050 | |
SDG Macerich Properties LP floater Series 2000-1 Class A3, 1.5788% 5/15/09 (a)(e) | 500,000 | 500,797 | |
STRIPs III Ltd./STRIPs III Corp. floater Series 2004-1A Class A, 1.7713% 3/24/18 (a)(e) | 652,638 | 652,638 | |
Wachovia Bank Commercial Mortgage Trust floater Series 2004-WHL3: | |||
Class A2, 1.56% 3/15/14 (a)(e) | 255,000 | 255,173 | |
Class E, 1.88% 3/15/14 (a)(e) | 160,000 | 160,717 | |
Class F, 1.93% 3/15/14 (a)(e) | 130,000 | 130,567 | |
Class G, 2.16% 3/15/14 (a)(e) | 65,000 | 65,287 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $22,090,796) | 22,151,328 | ||
Municipal Securities - 0.2% | |||
Lowndes County Solid Waste Disp. Rev. (Weyerhaeuser Co. Proj.) Series 1999, 1.75%, VRDN (e)(g) | 1,000,000 | 1,000,000 | |
Commercial Paper - 0.4% | |||
Comcast Corp. 1.86% 9/22/04 (a) | 2,000,000 | 1,994,976 | |
Fixed-Income Funds - 34.3% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (f) | 2,003,403 | 199,458,843 | |
Cash Equivalents - 17.2% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 99,906,380 | $ 99,895,000 | |
TOTAL INVESTMENT PORTFOLIO - 95.4% (Cost $553,780,835) | 554,324,157 | ||
NET OTHER ASSETS - 4.6% | 26,898,005 | ||
NET ASSETS - 100% | $ 581,222,162 |
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
46 Eurodollar 90 Day Index Contracts | Sept. 2004 | $ 45,776,900 | $ (7,163) | ||
93 Eurodollar 90 Day Index Contracts | Dec. 2004 | 92,451,300 | (10,544) | ||
89 Eurodollar 90 Day Index Contracts | March 2005 | 88,385,900 | (70,493) | ||
88 Eurodollar 90 Day Index Contracts | June 2005 | 87,311,400 | (107,352) | ||
89 Eurodollar 90 Day Index Contracts | Sept. 2005 | 88,227,925 | (63,906) | ||
44 Eurodollar 90 Day Index Contracts | Dec. 2005 | 43,512,802 | 35,974 | ||
TOTAL EURODOLLAR CONTRACTS | 445,666,227 | (223,484) | |||
Sold | |||||
Eurodollar Contracts | |||||
2 Eurodollar 90 Day Index Contracts | March 2006 | $ 1,980,000 | $ (2,385) | ||
2 Eurodollar 90 Day Index Contracts | June 2006 | 1,979,075 | (2,735) | ||
1 Eurodollar 90 Day Index Contracts | Sept. 2006 | 989,113 | (1,643) | ||
TOTAL EURODOLLAR CONTRACTS | 4,948,188 | (6,763) | |||
$ 450,614,415 | $ (230,247) | ||||
Swap Agreements | |||||
Expiration | Notional | Value | |||
Credit Default Swap | |||||
Receive annually a fixed rate of .6% multiplied by the notional amount and pay to Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 2, par value of the proportional notional amount (d) | Sept. 2009 | $ 2,000,000 | $ (1,860) | ||
Receive quarterly notional amount multiplied by .21% and pay Goldman Sachs upon default event of Consolidated Natural Gas Co., par value of the notional amount of Consolidated Natural Gas Co. 7.25% 10/1/04 | August 2004 | 1,000,000 | 86 | ||
Receive quarterly notional amount multiplied by .69% and pay Bank of America upon default event of Cox Communications, Inc., par value of the notional amount of Cox Communications, Inc. 7.75% 11/1/10 | Sept. 2009 | 2,500,000 | 142 | ||
Receive quarterly notional amount multiplied by .75% and pay Lehman Brothers, Inc. upon default event of AOL Time Warner, Inc., par value of the notional amount of AOL Time Warner, Inc. 6.875% 5/1/12 | Sept. 2009 | 2,000,000 | 919 | ||
$ 7,500,000 | $ (713) |
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 $33,715,878 or 5.8% 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 $1,993,674. |
(d) Dow Jones CDX N.A. Investment Grade 2 is a tradable index of credit default swaps on investment grade debt of U.S. companies. |
(e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(f) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(g) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
(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. |
(i) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$99,895,000 due 8/2/04 at 1.37% | |
Banc of America Securities LLC. | $ 36,948,418 |
Bank of America, National Association | 16,785,755 |
Bear Stearns & Co. Inc. | 4,196,439 |
BNP Paribas Securities Corp. | 4,196,439 |
Goldman, Sachs & Co. | 4,196,439 |
Morgan Stanley & Co. Incorporated. | 33,571,510 |
$ 99,895,000 |
Income Tax Information |
The fund hereby designates approximately $611,000 as a 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, 2004 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $99,895,000) (cost $553,780,835) - See accompanying schedule | $ 554,324,157 | |
Cash | 12,057 | |
Receivable for investments sold | 39,775,969 | |
Receivable for fund shares sold | 1,096,050 | |
Interest receivable | 1,230,060 | |
Receivable for daily variation on futures contracts | 96,463 | |
Prepaid expenses | 465 | |
Receivable from investment adviser for expense reductions | 22,285 | |
Other affiliated receivables | 30 | |
Total assets | 596,557,536 | |
Liabilities | ||
Payable for investments purchased | $ 2,621,522 | |
Delayed delivery | 11,392,993 | |
Payable for fund shares redeemed | 964,388 | |
Distributions payable | 68,141 | |
Swap agreements, at value | 713 | |
Accrued management fee | 196,099 | |
Distribution fees payable | 49 | |
Other affiliated payables | 62,346 | |
Other payables and accrued expenses | 29,123 | |
Total liabilities | 15,335,374 | |
Net Assets | $ 581,222,162 | |
Net Assets consist of: | ||
Paid in capital | $ 580,775,927 | |
Distributions in excess of net investment income | (122,365) | |
Accumulated undistributed net realized gain (loss) on investments | 256,050 | |
Net unrealized appreciation (depreciation) on investments | 312,550 | |
Net Assets | $ 581,222,162 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2004 | ||
Calculation of Maximum Offering Price | $ 10.05 | |
Maximum offering price per share (100/98.50 of $10.05) | $ 10.20 | |
Class T: | $ 10.05 | |
Maximum offering price per share (100/98.50 of $10.05) | $ 10.20 | |
Fidelity Ultra-Short Bond: | $ 10.05 | |
Institutional Class: | $ 10.05 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2004 | ||
Investment Income | ||
Interest | $ 6,831,755 | |
Expenses | ||
Management fee | $ 1,655,296 | |
Transfer agent fees | 495,131 | |
Distribution fees | 63 | |
Accounting fees and expenses | 101,861 | |
Non-interested trustees' compensation | 1,713 | |
Custodian fees and expenses | 9,529 | |
Registration fees | 111,089 | |
Audit | 29,534 | |
Legal | 3,297 | |
Miscellaneous | 11,827 | |
Total expenses before reductions | 2,419,340 | |
Expense reductions | (289,859) | 2,129,481 |
Net investment income (loss) | 4,702,274 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 151,236 | |
Futures contracts | 165,064 | |
Swap agreements | 11,402 | |
Total net realized gain (loss) | 327,702 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 401,779 | |
Futures contracts | (303,545) | |
Swap agreements | (3,720) | |
Total change in net unrealized appreciation (depreciation) | 94,514 | |
Net gain (loss) | 422,216 | |
Net increase (decrease) in net assets resulting from operations | $ 5,124,490 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | August 29, 2002 (commencement of | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 4,702,274 | $ 1,708,506 |
Net realized gain (loss) | 327,702 | 61,931 |
Change in net unrealized appreciation (depreciation) | 94,514 | 218,036 |
Net increase (decrease) in net assets resulting | 5,124,490 | 1,988,473 |
Distributions to shareholders from net investment income | (4,708,387) | (1,913,077) |
Share transactions - net increase (decrease) | 355,546,941 | 225,077,055 |
Redemption fees | 56,247 | 50,420 |
Total increase (decrease) in net assets | 356,019,291 | 225,202,871 |
Net Assets | ||
Beginning of period | 225,202,871 | - |
End of period (including distributions in excess of net investment income of $122,365 and distributions in excess of net investment income of $69,342, respectively) | $ 581,222,162 | $ 225,202,871 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Year ended July 31, | 2004 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) E | .013 |
Net realized and unrealized gain (loss) | .011 |
Total from investment operations | .024 |
Distributions from net investment income | (.014) |
Redemption fees added to paid in capital E, H | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C, D | .24% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | .85% A |
Expenses net of voluntary waivers, if any | .70% A |
Expenses net of all reductions | .70% A |
Net investment income (loss) | 1.11% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 316 |
Portfolio turnover rate | 53% |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
H Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Year ended July 31, | 2004 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) E | .013 |
Net realized and unrealized gain (loss) | .010 |
Total from investment operations | .023 |
Distributions from net investment income | (.013) |
Redemption fees added to paid in capital E, H | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C, D | .23% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | .86% A |
Expenses net of voluntary waivers, if any | .70% A |
Expenses net of all reductions | .70% A |
Net investment income (loss) | 1.11% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 356 |
Portfolio turnover rate | 53% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
H Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Ultra-Short Bond
Years ended July 31, | 2004 | 2003 E |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 10.02 | $ 10.00 |
Income from Investment Operations | ||
Net investment income (loss) D | .122 | .137 |
Net realized and unrealized gain (loss) | .029 | .052 |
Total from investment operations | .151 | .189 |
Distributions from net investment income | (.122) | (.173) |
Redemption fees added to paid in capital D | .001 | .004 |
Net asset value, end of period | $ 10.05 | $ 10.02 |
Total Return B, C | 1.52% | 1.94% |
Ratios to Average Net Assets F | ||
Expenses before expense reductions | .62% | .70% A |
Expenses net of voluntary waivers, if any | .55% | .55% A |
Expenses net of all reductions | .55% | .55% A |
Net investment income (loss) | 1.21% | 1.50% A |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 580,174 | $ 225,203 |
Portfolio turnover rate | 53% | 39% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period August 29, 2002 (commencement of operations) to July 31, 2003.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Year ended July 31, | 2004 E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) D | .015 |
Net realized and unrealized gain (loss) | .010 |
Total from investment operations | .025 |
Distributions from net investment income | (.015) |
Redemption fees added to paid in capital D, G | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C | .25% |
Ratios to Average Net Assets F | |
Expenses before expense reductions | .67% A |
Expenses net of voluntary waivers, if any | .55% A |
Expenses net of all reductions | .55% A |
Net investment income (loss) | 1.26% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 376 |
Portfolio turnover rate | 53% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2004
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 fund offers Class A, Class T, Fidelity Ultra Short Bond, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
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, including restricted 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 valuation models. If prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, 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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to losses deferred due to futures transactions, swap agreements, market discount and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,097,028 | |
Unrealized depreciation | (543,865) | |
Net unrealized appreciation (depreciation) | 553,163 | |
Undistributed ordinary income | 464,338 | |
Cost for federal income tax purposes | $ 553,770,994 |
The tax character of distributions paid was as follows:
July 31, 2004 | July 31, 2003 | |
Ordinary Income | $ 4,708,387 | $ 1,857,271 |
Long-term Capital Gains | - | 55,806 |
Total | $ 4,708,387 | $ 1,913,077 |
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1. Significant Accounting Policies - continued
Short-Term Trading (Redemption) Fees. Shares purchased and held in the fund less than 60 days are subject to a redemption fee equal to .25% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by Fidelity Management & Research Company (FMR), are retained by the fund and accounted for as an addition to paid in capital.
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. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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's terms, 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
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Notes to Financial Statements - continued
2. Operating Policies - continued
Futures Contracts - continued
"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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
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. Periodic payments and premiums received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
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2. Operating Policies - 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 may 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 sale 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. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $249,049,133 and $49,994,219, respectively.
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 annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period,
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Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 28 | $ 17 |
Class T | 0% | .15% | 35 | 25 |
$ 63 | $ 42 |
Sales Load. FDC receives a front-end sales charge of up to 1.50% for selling Class A and Class T shares, some of which is paid to financial intermediaries for selling shares of the fund. FDC receives the proceeds of a contingent deferred sales charges levied on Class A and Class T redemptions. These charges depend on the holding period. The deferred sales charges are .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 207 |
Class T | 91 |
$ 298 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the fund, except for Fidelity Ultra Short Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Ultra Short Bond shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
Amount | % of | |
Class A | $ 40 | .21* |
Class T | 52 | .22* |
Fidelity Ultra-Short Bond | 494,966 | .13 |
Institutional Class | 73 | .18* |
$ 495,131 |
* Annualized
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month.
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 $2,452,636 for the period.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | .70% | $ 30 |
Class T | .70% | 38 |
Fidelity Ultra-Short Bond | .55% | 288,280 |
Institutional Class | .55% | 51 |
$ 288,399 |
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 expense by $1,460.
Annual Report
Notes to Financial Statements - continued
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | ||
2004 A | 2003 B | |
From net investment income | ||
Class A | $ 200 | $ - |
Class T | 262 | - |
Fidelity Ultra-Short Bond | 4,707,454 | 1,913,077 |
Institutional Class | 471 | - |
Total | $ 4,708,387 | $ 1,913,077 |
A Distributions for Class A, Class T and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Distributions for Fidelity Ultra-Short Bond for the period August 29, 2002 (commencement of operations) to July 31, 2003.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2004 A | 2003 B | 2004 A | 2003 B | |
Class A | ||||
Shares sold | 31,506 | - | $ 316,495 | $ - |
Reinvestment of distributions | 19 | - | 195 | - |
Shares redeemed | (78) | - | (780) | - |
Net increase (decrease) | 31,447 | - | $ 315,910 | $ - |
Class T | ||||
Shares sold | 35,358 | - | $ 355,050 | $ - |
Reinvestment of distributions | 26 | - | 262 | - |
Net increase (decrease) | 35,384 | - | $ 355,312 | $ - |
Fidelity Ultra-Short Bond | ||||
Shares sold | 59,927,755 | 32,991,854 | $ 602,349,405 | $ 330,589,127 |
Reinvestment of distributions | 418,048 | 163,959 | 4,203,573 | 1,643,470 |
Shares redeemed | (25,071,625) | (10,686,601) | (252,053,274) | (107,155,542) |
Net increase (decrease) | 35,274,178 | 22,469,212 | $ 354,499,704 | $ 225,077,055 |
Institutional Class | ||||
Shares sold | 37,405 | - | $ 375,544 | $ - |
Reinvestment of distributions | 47 | - | 471 | - |
Net increase (decrease) | 37,452 | - | $ 376,015 | $ - |
A Share transactions for Class A, Class T and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Share transactions for Fidelity Ultra-Short Bond for the period August 29, 2002 (commencement of operations) to July 31, 2003.
Annual Report
Report of Independent Registered Public Accounting Firm
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, 2004 and the results of its operations, the changes in its 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 Ultra-Short Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 295 funds advised by FMR or an affiliate. Mr. McCoy oversees 297 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 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
Year of Election or Appointment: 2001 Senior Vice President of the fund (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 (50) | |
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 (52) | |
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.
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998, retired as Chairman May 1999, and 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. He is a member of the Executive Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 and the University of Notre Dame Advisory Council for the College of Science. |
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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 (43) | |
Year of Election or Appointment: 2002 Vice President of the fund. 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 (39) | |
Year of Election or Appointment: 2002 Vice President of the fund 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 (55) | |
Year of Election or Appointment: 2002 Secretary of the fund. 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 (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of the fund. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the fund. 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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of the fund. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the fund. 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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of the fund. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of the fund. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. 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). |
Distributions
A total of 1.64% 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 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.00 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | 7,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.496 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
AUSBI-UANN-0904
1.804593.100
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Fidelity®
Ultra-Short Bond
Fund
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR 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.
Commencing with the fiscal quarter ending October 31, 2004, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. The fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of the fund's portfolio holdings, view the fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com/holdings.
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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
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 Ultra-Short Bond'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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Life of |
Fidelity® Ultra-Short Bond | 1.52% | 1.80% |
A From August 29, 2002.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Ultra-Short Bond 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 had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
Fidelity Ultra-Short Bond Fund was up 1.52% during the past year, topping the Lehman Brothers 6 Month Swap Index and the LipperSM Ultra-Short Obligation Funds Average, which rose 1.06% and 1.32%, respectively. Sector selection was the main driver of performance, as the fund was well-positioned to exploit opportunities throughout the ultra-short-term bond space, while keeping its interest rate risk at a minimum. I invested in high-quality, higher-yielding spread sectors - including corporate bonds and securitized products such as asset-backed securities (ABS), collateralized mortgage obligations (CMOs) and mortgage pass-through securities - all of which outpaced comparable-duration Treasuries. This strategy played directly into Fidelity's research strengths, which also gave us an advantage in terms of security selection. The fund benefited a lot from its focus on attractively valued home equity ABS and CMOs, both of which did especially well. Elsewhere, modest positions in several middle- and lower-quality investment-grade corporates paid off in the first half of the period amid a bullish climate for riskier assets. Conversely, yield-curve positioning was a slight drag on performance. My strategy of owning securities with more evenly distributed cash flows relative to a single "bullet" maturity index proved ineffective during the period as the short end of the curve steepened.
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
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A (dagger) | |||
Actual | $ 1,000.00 | $ 1,002.40 | $ .88 |
Hypothetical A | $ 1,000.00 | $ 1,005.42 | $ .88 |
Class T(dagger) | |||
Actual | $ 1,000.00 | $ 1,002.30 | $ .88 |
Hypothetical A | $ 1,000.00 | $ 1,005.42 | $ .88 |
Beginning | Ending | Expenses Paid | |
Fidelity Ultra-Short Bond | |||
Actual | $ 1,000.00 | $ 1,005.20 | $ 2.74 |
Hypothetical A | $ 1,000.00 | $ 1,022.23 | $ 2.77 |
Institutional Class(dagger) | |||
Actual | $ 1,000.00 | $ 1,002.50 | $ .69 |
Hypothetical A | $ 1,000.00 | $ 1,005.61 | $ .69 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Class A | .70% |
Class T | .70% |
Fidelity Ultra-Short Bond | .55% |
Institutional Class | .55% |
* Calculated by multiplying by 46/366 to reflect the period June 16, 2004 to July 31, 2004.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2004 | As of January 31, 2004 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 20.4% | ![]() | AAA 21.6% | ||||
![]() | AA 7.1% | ![]() | AA 8.2% | ||||
![]() | A 12.4% | ![]() | A 15.4% | ||||
![]() | BBB 9.1% | ![]() | BBB 8.4% | ||||
![]() | BB and Below 0.2% | ![]() | BB and Below 0.6% | ||||
![]() | Not Rated 3.7% | ![]() | Not Rated 1.8% | ||||
![]() | 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, 2004 | ||
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, 2004 | ||
6 months ago | ||
Years | 0.5 | 0.5 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Corporate Bonds 5.4% | ![]() | Corporate Bonds 7.8% | ||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 15.4% | ![]() | CMOs and Other Mortgage Related Securities 12.5% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 4.1% | ** Foreign investments | 2.9% | ||||
* Futures and Swaps | 14.6% | ** Futures and Swaps | 15.0% |
Percentages are adjusted for the effect of futures contracts and swap contracts, if applicable. The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investment of Fidelity's fixed-income central fund. |
Annual Report
Investments July 31, 2004
Showing Percentage of Net Assets
Nonconvertible Bonds - 3.8% | |||
Principal | Value | ||
CONSUMER DISCRETIONARY - 0.8% | |||
Auto Components - 0.2% | |||
DaimlerChrysler NA Holding Corp.: | |||
1.87% 5/24/06 (e) | $ 800,000 | $ 802,894 | |
2.18% 8/8/06 (e) | 600,000 | 606,178 | |
1,409,072 | |||
Media - 0.6% | |||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 900,000 | 970,826 | |
Continental Cablevision, Inc. 8.3% 5/15/06 | 450,000 | 488,301 | |
Cox Communications, Inc. 7.5% 8/15/04 | 500,000 | 500,825 | |
Liberty Media Corp. 3.02% 9/17/06 (e) | 1,350,000 | 1,370,480 | |
3,330,432 | |||
TOTAL CONSUMER DISCRETIONARY | 4,739,504 | ||
CONSUMER STAPLES - 0.2% | |||
Food & Staples Retailing - 0.1% | |||
Safeway, Inc. 2.5% 11/1/05 | 820,000 | 816,672 | |
Tobacco - 0.1% | |||
Philip Morris Companies, Inc. 7% 7/15/05 | 300,000 | 310,332 | |
TOTAL CONSUMER STAPLES | 1,127,004 | ||
ENERGY - 0.0% | |||
Oil & Gas - 0.0% | |||
Pemex Project Funding Master Trust 3.0775% 1/7/05 (a)(e) | 150,000 | 150,780 | |
FINANCIALS - 1.7% | |||
Capital Markets - 0.1% | |||
State Street Capital Trust II 1.75% 2/15/08 (e) | 300,000 | 301,843 | |
Consumer Finance - 0.2% | |||
General Motors Acceptance Corp.: | |||
2.88% 10/20/05 (e) | 1,000,000 | 1,006,607 | |
6.75% 1/15/06 | 230,000 | 240,859 | |
John Deere Capital Corp. 2.16% 9/17/04 (e) | 50,000 | 50,023 | |
1,297,489 | |||
Diversified Financial Services - 1.0% | |||
Bombardier Capital, Inc. 7.5% 10/17/05 (a) | 1,000,000 | 1,028,321 | |
Deutsche Telekom International Finance BV 8.25% 6/15/05 | 1,500,000 | 1,572,759 | |
Nonconvertible Bonds - continued | |||
Principal | Value | ||
FINANCIALS - continued | |||
Diversified Financial Services - continued | |||
NiSource Finance Corp. 7.625% 11/15/05 | $ 675,000 | $ 714,064 | |
Powergen US Funding LLC 4.5% 10/15/04 | 335,000 | 336,692 | |
Sprint Capital Corp.: | |||
4.78% 8/17/06 | 1,000,000 | 1,023,258 | |
7.125% 1/30/06 | 500,000 | 528,821 | |
Tyco International Group SA yankee 6.375% 2/15/06 | 800,000 | 839,753 | |
6,043,668 | |||
Insurance - 0.1% | |||
St. Paul Travelers Companies, Inc. 7.875% 4/15/05 | 405,000 | 419,941 | |
Real Estate - 0.2% | |||
Arden Realty LP 8.875% 3/1/05 | 500,000 | 517,705 | |
Duke Realty LP 6.875% 3/15/05 | 300,000 | 308,161 | |
Regency Centers LP 7.125% 7/15/05 | 400,000 | 415,688 | |
1,241,554 | |||
Thrifts & Mortgage Finance - 0.1% | |||
Countrywide Home Loans, Inc. 1.795% 6/2/06 (e) | 500,000 | 502,492 | |
TOTAL FINANCIALS | 9,806,987 | ||
INFORMATION TECHNOLOGY - 0.2% | |||
Communications Equipment - 0.2% | |||
Motorola, Inc. 6.75% 2/1/06 | 1,000,000 | 1,057,432 | |
MATERIALS - 0.0% | |||
Paper & Forest Products - 0.0% | |||
Boise Cascade Corp. 7.35% 10/11/04 | 270,000 | 270,626 | |
TELECOMMUNICATION SERVICES - 0.8% | |||
Diversified Telecommunication Services - 0.6% | |||
British Telecommunications PLC 7.875% 12/15/05 | 950,000 | 1,013,074 | |
France Telecom SA 8.2% 3/1/06 | 800,000 | 855,781 | |
GTE Corp. 6.36% 4/15/06 | 1,000,000 | 1,051,875 | |
Telefonica Europe BV 7.35% 9/15/05 | 500,000 | 525,821 | |
3,446,551 | |||
Wireless Telecommunication Services - 0.2% | |||
AT&T Wireless Services, Inc. 7.35% 3/1/06 | 900,000 | 959,012 | |
TOTAL TELECOMMUNICATION SERVICES | 4,405,563 | ||
Nonconvertible Bonds - continued | |||
Principal | Value | ||
UTILITIES - 0.1% | |||
Electric Utilities - 0.1% | |||
Progress Energy, Inc. 6.75% 3/1/06 | $ 605,000 | $ 636,358 | |
TOTAL NONCONVERTIBLE BONDS (Cost $22,161,171) | 22,194,254 | ||
U.S. Government Agency Obligations - 5.5% | |||
Fannie Mae 1.55% 5/4/05 | 10,000,000 | 9,952,484 | |
Federal Home Loan Bank: | |||
1.265% 3/15/05 | 10,000,000 | 9,948,060 | |
1.35% 4/29/05 | 10,000,000 | 9,939,380 | |
Freddie Mac 0% 10/19/04 (c) | 2,000,000 | 1,993,674 | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $31,993,687) | 31,833,598 | ||
U.S. Government Agency - Mortgage Securities - 1.7% | |||
Fannie Mae - 1.7% | |||
5.5% 11/1/16 to 2/1/19 | 6,667,973 | 6,861,962 | |
6.5% 7/1/16 to 8/1/32 | 696,502 | 731,842 | |
7% 8/1/17 to 5/1/32 | 2,265,677 | 2,401,869 | |
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $10,013,200) | 9,995,673 | ||
Asset-Backed Securities - 18.9% | |||
Accredited Mortgage Loan Trust Series 2004-2 Class A2, 1.75% 7/25/34 (e) | 939,157 | 939,128 | |
ACE Securities Corp.: | |||
Series 2002-HE2 Class M1, 2.3% 8/25/32 (e) | 175,000 | 176,415 | |
Series 2003-FM1 Class M2, 3.3% 11/25/32 (e) | 145,000 | 147,655 | |
Series 2003-HE1: | |||
Class A2, 1.86% 11/25/33 (e) | 609,586 | 611,435 | |
Class M1 2.1% 11/25/33 (e) | 120,000 | 120,644 | |
Class M2, 3.15% 11/25/33 (e) | 75,000 | 76,192 | |
Series 2003-HS1: | |||
Class M1, 2.2% 6/25/33 (e) | 50,000 | 50,237 | |
Class M2, 3.2% 6/25/33 (e) | 50,000 | 50,719 | |
Series 2003-NC1 Class M1, 2.23% 7/25/33 (e) | 100,000 | 101,050 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
ACE Securities Corp.: - continued | |||
Series 2003-TC1 Class A2, 1.84% 6/25/33 (e) | $ 79,084 | $ 79,253 | |
Series 2004-HE1: | |||
Class M1, 1.95% 2/25/34 (e) | 150,000 | 150,016 | |
Class M2, 2.55% 2/25/34 (e) | 175,000 | 175,040 | |
American Express Credit Account Master Trust | 410,000 | 410,690 | |
American Express Credit Account Trust Series 2004-C Class C, 1.88% 2/15/12 (a)(e) | 1,200,000 | 1,200,750 | |
AmeriCredit Automobile Receivables Trust: | |||
Series 2000-D Class A4, 1.57% 9/12/07 (e) | 289,712 | 289,988 | |
Series 2001-D Class A3, 1.66% 9/12/06 (e) | 94,389 | 94,403 | |
Series 2002-A Class A3, 1.56% 10/12/06 (e) | 104,570 | 104,582 | |
Series 2003-AM Class A4B, 1.83% 11/6/09 (e) | 600,000 | 603,745 | |
Series 2003-BX Class A4B, 1.74% 1/6/10 (e) | 140,000 | 140,960 | |
Series 2003-CF Class A3, 2.75% 10/9/07 | 1,000,000 | 1,001,604 | |
Series 2004-1 Class A3, 3.22% 7/6/08 | 365,000 | 365,573 | |
Ameriquest Mortgage Securities, Inc.: | |||
Series 2002-4: | |||
Class A2, 1.89% 2/25/33 (e) | 59,252 | 59,463 | |
Class M1, 2.45% 2/25/33 (e) | 105,000 | 105,836 | |
Series 2002-AR1: | |||
Class A2, 1.77% 9/25/32 (e) | 41,652 | 41,672 | |
Class M2, 2.75% 9/25/32 (e) | 490,000 | 492,705 | |
Series 2003-1: | |||
Class A2, 1.86% 2/25/33 (e) | 106,091 | 106,431 | |
Class M1, 2.35% 2/25/33 (e) | 100,000 | 101,343 | |
Series 2003-3 Class M1, 2.25% 3/25/33 (e) | 75,000 | 75,328 | |
Series 2003-6: | |||
Class AV3, 1.77% 8/25/33 (e) | 255,193 | 255,600 | |
Class S, 5% 5/25/33 (h) | 4,022,099 | 179,895 | |
Series 2003-7 Class M1, 2.3% 8/25/33 (e) | 140,000 | 141,795 | |
Series 2003-AR1 Class M1, 2.6% 1/25/33 (e) | 500,000 | 504,215 | |
Series 2004-R2: | |||
Class M1, 1.88% 4/25/34 (e) | 85,000 | 84,997 | |
Class M2, 1.93% 4/25/34 (e) | 75,000 | 74,998 | |
Amortizing Residential Collateral Trust: | |||
Series 2002-BC6 Class M1, 2.2% 8/25/32 (e) | 100,000 | 100,741 | |
Series 2002-BC7: | |||
Class M1, 2.25% 10/25/32 (e) | 450,000 | 452,531 | |
Class M2, 2.35% 10/25/32 (e) | 300,000 | 302,403 | |
Series 2002-BC9 Class A2, 1.93% 12/25/32 (e) | 112,982 | 113,557 | |
Series 2003-BC1 Class M2, 2.55% 1/25/32 (e) | 175,000 | 175,380 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
AQ Finance NIMS Trust Series 2003-N6A Class NOTE, 1.75% 5/25/10 (a)(e) | $ 108,271 | $ 108,204 | |
Argent Securities, Inc.: | |||
Series 2003-W3 Class M2, 3.25% 9/25/33 (e) | 800,000 | 821,739 | |
Series 2003-W6 Class AV2, 1.82% 1/25/34 (e) | 743,294 | 745,337 | |
Series 2004-W7: | |||
Class M1, 2% 5/25/34 (e) | 305,000 | 304,990 | |
Class M2, 2.05% 5/25/34 (e) | 250,000 | 249,992 | |
Asset Backed Securities Corp. Series 2002-HE2 Class M2, 2.51% 8/15/32 (e) | 100,000 | 100,168 | |
Asset Backed Securities Corp. Home Equity Loan Trust: | |||
Series 2002-HE3 Class 2A, 1.78% 10/15/32 (e) | 53,493 | 53,640 | |
Series 2003-HE2: | |||
Class A2, 1.76% 4/15/33 (e) | 153,668 | 153,884 | |
Class M1, 2.28% 4/15/33 (e) | 1,000,000 | 1,009,979 | |
Series 2003-HE3 Class A2, 1.73% 6/15/33 (e) | 55,384 | 55,400 | |
Series 2003-HE4: | |||
Class A3, 1.6% 8/15/33 (e) | 146,187 | 146,169 | |
Class M2, 3.38% 8/15/33 (e) | 285,000 | 290,537 | |
Series 2003-HE5 Class A2A, 1.74% 8/15/33 (e) | 293,315 | 293,935 | |
Series 2003-HE6 Class M1, 2.1% 11/25/33 (e) | 215,000 | 216,116 | |
Series 2003-HE7 Class A3, 1.74% 12/15/33 (e) | 603,442 | 604,831 | |
Series 2004-HE6 Series A2, 2.03% 9/25/34 (b)(e) | 2,640,000 | 2,637,938 | |
Associates Automobile Receivables Trust Series 2000-1 | 187,894 | 189,888 | |
Bank One Issuance Trust: | |||
Series 2002-B1 Class B1, 1.76% 12/15/09 (e) | 465,000 | 467,094 | |
Series 2002-B2 Class B2, 1.72% 5/15/08 (e) | 100,000 | 100,255 | |
Series 2002-B3 Class B, 1.74% 8/15/08 (e) | 500,000 | 501,489 | |
Series 2002-C1 Class C1, 2.34% 12/15/09 (e) | 675,000 | 683,988 | |
Series 2002-C2 Class C2, 2.37% 5/15/08 (e) | 2,850,000 | 2,868,528 | |
Bayview Financial Asset Trust Series 2000-F Class A, 1.9619% 9/28/43 (e) | 365,815 | 367,501 | |
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 1.9119% 2/28/44 (e) | 657,173 | 658,867 | |
Capital Auto Receivables Asset Trust Series 2003-1 Class B, 1.85% 6/15/10 (a)(e) | 287,287 | 288,372 | |
Capital One Auto Finance Trust Series 2003-A Class A4B, 1.66% 1/15/10 (e) | 425,000 | 426,990 | |
Capital One Master Trust: | |||
Series 2001-1 Class B, 1.89% 12/15/10 (e) | 500,000 | 503,625 | |
Series 2001-8A Class B, 1.93% 8/17/09 (e) | 405,000 | 408,185 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
Capital One Multi-Asset Execution Trust: | |||
Series 2002-B1 Class B1, 2.06% 7/15/08 (e) | $ 1,035,000 | $ 1,039,978 | |
Series 2003-B1 Class B1, 2.55% 2/17/09 (e) | 1,135,000 | 1,152,607 | |
Series 2003-B6 Class B6, 1.91% 9/15/11 (e) | 1,125,000 | 1,134,836 | |
Series 2004-B1 Class B1, 1.82% 11/15/11 (e) | 1,180,000 | 1,183,000 | |
Capital Trust Ltd. Series 2004-1: | |||
Class A2, 1.7% 7/20/39 (a)(e) | 265,000 | 265,000 | |
Class B, 1.85% 7/20/39 (a)(e) | 140,000 | 140,000 | |
Class C, 2.15% 7/20/39 (a)(e) | 180,000 | 180,000 | |
CDC Mortgage Capital Trust: | |||
Series 2001-HE1 Class A, 1.79% 1/25/32 (e) | 46,411 | 46,430 | |
Series 2002-HE3: | |||
Class M1, 2.55% 3/25/33 (e) | 299,999 | 305,872 | |
Class M2, 3.7% 3/25/33 (e) | 489,999 | 497,677 | |
Series 2003-HE1 Class M2, 3.4% 8/25/33 (e) | 215,000 | 219,361 | |
Series 2003-HE2 Class A, 1.8% 10/25/33 (e) | 379,917 | 380,671 | |
Series 2003-HE3: | |||
Class M1, 2.15% 11/25/33 (e) | 104,999 | 105,892 | |
Class M2, 3.2% 11/25/33 (e) | 80,000 | 80,800 | |
Series 2003-HE4 Class A2, 1.68% 3/25/34 (e) | 948,098 | 948,576 | |
Series 2004-HE2 Class M2, 2.65% 7/26/34 (e) | 175,000 | 174,994 | |
Chase Credit Card Owner Trust: | |||
Series 2001-6 Class B, 1.86% 3/16/09 (e) | 200,000 | 201,310 | |
Series 2002-2 Class C, 2.28% 7/16/07 (e) | 1,170,000 | 1,174,108 | |
Series 2002-6 Class B, 1.73% 1/15/08 (e) | 150,000 | 150,394 | |
Series 2004-1 Class B, 1.58% 5/15/09 (e) | 295,000 | 294,983 | |
Citibank Credit Card Issuance Trust: | |||
Series 2000-C2 Class C2, 2.25% 10/15/07 (e) | 900,000 | 902,372 | |
Series 2001-B2 Class B2, 1.88% 12/10/08 (e) | 615,000 | 618,735 | |
Series 2002-B1 Class B1, 1.9% 6/25/09 (e) | 655,000 | 656,806 | |
Series 2002-C1 Class C1, 2.17% 2/9/09 (e) | 900,000 | 912,709 | |
Series 2003-C1 Class C1, 2.24% 4/7/10 (e) | 1,685,000 | 1,723,510 | |
Countrywide Home Loans, Inc.: | |||
Series 2000-2 Class MV2, 2.35% 6/25/31 (e) | 166,833 | 167,112 | |
Series 2002-6 Class AV1, 1.88% 5/25/33 (e) | 211,371 | 211,810 | |
Series 2003-BC1 Class M2, 3.45% 9/25/32 (e) | 1,025,000 | 1,052,669 | |
Series 2003-SD3 Class A1, 1.87% 12/25/32 (a)(e) | 148,572 | 149,165 | |
Series 2004-2 Class M1, 1.95% 5/25/34 (e) | 375,000 | 374,988 | |
Series 2004-3: | |||
Class 3A4, 1.7% 8/25/34 (e) | 9,328,000 | 9,261,372 | |
Class M1, 1.95% 6/25/34 (e) | 100,000 | 100,103 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 2002-HE16 Class M2, 2.95% 10/25/32 (e) | 75,000 | 75,875 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
CS First Boston Mortgage Securities Corp.: - continued | |||
Series 2003-8 Class A2, 1.84% 4/25/34 (e) | $ 514,436 | $ 515,979 | |
Series 2004-FRE1: | |||
Class A2, 1.96% 4/25/34 (b)(e) | 825,000 | 825,000 | |
Class B1, 3.41% 4/25/34 (b)(e) | 605,000 | 605,000 | |
Class M3, 2.26% 4/25/34 (b)(e) | 610,000 | 610,000 | |
Discover Card Master Trust I Series 2003-4 Class B1, 1.71% 5/16/11 (e) | 550,000 | 551,846 | |
Fannie Mae guaranteed REMIC pass thru certificates | 661,207 | 22,026 | |
Fieldstone Mortgage Investment Corp.: | |||
Series 2003-1 Class M1, 2.13% 11/25/33 (e) | 100,000 | 100,876 | |
Series 2004-1 Class 2A, 1.74% 1/25/35 (b)(e) | 3,541,473 | 3,540,658 | |
Series 2004-1 Class M2, 2.55% 1/25/35 (e) | 300,000 | 300,100 | |
First Franklin Mortgage Loan Trust Series 2004-FF2: | |||
Class M3, 2% 3/25/34 (e) | 25,000 | 24,999 | |
Class M4, 2.35% 3/25/34 (e) | 25,000 | 24,999 | |
Class M6, 2.7% 3/25/34 (e) | 25,000 | 24,786 | |
First USA Secured Note Trust Series 2001-3 Class C, 2.46% 11/19/08 (a)(e) | 785,000 | 790,397 | |
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 270,000 | 270,735 | |
Ford Credit Auto Owner Trust Series 2003-B Class B2, 1.81% 10/15/07 (e) | 650,000 | 653,152 | |
Fremont Home Loan Trust Series 2004-A Class M2, 2.6% 1/25/34 (e) | 375,000 | 374,988 | |
GE Business Loan Trust Series 2003-1 Class A, 1.81% 4/15/31 (a)(e) | 320,717 | 321,118 | |
Gracechurch Card Funding PLC: | |||
Series 5: | |||
Class B, 1.4688% 8/15/08 (e) | 80,000 | 79,950 | |
Class C, 2.1688% 8/15/08 (e) | 295,000 | 295,553 | |
Series 6 Class B, 1.4288% 2/17/09 (e) | 75,000 | 74,953 | |
GS Mortgage Securities Corp.: | |||
Series 2003-FM1 Class M1, 2.1% 3/20/33 (e) | 750,000 | 758,467 | |
Series 2004-FF3 Class M2, 2.59% 5/25/34 (e) | 370,000 | 369,993 | |
Series 2004-FM1: | |||
Class M1, 2.1% 11/25/33 (e) | 195,000 | 194,994 | |
Class M2, 2.85% 11/25/33 (e) | 135,000 | 135,538 | |
5.5% 11/25/32 (a) | 503,558 | 502,802 | |
GSAMP Trust: | |||
Series 2002-NC1 Class A2, 1.77% 7/25/32 (e) | 213,315 | 214,127 | |
Series 2004-FM2 Class M1, 1.95% 1/25/34 (e) | 250,000 | 249,990 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
GSAMP Trust: - continued | |||
Series 2004-HE1: | |||
Class M1, 2% 5/25/34 (e) | $ 320,000 | $ 319,990 | |
Class M2, 2.6% 5/25/34 (e) | 150,000 | 148,711 | |
Class M3, 2.85% 5/25/34 (e) | 100,000 | 99,154 | |
Home Equity Asset Trust: | |||
Series 2002-3 Class A5, 1.89% 2/25/33 (e) | 35,459 | 35,513 | |
Series 2002-4: | |||
Class A3, 1.93% 3/25/33 (e) | 317,953 | 319,030 | |
Class M2, 3.5% 3/25/33 (e) | 125,000 | 126,876 | |
Series 2002-5: | |||
Class A3, 1.97% 5/25/33 (e) | 414,468 | 417,046 | |
Class M1, 2.65% 5/25/33 (e) | 200,000 | 204,487 | |
Series 2003-1: | |||
Class A2, 1.92% 6/25/33 (e) | 772,460 | 774,827 | |
Class M1, 2.45% 6/25/33 (e) | 300,000 | 302,306 | |
Series 2003-2: | |||
Class A2, 1.83% 8/25/33 (e) | 45,315 | 45,443 | |
Class M1, 2.33% 8/25/33 (e) | 80,000 | 81,040 | |
Series 2003-3: | |||
Class A2, 1.81% 8/25/33 (e) | 223,601 | 224,089 | |
Class M1, 2.31% 8/25/33 (e) | 330,000 | 334,244 | |
Series 2003-4: | |||
Class M1, 2.25% 10/25/33 (e) | 170,000 | 171,636 | |
Class M2, 3.35% 10/25/33 (e) | 200,000 | 203,796 | |
Series 2003-5: | |||
Class A2, 1.8% 12/25/33 (e) | 676,850 | 678,166 | |
Class M1, 2.15% 12/25/33 (e) | 160,000 | 161,180 | |
Class M2, 3.18% 12/25/33 (e) | 70,000 | 71,291 | |
Series 2003-7 Class A2, 1.83% 3/25/34 (e) | 1,332,595 | 1,336,263 | |
Series 2003-8 Class M1, 2.17% 4/25/34 (e) | 260,000 | 261,488 | |
Series 2004-4 Class A2, 1.68% 10/25/34 (e) | 1,188,753 | 1,190,137 | |
Home Equity Asset Trust NIMS Trust Series 2002-4N Class A, 8% 5/27/33 (a) | 23,154 | 23,212 | |
Household Affinity Credit Card Master Note Trust I | 500,000 | 500,581 | |
Household Credit Card Master Trust I Series 2002-1 Class B, 2.03% 7/15/08 (e) | 300,000 | 301,886 | |
Household Home Equity Loan Trust: | |||
Series 2002-3 Class A, 1.73% 7/20/32 (e) | 101,126 | 101,314 | |
Series 2003-1 Class M, 1.91% 10/20/32 (e) | 83,838 | 84,030 | |
Series 2003-2: | |||
Asset-Backed Securities - continued | |||
Principal | Value | ||
Household Home Equity Loan Trust: - continued | |||
Class A, 1.75% 9/20/33 (e) | $ 440,445 | $ 441,398 | |
Class M, 2% 9/20/33 (e) | 129,169 | 129,628 | |
Series 2004-1 Class M, 1.93% 9/20/33 (e) | 480,000 | 480,000 | |
Household Mortgage Loan Trust: | |||
Series 2002-HC1: | |||
Class A, 1.72% 5/20/32 (e) | 199,402 | 199,899 | |
Class M, 2.07% 5/20/32 (e) | 95,237 | 95,365 | |
Series 2003-HC1: | |||
Class A, 1.77% 2/20/33 (e) | 364,323 | 365,078 | |
Class M, 2.07% 2/20/33 (e) | 192,571 | 193,549 | |
Series 2003-HC2: | |||
Class A2, 1.75% 6/20/33 (e) | 390,541 | 391,274 | |
Class M, 2.02% 6/20/33 (e) | 329,858 | 327,038 | |
Household Private Label Credit Card Master Note Trust I: | |||
Series 2002-2 Class A, 1.55% 1/18/11 (e) | 1,000,000 | 1,001,242 | |
Series 2002-3 Class B, 2.63% 9/15/09 (e) | 150,000 | 151,664 | |
Ikon Receivables Funding LLC Series 2003-1 Class A3A, 1.62% 12/17/07 (e) | 429,930 | 430,124 | |
Keycorp Student Loan Trust Series 1999-A Class A2, 1.9163% 12/27/09 (e) | 360,360 | 361,368 | |
Long Beach Mortgage Loan Trust: | |||
Series 2001-4 Class 2M1, 2.4% 3/25/32 (e) | 765,000 | 772,561 | |
Series 2003-1: | |||
Class A2, 1.85% 3/25/33 (e) | 111,602 | 111,797 | |
Class M1, 2.37% 3/25/33 (e) | 300,000 | 303,630 | |
Series 2003-2 Class M1, 2.27% 6/25/33 (e) | 500,000 | 503,366 | |
Series 2003-3 Class M1, 2.2% 7/25/33 (e) | 340,000 | 342,947 | |
MASTR ABS NIMS Trust: | |||
Series 2002-OPT1 Class NOTE, 2% 11/26/07 (a)(e) | 405 | 405 | |
Series 2003-OPT1 Class NOTE, 1.83% 2/26/08 (a)(e) | 25,054 | 25,062 | |
MASTR Asset Backed Securities Trust Series 2004 FRE1 Class M1, 2.02% 7/25/34 (e) | 485,000 | 485,000 | |
MBNA Asset Backed Note Trust Series 2000-K Class C, 2.18% 3/17/08 (a)(e) | 1,000,000 | 1,003,600 | |
MBNA Credit Card Master Note Trust: | |||
Series 2001-B1 Class B1, 1.755% 10/15/08 (e) | 1,250,000 | 1,253,165 | |
Series 2001-B2 Class B2, 1.74% 1/15/09 (e) | 1,000,000 | 1,003,604 | |
Series 2002-B2 Class B2, 1.76% 10/15/09 (e) | 1,034,000 | 1,038,792 | |
Series 2002-B4 Class B4, 1.88% 3/15/10 (e) | 630,000 | 635,343 | |
Series 2003-B2 Class B2, 1.77% 10/15/10 (e) | 125,000 | 125,690 | |
Series 2003-B3 Class B3, 1.755% 1/18/11 (e) | 75,000 | 75,188 | |
Series 2003-B5 Class B5, 1.75% 2/15/11 (e) | 485,000 | 488,499 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
MBNA Master Credit Card Trust II: | |||
Series 1997-J Class B, 1.68% 2/15/07 (e) | $ 500,000 | $ 500,114 | |
Series 1998-E Class B, 1.47% 9/15/10 (e) | 200,000 | 201,002 | |
Series 1998-G Class B, 1.78% 2/17/09 (e) | 500,000 | 501,346 | |
Meritage Mortgage Loan Trust Series 2004-1: | |||
Class M1, 1.95% 7/25/34 (e) | 150,000 | 149,995 | |
Class M2, 2% 7/25/34 (e) | 25,000 | 24,999 | |
Class M3, 2.4% 7/25/34 (e) | 50,000 | 49,998 | |
Class M4, 2.55% 7/25/34 (e) | 50,000 | 49,998 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
Series 2002-HE1N Class N1, 2.05% 11/25/09 (a)(e) | 34,457 | 34,445 | |
Series 2003-HE1 Class A1, 1.9% 7/25/34 (e) | 857,761 | 858,690 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-HE3 Class M1, 2.55% 12/27/32 (e) | 125,000 | 127,078 | |
Series 2003-HE1 Class M2, 3.35% 5/25/33 (e) | 325,000 | 331,014 | |
Series 2003-NC10 Class M1, 2.13% 10/25/33 (e) | 830,000 | 835,240 | |
Series 2003-NC5 Class M2, 3.45% 4/25/33 (e) | 200,000 | 203,368 | |
Series 2003-NC6 Class M2, 3.4% 6/27/33 (e) | 630,000 | 643,366 | |
Series 2003-NC8 Class M1, 2.15% 9/25/33 (e) | 120,000 | 120,583 | |
Series 2004-HE6 Class A2, 1.96% 8/25/34 (b)(e) | 2,000,000 | 2,000,000 | |
Series 2004-NC6 Class A2, 1.8019% 9/25/34 (e) | 630,000 | 630,000 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-AM1: | |||
Class M1, 2.3% 2/25/32 (e) | 800,000 | 810,842 | |
Class M2, 2.85% 2/25/32 (e) | 500,000 | 504,138 | |
Series 2001-NC1 Class M2, 2.52% 10/25/31 (e) | 100,000 | 100,352 | |
Series 2001-NC3 Class M2, 2.95% 10/25/31 (e) | 225,000 | 227,405 | |
Series 2001-NC4: | |||
Class M1, 2.45% 1/25/32 (e) | 140,000 | 142,223 | |
Class M2, 3.1% 1/25/32 (e) | 105,000 | 106,575 | |
Series 2002-AM3 Class A3, 1.94% 2/25/33 (e) | 109,916 | 110,301 | |
Series 2002-HE1 Class M1, 2.05% 7/25/32 (e) | 145,000 | 145,693 | |
Series 2002-HE2 Class M2, 2.7% 8/25/32 (e) | 100,000 | 100,552 | |
Series 2002-NC3 Class M1, 2.17% 8/25/32 (e) | 100,000 | 100,916 | |
Series 2002-NC4 Class M2, 3.05% 9/25/32 (e) | 75,000 | 75,685 | |
Series 2002-OP1 Class M1, 2.2% 9/25/32 (e) | 95,000 | 95,746 | |
Series 2003-NC1 Class M2, 3.5% 11/25/32 (e) | 130,000 | 131,910 | |
Series 2003-NC2 Class M2, 3.45% 2/25/33 (e) | 165,000 | 168,989 | |
Navistar Financial Corp. Owner Trust Series 2001-B Class B, 4.83% 11/17/08 | 565,284 | 571,600 | |
New Century Finance NIMS Trust Series 2003-A | 173,685 | 174,825 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
New Century Home Equity Loan Trust Series 2003-2: | |||
Class A2, 1.88% 1/25/33 (e) | $ 129,049 | $ 129,296 | |
Class AIO, 4.5% 3/25/05 (e)(h) | 13,302,840 | 295,323 | |
Nissan Auto Lease Trust Series 2003-A Class A3A, 1.3788% 6/15/09 (e) | 1,000,000 | 1,001,226 | |
NovaStar Home Equity Loan Series 2004-1: | |||
Class M1, 1.9% 6/25/34 (e) | 100,000 | 100,094 | |
Class M4, 2.425% 6/25/34 (e) | 170,000 | 170,252 | |
NovaStar Mortgage Funding Trust Series 2003-3 Class A3, 1.9% 12/25/33 (e) | 743,128 | 743,751 | |
Onyx Acceptance Owner Trust Series 2003-D Class A3, 2.4% 12/15/07 | 470,000 | 468,919 | |
Option One Mortgage Loan Trust Series 2003-6 Class M1, 2.1% 11/25/33 (e) | 1,025,000 | 1,030,353 | |
Park Place Securities, Inc.: | |||
Series 2004 WCW Class M1, 2.17% 8/25/34 (b)(e) | 270,000 | 270,000 | |
Series 2004 WCW1: | |||
Class M2, 2.22% 8/25/34 (b)(e) | 470,000 | 470,000 | |
Class M3, 2.79% 8/25/34 (b)(e) | 435,000 | 435,000 | |
Providian Gateway Master Trust Series 2002-B Class A, 2.08% 6/15/09 (a)(e) | 400,000 | 400,967 | |
Residential Asset Mortgage Products, Inc.: | |||
Series 2003-RP2 Class A1, 1.95% 9/25/33 (a)(e) | 353,313 | 354,417 | |
Series 2004-RS6: | |||
Class 2M2, 2.63% 6/25/34 (e) | 250,000 | 249,992 | |
Class 2M3, 2.78% 6/25/34 (e) | 250,000 | 249,992 | |
Salomon Brothers Mortgage Securities VII, Inc. | 113,137 | 113,501 | |
Saxon Asset Securities Trust Series 2004 2 Class MV1, 2.03% 10/25/34 (e) | 415,000 | 415,000 | |
Sears Credit Account Master Trust II: | |||
Series 1998-2 Class A, 5.25% 10/16/08 | 62,500 | 62,786 | |
Series 2002-4: | |||
Class A, 1.51% 8/18/09 (e) | 800,000 | 800,960 | |
Class B, 1.805% 8/18/09 (e) | 1,080,000 | 1,082,710 | |
Series 2002-5 Class B, 2.63% 11/17/09 (e) | 500,000 | 501,326 | |
Specialty Underwriting & Residential Finance Series 2003-BC3 Class M1, 2.1% 8/25/34 (e) | 1,000,000 | 1,004,421 | |
Structured Asset Securities Corp. Series 2004-GEL1 Class A, 1.81% 2/25/34 (e) | 142,829 | 142,824 | |
Superior Wholesale Inventory Financing Trust VII | 675,000 | 675,527 | |
Terwin Mortgage Trust: | |||
Series 2003-8HE, Class A, 1.92% 12/25/34 (e) | 374,496 | 374,719 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
Terwin Mortgage Trust: - continued | |||
Series 2003-4HE Class A1, 1.88% 9/25/34 (e) | $ 778,582 | $ 781,835 | |
Series 2003-6HE Class A1, 1.92% 11/25/33 (e) | 285,723 | 287,179 | |
Series 2004-1HE Class A1, 1.96% 2/25/35 (a)(e) | 368,633 | 368,633 | |
Triad Auto Receivables Owner Trust Series 2002-A Class A3, 2.62% 2/12/07 | 403,706 | 404,855 | |
WFS Financial 2004-3 Owner Trust Series 2004 3 Class D, 4.07% 2/17/12 | 660,000 | 660,000 | |
TOTAL ASSET-BACKED SECURITIES (Cost $109,646,377) | 109,962,209 | ||
Collateralized Mortgage Obligations - 9.6% | |||
Private Sponsor - 5.7% | |||
Countrywide Home Loans, Inc.: | |||
floater Series 2004 16 Class A1, 1.7688% 8/25/34 (e) | 1,250,000 | 1,250,000 | |
sequential pay Series 2002-5 Class 2A1, 6% 4/25/17 | 161,939 | 161,675 | |
CS First Boston Mortgage Securities Corp.: | |||
floater: | |||
Series 2004-AR7 Class 6A2, 1.85% 8/25/34 (e) | 1,025,000 | 1,025,000 | |
Series 2004-AR2 Class 6A1, 1.85% 3/25/34 (e) | 852,587 | 851,317 | |
Series 2004-AR3 Class 6A2, 1.82% 3/25/34 (e) | 339,077 | 339,872 | |
Series 2004-AR5 Class 11A2, 1.82% 6/25/34 (e) | 501,440 | 500,361 | |
Series 2004-AR6 Class 9A2, 1.82% 7/25/34 (e) | 610,398 | 610,398 | |
Series 2003-TFLA Class F, 1.9433% 4/15/13 (a)(e) | 235,000 | 236,780 | |
Granite Mortgages PLC floater: | |||
Series 2004-1: | |||
Class 1B, 1.76% 3/20/44 (e) | 95,000 | 95,089 | |
Class 1C, 2.45% 3/20/44 (e) | 280,000 | 280,788 | |
Class 1M, 1.96% 3/20/44 (e) | 130,000 | 130,163 | |
Series 2004-2: | |||
Class 1A2, 1.4381% 6/20/28 (e) | 500,000 | 500,000 | |
Class 1B, 1.5381% 6/20/44 (e) | 100,000 | 100,000 | |
Class 1C, 2.0681% 6/20/44 (e) | 365,000 | 365,000 | |
Class 1M, 1.6481% 6/20/44 (e) | 185,000 | 185,000 | |
Holmes Financing PLC floater: | |||
Series 7 Class 2M, 2.4% 7/15/40 (e) | 195,000 | 197,541 | |
Series 8: | |||
Class 1B, 1.73% 7/15/40 (e) | 145,000 | 145,000 | |
Class 1C, 2.22% 7/15/40 (e) | 1,040,000 | 1,040,325 | |
Class 2A, 1.68% 4/15/11 (e) | 1,400,000 | 1,400,109 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
Private Sponsor - continued | |||
Holmes Financing PLC floater: - continued | |||
Series 8: | |||
Class 2B, 1.77% 7/15/40 (e) | $ 190,000 | $ 190,000 | |
Class 2C, 2.32% 7/15/40 (e) | 775,000 | 775,242 | |
Impac CMB Trust floater Series 2004 6 Class 1A2, 1.84% 10/25/34 (e) | 504,116 | 503,620 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
floater: | |||
Series 2003-A: | |||
Class 2A1, 1.84% 3/25/28 (e) | 447,161 | 448,552 | |
Class 2A2, 1.59% 3/25/28 (e) | 159,700 | 160,827 | |
Series 2003-B Class A1, 1.79% 4/25/28 (e) | 411,755 | 413,100 | |
Series 2003-E Class A2, 1.51% 10/25/28 (e) | 870,224 | 869,459 | |
Series 2003-F Class A2, 1.49% 10/25/28 (e) | 899,961 | 903,301 | |
Series 2004-A Class A2, 1.4% 4/25/29 (e) | 1,118,446 | 1,113,769 | |
Series 2004-B Class A2, 1.8525% 6/25/29 (e) | 1,142,977 | 1,139,649 | |
Series 2004-C Class A2, 2.1506% 7/25/29 (e) | 1,536,888 | 1,536,708 | |
Series 2003-G Class XA1, 1% 1/25/29 (h) | 4,012,587 | 69,280 | |
Permanent Financing PLC floater: | |||
Series 3: | |||
Class 1C, 2.36% 6/10/42 (e) | 1,000,000 | 1,001,037 | |
Class 2C, 2.46% 6/10/42 (e) | 205,000 | 206,025 | |
Series 4 Class 2C, 2.13% 6/10/42 (e) | 1,145,000 | 1,144,730 | |
Series 5: | |||
Class 1C, 1.9878% 6/10/42 (e) | 260,000 | 260,000 | |
Class 2C, 2.1378% 6/10/42 (e) | 390,000 | 390,000 | |
Class 3C, 2.2878% 6/10/42 (e) | 825,000 | 825,000 | |
Residential Asset Mortgage Products, Inc.: | |||
sequential pay: | |||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 535,158 | 554,474 | |
Series 2004-SL2 Class A1, 6.5% 11/25/16 | 210,971 | 218,191 | |
Series 2003-RP1 Class A, 1.95% 4/25/34 (e) | 302,025 | 303,440 | |
Residential Finance LP/Residential Finance Development Corp. floater: | |||
Series 2002-A: | |||
Class B4, 3.1631% 10/10/34 (a)(e) | 97,895 | 99,423 | |
Class B5, 3.7131% 10/10/34 (a)(e) | 97,895 | 99,179 | |
Class B6, 4.2131% 10/10/34 (a)(e) | 97,895 | 99,852 | |
Series 2003-A: | |||
Class B4, 3.1631% 3/10/35 (a)(e) | 98,057 | 99,507 | |
Class B5, 3.7131% 3/10/35 (a)(e) | 98,057 | 100,052 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
Private Sponsor - continued | |||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (a)(h) | $ 14,724,128 | $ 157,594 | |
Sequoia Mortgage Trust: | |||
floater: | |||
Series 2003-5 Class A2, 1.5% 9/20/33 (e) | 866,753 | 863,898 | |
Series 2003-7 Class A2, 1.8788% 1/20/34 (e) | 448,491 | 448,079 | |
Series 2004-6 Class A3B, 2.3063% 7/20/34 (e) | 1,968,357 | 1,960,975 | |
Series 2004-7 Class A3A, 2.285% 8/20/34 (e) | 1,030,000 | 1,030,000 | |
Series 2004-1 Class A, 1.47% 2/20/34 (e) | 622,928 | 621,654 | |
Series 2004-4 Class A, 1.6081% 5/20/34 (e) | 494,060 | 491,934 | |
Series 2004-5 Class A3, 1.8625% 6/20/34 (e) | 785,590 | 785,590 | |
Series 2004-6 Class A3A, 2.1638% 6/20/35 (e) | 984,178 | 984,178 | |
Series 2004-7 Class A3B, 2.53% 7/20/34 (e) | 2,000,000 | 2,000,000 | |
Structured Asset Securities Corp. floater Series 2004 NP1 | 491,185 | 491,185 | |
WAMU Mortgage pass thru certificates sequential pay | 307,287 | 311,082 | |
Washington Mutual Mortgage Securities Corp. sequential pay Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 127,106 | 134,236 | |
TOTAL PRIVATE SPONSOR | 33,219,240 | ||
U.S. Government Agency - 3.9% | |||
Fannie Mae: | |||
floater Series 2002-89 Class F, 1.75% 1/25/33 (e) | 253,528 | 253,747 | |
planned amortization class: | |||
Series 1994-81 Class PJ, 8% 7/25/23 | 167,594 | 169,186 | |
Series 2002-81 Class PU, 4.5% 5/25/20 | 2,280,000 | 2,315,511 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
floater: | |||
Series 2002-11 Class QF, 1.95% 3/25/32 (e) | 310,453 | 312,377 | |
Series 2002-36 Class FT, 1.95% 6/25/32 (e) | 283,736 | 286,215 | |
Series 2002-64 Class FE, 1.76% 10/18/32 (e) | 166,702 | 167,459 | |
Series 2002-74 Class FV, 1.9% 11/25/32 (e) | 187,464 | 188,841 | |
Series 2003-11: | |||
Class DF, 1.9% 2/25/33 (e) | 236,047 | 237,000 | |
Class EF, 1.9% 2/25/33 (e) | 198,423 | 198,909 | |
planned amortization class: | |||
Series 2001-62 Class PG, 6.5% 10/25/30 | 200,739 | 204,985 | |
Series 2002-52 Class PA, 6% 4/25/31 | 46,468 | 47,279 | |
Series 2002-55 Class QB, 5.5% 8/25/12 | 38,458 | 38,481 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | |||
planned amortization class: | |||
Series 2002-8 Class PD, 6.5% 7/25/30 | $ 821,128 | $ 842,593 | |
Series 2003-17 Class PQ, 4.5% 3/25/16 | 855,000 | 864,768 | |
sequential pay Series 2001-15 Class VA, 6% 6/25/10 | 51,073 | 51,213 | |
Series 2002-50 Class LE, 7% 12/25/29 | 275,508 | 281,897 | |
Series 2004-31 Class IA, 4.5% 6/25/10 (h) | 635,000 | 44,906 | |
Freddie Mac planned amortization class: | |||
Series 2091 Class PP, 6% 2/15/27 | 653,693 | 661,064 | |
Series 2256 Class MB, 7.25% 5/15/30 | 332,440 | 337,008 | |
Series 2360 Class PW, 6% 11/15/14 | 130,992 | 131,149 | |
Series 2517 Class TL, 4.5% 4/15/26 | 205,714 | 205,657 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
floater: | |||
Series 2526 Class FC, 1.78% 11/15/32 (e) | 70,321 | 70,592 | |
Series 2538 Class FB, 1.78% 12/15/32 (e) | 325,696 | 326,966 | |
Series 2551 Class FH, 1.83% 1/15/33 (e) | 177,370 | 177,960 | |
planned amortization class: | |||
Series 1675 Class H, 6.375% 10/15/22 | 43,799 | 43,870 | |
Series 1732 Class H, 6.5% 11/15/22 | 27,529 | 27,510 | |
Series 2293 Class WD, 6.5% 12/15/29 | 320,072 | 320,233 | |
Series 2368 Class PQ, 6.5% 8/15/30 | 172,631 | 173,985 | |
Series 2376 Class JC, 5.5% 2/15/14 | 543,459 | 546,033 | |
Series 2394 Class ND, 6% 6/15/27 | 643,115 | 658,652 | |
Series 2398 Class DK, 6.5% 1/15/31 | 365,048 | 370,058 | |
Series 2420 Class BE, 6.5% 12/15/30 | 848,802 | 870,546 | |
Series 2430 Class OB, 6% 10/15/26 | 6,740 | 6,732 | |
Series 2435: | |||
Class EL, 6% 9/15/27 | 206,268 | 206,192 | |
Class GD, 6.5% 2/15/30 | 239,369 | 241,011 | |
Series 2443 Class TD, 6.5% 10/15/30 | 785,280 | 807,271 | |
Series 2461 Class PG, 6.5% 1/15/31 | 645,371 | 662,074 | |
Series 2466 Class EC, 6% 10/15/27 | 378,177 | 381,128 | |
Series 2473 Class JB, 5.5% 2/15/29 | 385,275 | 386,876 | |
Series 2483 Class DC, 5.5% 7/15/14 | 1,112,604 | 1,133,179 | |
Series 2490 Class PM, 6% 7/15/28 | 579,932 | 590,707 | |
Series 2496 Class OC, 5.5% 9/15/14 | 2,675,257 | 2,734,940 | |
Series 2557 Class MA, 4.5% 7/15/16 | 190,980 | 193,259 | |
Series 2748 Class IB, 4.5% 3/15/10 (h) | 1,572,500 | 102,616 | |
Series 2776 Class UJ, 4.5% 5/15/20 (h) | 755,951 | 58,608 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Freddie Mac Multi-class participation certificates guaranteed: - continued | |||
sequential pay: | |||
Series 2129 Class VM, 6% 1/15/06 | $ 510,367 | $ 510,020 | |
Series 2445 Class BD, 6.5% 6/15/30 | 51,013 | 51,138 | |
Series 2448 Class D, 5.5% 5/15/12 | 87,370 | 87,406 | |
Series 2480 Class QW, 5.75% 2/15/30 | 380,851 | 384,624 | |
Series 1803 Class A, 6% 12/15/08 | 317,256 | 328,627 | |
Series 2749 Class MZ, 5% 2/15/24 | 79,291 | 79,277 | |
Series 2802 Class Z, 5.5% 4/15/33 | 325,227 | 325,117 | |
Series 2807: | |||
Class TZ, 6% 12/15/31 | 160,907 | 161,724 | |
Class ZK, 6% 12/15/31 | 81,474 | 81,321 | |
Series FHR 2762 Class BZ, 5% 3/15/34 | 865,976 | 866,165 | |
Series FHR 2809 Class WZ, 5% 3/15/34 | 534,209 | 534,286 | |
Ginnie Mae guaranteed REMIC pass thru securities: | |||
floater Series 2001-21 Class FB, 1.79% 1/16/27 (e) | 199,523 | 200,704 | |
planned amortization class: | |||
Series 1999-17 Class PC, 6.5% 10/16/27 | 31,352 | 31,358 | |
Series 2002-57 Class PJ, 6% 1/20/29 | 45,768 | 46,026 | |
TOTAL U.S. GOVERNMENT AGENCY | 22,619,036 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $55,886,665) | 55,838,276 | ||
Commercial Mortgage Securities - 3.8% | |||
Banc of America Large Loan, Inc. floater: | |||
Series 2002-FL2A Class A2, 1.6713% 9/8/14 (a)(e) | 64,481 | 64,482 | |
Series 2003-BBA2: | |||
Class A3, 1.7% 11/15/15 (a)(e) | 340,000 | 340,052 | |
Class C, 1.85% 11/15/15 (a)(e) | 70,000 | 70,344 | |
Class D, 1.93% 11/15/15 (a)(e) | 110,000 | 110,635 | |
Class F, 2.28% 11/15/15 (a)(e) | 80,000 | 80,669 | |
Class H, 2.78% 11/15/15 (a)(e) | 70,000 | 70,520 | |
Class J, 3.33% 11/15/15 (a)(e) | 70,000 | 71,100 | |
Class K, 2.8103% 11/15/15 (a)(e) | 65,000 | 65,663 | |
Bayview Commercial Asset Trust floater: | |||
Series 2003-1 Class A, 1.88% 8/25/33 (a)(e) | 425,279 | 427,672 | |
Series 2003-2 Class A, 2.03% 12/25/33 (a)(e) | 1,052,882 | 1,054,724 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Bayview Commercial Asset Trust floater: - continued | |||
Series 2004 2 Class M1: | |||
1.82% 8/25/34 (a)(e) | $ 638,502 | $ 638,502 | |
1.97% 8/25/34 (a)(e) | 204,520 | 204,520 | |
Series 2004-1: | |||
Class A, 1.66% 4/25/34 (a)(e) | 585,208 | 584,842 | |
Class B, 3.35% 4/25/34 (a)(e) | 97,535 | 97,474 | |
Bear Stearns Commercial Mortgage Securities, Inc. floater: | |||
Series 2003-BA1A Class A1, 1.4913% 4/14/15 (a)(e) | 683,229 | 683,175 | |
Series 2003-WEST Class A, 1.9613% 1/3/15 (a)(e) | 369,643 | 371,201 | |
Series 2004-BBA3 Class E, 2.15% 6/15/17 (a)(e) | 960,000 | 960,000 | |
Series 2004-ESA Class A2, 1.67% 5/14/16 (a)(e) | 565,000 | 565,282 | |
Series 2004-HS2A: | |||
Class E, 2.1113% 1/14/16 (a)(e) | 125,000 | 125,572 | |
Class F, 2.2613% 1/14/16 (a)(e) | 75,000 | 75,331 | |
Calwest Industrial Trust floater Series 2002-CALW | 800,000 | 800,658 | |
COMM floater: | |||
Series 2000-FL3A Class C, 2.14% 11/15/12 (a)(e) | 559,444 | 558,905 | |
Series 2002-FL6: | |||
Class K4M, 3.38% 6/14/14 (a)(e) | 100,000 | 100,545 | |
Class L4M, 3.68% 6/14/14 (a)(e) | 100,000 | 100,638 | |
Class M4M, 4.13% 6/14/14 (a)(e) | 100,000 | 99,980 | |
Series 2002-FL7: | |||
Class A2, 1.73% 11/15/14 (a)(e) | 161,243 | 161,258 | |
Class C, 1.88% 11/15/14 (a)(e) | 555,000 | 555,091 | |
Class F, 2.68% 11/15/14 (a)(e) | 1,000,000 | 1,005,862 | |
Class H, 3.63% 11/15/14 (a)(e) | 150,000 | 149,309 | |
Series 2003-FL9 Class B, 1.88% 11/15/15 (a)(e) | 1,195,000 | 1,197,991 | |
Commercial Mortgage Pass Through Certificates floater | |||
Class B, 1.84% 7/15/16 (a)(e) | 55,000 | 55,000 | |
Class D, 1.94% 7/15/16 (a)(e) | 120,000 | 120,000 | |
Class E, 2.14% 7/15/16 (a)(e) | 85,000 | 85,000 | |
Class F, 2.19% 7/15/16 (a)(e) | 90,000 | 90,000 | |
Class H, 2.69% 7/15/16 (a)(e) | 265,000 | 265,000 | |
Class J, 2.84% 7/15/16 (a)(e) | 100,000 | 100,000 | |
Class K, 3.74% 7/15/16 (a)(e) | 115,000 | 115,000 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
CS First Boston Mortgage Securities Corp.: | |||
floater: | |||
Series 2002-TFLA Class C, 1.8238% 11/18/12 (a)(e) | $ 255,000 | $ 255,279 | |
Series 2003-TF2A Class A2, 1.7% 11/15/14 (a)(e) | 700,000 | 700,155 | |
Series 2004-FL1 Class B, 1.6888% 5/15/14 (a)(e) | 1,000,000 | 1,000,000 | |
Series 2004-TFL1: | |||
Class A2, 1.57% 2/15/14 (a)(e) | 505,000 | 504,817 | |
Class E, 1.93% 2/15/14 (a)(e) | 200,000 | 200,888 | |
Class F, 1.98% 2/15/14 (a)(e) | 175,000 | 175,835 | |
Class G, 2.23% 2/15/14 (a)(e) | 125,000 | 125,515 | |
Class H, 2.48% 2/15/14 (a)(e) | 100,000 | 100,416 | |
Class J, 2.78% 2/15/14 (a)(e) | 50,000 | 50,265 | |
Series 2003-TFLA Class G, 1.9433% 4/15/13 (a)(e) | 145,000 | 139,201 | |
Greenwich Capital Commercial Funding Corp. floater | 127,697 | 127,697 | |
GS Mortgage Securities Corp. II floater Series 2000-GSFL Class A, 1.66% 8/15/12 (a)(e) | 274,884 | 274,875 | |
John Hancock Tower Mortgage Trust floater Series 2003-C5A Class B, 3.8516% 4/10/15 (a)(e) | 420,000 | 415,178 | |
KSL Resorts floater Series 2003-1A: | |||
Class A, 1.93% 5/15/13 (a)(e) | 200,000 | 200,068 | |
Class B, 2.08% 5/15/13 (a)(e) | 200,000 | 200,068 | |
Class K, 4.03% 5/15/13 (a)(e) | 200,000 | 200,985 | |
Class L, 4.23% 5/15/13 (a)(e) | 200,000 | 200,984 | |
Lehman Brothers Floating Rate Commercial Mortgage Trust floater: | |||
Series 2001-LLFA: | |||
Class A, 1.4513% 8/16/13 (a)(e) | 17,596 | 17,595 | |
Class C, 1.5613% 8/16/13 (a)(e) | 300,000 | 299,992 | |
Series 2003-C4A Class H, 4.3631% 7/11/15 (a)(e) | 933,108 | 933,108 | |
Series 2003-LLFA: | |||
Class A2, 1.6013% 12/16/14 (a)(e) | 490,000 | 491,393 | |
Class C, 1.9113% 12/16/14 (a)(e) | 110,000 | 111,065 | |
Morgan Stanley Dean Witter Capital I Trust floater Series 2001-XLF: | |||
Class A2, 1.91% 10/7/13 (a)(e) | 410,145 | 410,104 | |
Class F, 3.3% 10/7/13 (a)(e) | 740,458 | 733,299 | |
Salomon Brothers Mortgage Securities VII, Inc. floater | |||
Class HBST, 2.98% 2/15/15 (a)(e) | 80,000 | 80,100 | |
Class HEXB, 3.28% 2/15/15 (a)(e) | 30,000 | 30,038 | |
Class JBST, 3.18% 2/15/15 (a)(e) | 60,000 | 60,075 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Salomon Brothers Mortgage Securities VII, Inc. floater | |||
Class JEXB, 3.48% 2/15/15 (a)(e) | $ 50,000 | $ 50,063 | |
Class KBST, 3.53% 2/15/15 (a)(e) | 35,000 | 35,044 | |
Class KEXB, 3.88% 2/15/15 (a)(e) | 40,000 | 40,050 | |
SDG Macerich Properties LP floater Series 2000-1 Class A3, 1.5788% 5/15/09 (a)(e) | 500,000 | 500,797 | |
STRIPs III Ltd./STRIPs III Corp. floater Series 2004-1A Class A, 1.7713% 3/24/18 (a)(e) | 652,638 | 652,638 | |
Wachovia Bank Commercial Mortgage Trust floater Series 2004-WHL3: | |||
Class A2, 1.56% 3/15/14 (a)(e) | 255,000 | 255,173 | |
Class E, 1.88% 3/15/14 (a)(e) | 160,000 | 160,717 | |
Class F, 1.93% 3/15/14 (a)(e) | 130,000 | 130,567 | |
Class G, 2.16% 3/15/14 (a)(e) | 65,000 | 65,287 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $22,090,796) | 22,151,328 | ||
Municipal Securities - 0.2% | |||
Lowndes County Solid Waste Disp. Rev. (Weyerhaeuser Co. Proj.) Series 1999, 1.75%, VRDN (e)(g) | 1,000,000 | 1,000,000 | |
Commercial Paper - 0.4% | |||
Comcast Corp. 1.86% 9/22/04 (a) | 2,000,000 | 1,994,976 | |
Fixed-Income Funds - 34.3% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (f) | 2,003,403 | 199,458,843 | |
Cash Equivalents - 17.2% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 99,906,380 | $ 99,895,000 | |
TOTAL INVESTMENT PORTFOLIO - 95.4% (Cost $553,780,835) | 554,324,157 | ||
NET OTHER ASSETS - 4.6% | 26,898,005 | ||
NET ASSETS - 100% | $ 581,222,162 |
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
46 Eurodollar 90 Day Index Contracts | Sept. 2004 | $ 45,776,900 | $ (7,163) | ||
93 Eurodollar 90 Day Index Contracts | Dec. 2004 | 92,451,300 | (10,544) | ||
89 Eurodollar 90 Day Index Contracts | March 2005 | 88,385,900 | (70,493) | ||
88 Eurodollar 90 Day Index Contracts | June 2005 | 87,311,400 | (107,352) | ||
89 Eurodollar 90 Day Index Contracts | Sept. 2005 | 88,227,925 | (63,906) | ||
44 Eurodollar 90 Day Index Contracts | Dec. 2005 | 43,512,802 | 35,974 | ||
TOTAL EURODOLLAR CONTRACTS | 445,666,227 | (223,484) | |||
Sold | |||||
Eurodollar Contracts | |||||
2 Eurodollar 90 Day Index Contracts | March 2006 | $ 1,980,000 | $ (2,385) | ||
2 Eurodollar 90 Day Index Contracts | June 2006 | 1,979,075 | (2,735) | ||
1 Eurodollar 90 Day Index Contracts | Sept. 2006 | 989,113 | (1,643) | ||
TOTAL EURODOLLAR CONTRACTS | 4,948,188 | (6,763) | |||
$ 450,614,415 | $ (230,247) | ||||
Swap Agreements | |||||
Expiration | Notional | Value | |||
Credit Default Swap | |||||
Receive annually a fixed rate of .6% multiplied by the notional amount and pay to Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 2, par value of the proportional notional amount (d) | Sept. 2009 | $ 2,000,000 | $ (1,860) | ||
Receive quarterly notional amount multiplied by .21% and pay Goldman Sachs upon default event of Consolidated Natural Gas Co., par value of the notional amount of Consolidated Natural Gas Co. 7.25% 10/1/04 | August 2004 | 1,000,000 | 86 | ||
Receive quarterly notional amount multiplied by .69% and pay Bank of America upon default event of Cox Communications, Inc., par value of the notional amount of Cox Communications, Inc. 7.75% 11/1/10 | Sept. 2009 | 2,500,000 | 142 | ||
Receive quarterly notional amount multiplied by .75% and pay Lehman Brothers, Inc. upon default event of AOL Time Warner, Inc., par value of the notional amount of AOL Time Warner, Inc. 6.875% 5/1/12 | Sept. 2009 | 2,000,000 | 919 | ||
$ 7,500,000 | $ (713) |
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 $33,715,878 or 5.8% 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 $1,993,674. |
(d) Dow Jones CDX N.A. Investment Grade 2 is a tradable index of credit default swaps on investment grade debt of U.S. companies. |
(e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(f) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(g) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
(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. |
(i) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$99,895,000 due 8/2/04 at 1.37% | |
Banc of America Securities LLC. | $ 36,948,418 |
Bank of America, National Association | 16,785,755 |
Bear Stearns & Co. Inc. | 4,196,439 |
BNP Paribas Securities Corp. | 4,196,439 |
Goldman, Sachs & Co. | 4,196,439 |
Morgan Stanley & Co. Incorporated. | 33,571,510 |
$ 99,895,000 |
Income Tax Information |
The fund hereby designates approximately $611,000 as a 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, 2004 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $99,895,000) (cost $553,780,835) - See accompanying schedule | $ 554,324,157 | |
Cash | 12,057 | |
Receivable for investments sold | 39,775,969 | |
Receivable for fund shares sold | 1,096,050 | |
Interest receivable | 1,230,060 | |
Receivable for daily variation on futures contracts | 96,463 | |
Prepaid expenses | 465 | |
Receivable from investment adviser for expense reductions | 22,285 | |
Other affiliated receivables | 30 | |
Total assets | 596,557,536 | |
Liabilities | ||
Payable for investments purchased | $ 2,621,522 | |
Delayed delivery | 11,392,993 | |
Payable for fund shares redeemed | 964,388 | |
Distributions payable | 68,141 | |
Swap agreements, at value | 713 | |
Accrued management fee | 196,099 | |
Distribution fees payable | 49 | |
Other affiliated payables | 62,346 | |
Other payables and accrued expenses | 29,123 | |
Total liabilities | 15,335,374 | |
Net Assets | $ 581,222,162 | |
Net Assets consist of: | ||
Paid in capital | $ 580,775,927 | |
Distributions in excess of net investment income | (122,365) | |
Accumulated undistributed net realized gain (loss) on investments | 256,050 | |
Net unrealized appreciation (depreciation) on investments | 312,550 | |
Net Assets | $ 581,222,162 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2004 | ||
Calculation of Maximum Offering Price | $ 10.05 | |
Maximum offering price per share (100/98.50 of $10.05) | $ 10.20 | |
Class T: | $ 10.05 | |
Maximum offering price per share (100/98.50 of $10.05) | $ 10.20 | |
Fidelity Ultra-Short Bond: | $ 10.05 | |
Institutional Class: | $ 10.05 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2004 | ||
Investment Income | ||
Interest | $ 6,831,755 | |
Expenses | ||
Management fee | $ 1,655,296 | |
Transfer agent fees | 495,131 | |
Distribution fees | 63 | |
Accounting fees and expenses | 101,861 | |
Non-interested trustees' compensation | 1,713 | |
Custodian fees and expenses | 9,529 | |
Registration fees | 111,089 | |
Audit | 29,534 | |
Legal | 3,297 | |
Miscellaneous | 11,827 | |
Total expenses before reductions | 2,419,340 | |
Expense reductions | (289,859) | 2,129,481 |
Net investment income (loss) | 4,702,274 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 151,236 | |
Futures contracts | 165,064 | |
Swap agreements | 11,402 | |
Total net realized gain (loss) | 327,702 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 401,779 | |
Futures contracts | (303,545) | |
Swap agreements | (3,720) | |
Total change in net unrealized appreciation (depreciation) | 94,514 | |
Net gain (loss) | 422,216 | |
Net increase (decrease) in net assets resulting from operations | $ 5,124,490 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | August 29, 2002 (commencement of | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 4,702,274 | $ 1,708,506 |
Net realized gain (loss) | 327,702 | 61,931 |
Change in net unrealized appreciation (depreciation) | 94,514 | 218,036 |
Net increase (decrease) in net assets resulting | 5,124,490 | 1,988,473 |
Distributions to shareholders from net investment income | (4,708,387) | (1,913,077) |
Share transactions - net increase (decrease) | 355,546,941 | 225,077,055 |
Redemption fees | 56,247 | 50,420 |
Total increase (decrease) in net assets | 356,019,291 | 225,202,871 |
Net Assets | ||
Beginning of period | 225,202,871 | - |
End of period (including distributions in excess of net investment income of $122,365 and distributions in excess of net investment income of $69,342, respectively) | $ 581,222,162 | $ 225,202,871 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Year ended July 31, | 2004 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) E | .013 |
Net realized and unrealized gain (loss) | .011 |
Total from investment operations | .024 |
Distributions from net investment income | (.014) |
Redemption fees added to paid in capital E, H | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C, D | .24% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | .85% A |
Expenses net of voluntary waivers, if any | .70% A |
Expenses net of all reductions | .70% A |
Net investment income (loss) | 1.11% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 316 |
Portfolio turnover rate | 53% |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
H Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Year ended July 31, | 2004 F |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) E | .013 |
Net realized and unrealized gain (loss) | .010 |
Total from investment operations | .023 |
Distributions from net investment income | (.013) |
Redemption fees added to paid in capital E, H | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C, D | .23% |
Ratios to Average Net Assets G | |
Expenses before expense reductions | .86% A |
Expenses net of voluntary waivers, if any | .70% A |
Expenses net of all reductions | .70% A |
Net investment income (loss) | 1.11% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 356 |
Portfolio turnover rate | 53% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
G Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
H Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Ultra-Short Bond
Years ended July 31, | 2004 | 2003 E |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 10.02 | $ 10.00 |
Income from Investment Operations | ||
Net investment income (loss) D | .122 | .137 |
Net realized and unrealized gain (loss) | .029 | .052 |
Total from investment operations | .151 | .189 |
Distributions from net investment income | (.122) | (.173) |
Redemption fees added to paid in capital D | .001 | .004 |
Net asset value, end of period | $ 10.05 | $ 10.02 |
Total Return B, C | 1.52% | 1.94% |
Ratios to Average Net Assets F | ||
Expenses before expense reductions | .62% | .70% A |
Expenses net of voluntary waivers, if any | .55% | .55% A |
Expenses net of all reductions | .55% | .55% A |
Net investment income (loss) | 1.21% | 1.50% A |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 580,174 | $ 225,203 |
Portfolio turnover rate | 53% | 39% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period August 29, 2002 (commencement of operations) to July 31, 2003.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Year ended July 31, | 2004 E |
Selected Per-Share Data | |
Net asset value, beginning of period | $ 10.04 |
Income from Investment Operations | |
Net investment income (loss) D | .015 |
Net realized and unrealized gain (loss) | .010 |
Total from investment operations | .025 |
Distributions from net investment income | (.015) |
Redemption fees added to paid in capital D, G | - |
Net asset value, end of period | $ 10.05 |
Total Return B, C | .25% |
Ratios to Average Net Assets F | |
Expenses before expense reductions | .67% A |
Expenses net of voluntary waivers, if any | .55% A |
Expenses net of all reductions | .55% A |
Net investment income (loss) | 1.26% A |
Supplemental Data | |
Net assets, end of period (000 omitted) | $ 376 |
Portfolio turnover rate | 53% |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
F Expense ratios reflect operating expenses of the class. 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 class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of 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 class.
G Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2004
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 fund offers Class A, Class T, Fidelity Ultra Short Bond, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
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, including restricted 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 valuation models. If prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, 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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to losses deferred due to futures transactions, swap agreements, market discount and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,097,028 | |
Unrealized depreciation | (543,865) | |
Net unrealized appreciation (depreciation) | 553,163 | |
Undistributed ordinary income | 464,338 | |
Cost for federal income tax purposes | $ 553,770,994 |
The tax character of distributions paid was as follows:
July 31, 2004 | July 31, 2003 | |
Ordinary Income | $ 4,708,387 | $ 1,857,271 |
Long-term Capital Gains | - | 55,806 |
Total | $ 4,708,387 | $ 1,913,077 |
Annual Report
1. Significant Accounting Policies - continued
Short-Term Trading (Redemption) Fees. Shares purchased and held in the fund less than 60 days are subject to a redemption fee equal to .25% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by Fidelity Management & Research Company (FMR), are retained by the fund and accounted for as an addition to paid in capital.
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. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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's terms, 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
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Futures Contracts - continued
"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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
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. Periodic payments and premiums received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
Annual Report
2. Operating Policies - 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 may 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 sale 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. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $249,049,133 and $49,994,219, respectively.
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 annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period,
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 28 | $ 17 |
Class T | 0% | .15% | 35 | 25 |
$ 63 | $ 42 |
Sales Load. FDC receives a front-end sales charge of up to 1.50% for selling Class A and Class T shares, some of which is paid to financial intermediaries for selling shares of the fund. FDC receives the proceeds of a contingent deferred sales charges levied on Class A and Class T redemptions. These charges depend on the holding period. The deferred sales charges are .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 207 |
Class T | 91 |
$ 298 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the fund, except for Fidelity Ultra Short Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Ultra Short Bond shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
Amount | % of | |
Class A | $ 40 | .21* |
Class T | 52 | .22* |
Fidelity Ultra-Short Bond | 494,966 | .13 |
Institutional Class | 73 | .18* |
$ 495,131 |
* Annualized
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month.
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 $2,452,636 for the period.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | .70% | $ 30 |
Class T | .70% | 38 |
Fidelity Ultra-Short Bond | .55% | 288,280 |
Institutional Class | .55% | 51 |
$ 288,399 |
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 expense by $1,460.
Annual Report
Notes to Financial Statements - continued
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | ||
2004 A | 2003 B | |
From net investment income | ||
Class A | $ 200 | $ - |
Class T | 262 | - |
Fidelity Ultra-Short Bond | 4,707,454 | 1,913,077 |
Institutional Class | 471 | - |
Total | $ 4,708,387 | $ 1,913,077 |
A Distributions for Class A, Class T and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Distributions for Fidelity Ultra-Short Bond for the period August 29, 2002 (commencement of operations) to July 31, 2003.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2004 A | 2003 B | 2004 A | 2003 B | |
Class A | ||||
Shares sold | 31,506 | - | $ 316,495 | $ - |
Reinvestment of distributions | 19 | - | 195 | - |
Shares redeemed | (78) | - | (780) | - |
Net increase (decrease) | 31,447 | - | $ 315,910 | $ - |
Class T | ||||
Shares sold | 35,358 | - | $ 355,050 | $ - |
Reinvestment of distributions | 26 | - | 262 | - |
Net increase (decrease) | 35,384 | - | $ 355,312 | $ - |
Fidelity Ultra-Short Bond | ||||
Shares sold | 59,927,755 | 32,991,854 | $ 602,349,405 | $ 330,589,127 |
Reinvestment of distributions | 418,048 | 163,959 | 4,203,573 | 1,643,470 |
Shares redeemed | (25,071,625) | (10,686,601) | (252,053,274) | (107,155,542) |
Net increase (decrease) | 35,274,178 | 22,469,212 | $ 354,499,704 | $ 225,077,055 |
Institutional Class | ||||
Shares sold | 37,405 | - | $ 375,544 | $ - |
Reinvestment of distributions | 47 | - | 471 | - |
Net increase (decrease) | 37,452 | - | $ 376,015 | $ - |
A Share transactions for Class A, Class T and Institutional Class are for the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
B Share transactions for Fidelity Ultra-Short Bond for the period August 29, 2002 (commencement of operations) to July 31, 2003.
Annual Report
Report of Independent Registered Public Accounting Firm
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, 2004 and the results of its operations, the changes in its 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 Ultra-Short Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 295 funds advised by FMR or an affiliate. Mr. McCoy oversees 297 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
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 (50) | |
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 (52) | |
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998, retired as Chairman May 1999, and 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. He is a member of the Executive Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
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 (43) | |
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 (39) | |
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 (55) | |
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 (44) | |
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. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of Ultra-Short Bond. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance officer of Ultra-Short Bond. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Ultra-Short Bond. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ultra-Short Bond. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (57) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Ultra-Short 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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Ultra-Short Bond. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
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. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Ultra-Short Bond. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
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
Distributions
A total of 1.64% 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 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | 7,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.496 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments
Money Management, Inc.
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
Focused High Income Fund
Ginnie Mae
Government Income
High Income
Inflation-Protected Bond
Intermediate Bond
Intermediate Government Income
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Total Bond
Ultra-Short Bond
U.S. Bond Index
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
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www.fidelity.com
Fidelity® Ginnie Mae Fund
Fidelity Government
Income Fund
Fidelity Intermediate
Government Income Fund
Annual Report
July 31, 2004
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Shareholder Expense Example | An example of shareholder expenses. | |
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 | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Proxy Voting Results |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR 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.
Commencing with the fiscal quarter ending October 31, 2004, each fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. Each fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of each fund's portfolio holdings, view each fund's most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com/holdings.
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:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Shareholder Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2004 to July 31, 2004).
Actual Expenses
The first line of the table below for each fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.
Hypothetical Example for Comparison Purposes
The second line of the table below for each fund provides information about hypothetical account values and hypothetical expenses based on a fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. A small balance maintenance fee of $12.00 that is charged once a year may apply for certain accounts with a value of less than $2,000. This fee is not included in the table below. If it was, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.
Annual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
Beginning | Ending | Expenses Paid | |
Ginnie Mae Fund | |||
Actual | $ 1,000.00 | $ 1,010.20 | $ 3.00 |
HypotheticalA | $ 1,000.00 | $ 1,021.98 | $ 3.02 |
Government Income Fund | |||
Actual | $ 1,000.00 | $ 1,000.40 | $ 3.13 |
HypotheticalA | $ 1,000.00 | $ 1,021.83 | $ 3.17 |
Intermediate Government Income Fund | |||
Actual | $ 1,000.00 | $ 1,000.00 | $ 2.93 |
HypotheticalA | $ 1,000.00 | $ 1,022.03 | $ 2.97 |
A 5% return per year before expenses
* Expenses are equal to each Fund's annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Annualized | |
Ginnie Mae Fund | .60% |
Government Income Fund | .63% |
Intermediate Government Income Fund | .59% |
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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Past 5 | Past 10 |
Fidelity® Ginnie Mae Fund | 3.96% | 6.43% | 6.67% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Ginnie Mae Fund on July 31, 1994. 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
Fidelity Ginnie Mae Fund
Comments from Tom Silvia, Portfolio Manager of Fidelity® Ginnie Mae Fund
Investment-grade debt had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
For the 12 months ending July 31, 2004, the fund returned 3.96%. During the same period, the LipperSM GNMA Funds Average returned 3.84% and the Lehman Brothers GNMA Index returned 4.67%. Aiding the fund's outperformance of its Lipper peer group average was good security and sector selection, which was driven by the ability of Fidelity's mortgage research group to accurately predict mortgage prepayment speeds. In particular, the fund's performance was boosted by its stake in bonds from the Ginnie Mae II Program, which are made up of single family mortgages with varying interest rates and typically outpaced other Ginnie Mae securities. The fund also benefited from its stake in collateralized mortgage obligations (CMOs), in large part because they tended to experience more predictable levels of prepayment activity. The major disappointment during the period was the fund's stake in Ginnie Mae project loans, which performed poorly due to faster-than-expected prepayments.
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 Ginnie Mae Fund
Investment Changes
Coupon Distribution as of July 31, 2004 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.0 | 0.3 |
Less than 4% | 2.4 | 2.2 |
4 - 4.99% | 11.6 | 6.1 |
5 - 5.99% | 38.9 | 33.7 |
6 - 6.99% | 34.8 | 36.3 |
7 - 7.99% | 9.3 | 15.5 |
8% and over | 1.8 | 2.1 |
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, 2004 | ||
6 months ago | ||
Years | 6.1 | 4.0 |
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, 2004 | ||
6 months ago | ||
Years | 3.9 | 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, 2004 | As of January 31, 2004 | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 12.8% | ![]() | CMOs and Other Mortgage Related Securities 12.1% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* GNMA Securities | 84.5% | ** GNMA Securities | 83.1% |
*** Short-Term Investments and Net Other Assets are not included in the pie chart. |
Annual Report
Fidelity Ginnie Mae Fund
Investments July 31, 2004
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 92.9% | ||||
Principal | Value (Note 1) | |||
Fannie Mae - 6.8% | ||||
4.5% 6/1/33 to 10/1/33 | $ 196,726 | $ 186,020 | ||
5% 10/1/17 to 12/1/18 | 54,506 | 55,007 | ||
6.5% 10/1/17 to 12/1/24 | 12,485 | 13,132 | ||
7% 11/1/16 to 3/1/17 | 3,910 | 4,149 | ||
7.5% 1/1/07 to 4/1/17 | 9,253 | 9,806 | ||
8.5% 12/1/27 | 908 | 1,003 | ||
9.5% 9/1/30 | 740 | 815 | ||
10.25% 10/1/18 | 74 | 82 | ||
11.5% 5/1/14 to 9/1/15 | 57 | 64 | ||
12.5% 11/1/13 to 7/1/16 | 183 | 207 | ||
13.25% 9/1/11 | 96 | 112 | ||
270,397 | ||||
Freddie Mac - 1.6% | ||||
4% 4/1/19 to 7/1/19 | 65,000 | 62,412 | ||
8.5% 6/1/08 to 6/1/25 | 122 | 132 | ||
9% 7/1/08 to 7/1/21 | 645 | 694 | ||
9.5% 7/1/30 to 8/1/30 | 264 | 290 | ||
9.75% 12/1/08 to 4/1/13 | 43 | 47 | ||
10% 10/1/04 to 11/1/20 | 1,144 | 1,265 | ||
10.25% 2/1/09 to 11/1/16 | 574 | 631 | ||
10.5% 5/1/10 | 10 | 11 | ||
11.25% 2/1/10 | 34 | 38 | ||
11.75% 11/1/11 | 18 | 20 | ||
12% 5/1/10 to 2/1/17 | 136 | 154 | ||
12.5% 11/1/12 to 5/1/15 | 207 | 235 | ||
13% 5/1/14 to 11/1/14 | 24 | 27 | ||
13.5% 1/1/13 to 12/1/14 | 9 | 10 | ||
65,966 | ||||
Government National Mortgage Association - 84.5% | ||||
3.5% 3/20/34 | 1,321 | 1,142 | ||
4% 11/20/33 | 1,963 | 1,784 | ||
4.5% 12/20/32 to 4/20/34 | 247,302 | 234,588 | ||
5% 6/20/32 to 7/20/34 (a) | 1,156,975 | 1,134,905 | ||
5.5% 12/20/18 to 3/20/34 | 382,846 | 385,465 | ||
6% 12/20/23 to 7/15/34 | 539,522 | 554,987 | ||
6% 8/1/34 (a)(b) | 197,857 | 203,175 | ||
6.5% 4/15/23 to 7/15/34 (b) | 410,044 | 429,404 | ||
6.5% 8/1/34 (a)(b) | 25,000 | 26,109 | ||
7% 3/15/22 to 7/20/34 | 222,865 | 237,036 | ||
7% 8/1/34 (a) | 3,015 | 3,203 | ||
7.25% 4/15/05 to 12/15/30 | 1,003 | 1,075 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) | |||
Government National Mortgage Association - continued | ||||
7.5% 4/15/06 to 9/20/32 | $ 85,221 | $ 91,835 | ||
8% 2/15/05 to 7/15/32 | 32,261 | 35,314 | ||
8.5% 2/15/05 to 2/15/31 | 10,221 | 11,253 | ||
9% 10/15/04 to 6/15/30 | 4,325 | 4,853 | ||
9.5% 12/20/15 to 8/20/17 | 1,388 | 1,554 | ||
10% 6/15/05 | 1 | 1 | ||
10.5% 1/15/14 to 9/15/19 | 1,206 | 1,356 | ||
13% 2/15/11 to 5/15/15 | 281 | 322 | ||
13.5% 7/15/10 to 1/15/15 | 65 | 75 | ||
3,359,436 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $3,673,731) | 3,695,799 | |||
Collateralized Mortgage Obligations - 9.8% | ||||
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 | 7,000 | 7,081 | ||
U.S. Government Agency - 9.6% | ||||
Fannie Mae target amortization class Series G94-2 Class D, 6.45% 1/25/24 | 10,072 | 10,532 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
planned amortization class: | ||||
Series 2220 Class PD, 8% 3/15/30 | 11,231 | 11,897 | ||
Series 2435 Class GD, 6.5% 2/15/30 | 2,535 | 2,553 | ||
sequential pay: | ||||
Series 2750 Class ZT, 5% 2/15/34 | 5,228 | 4,224 | ||
Series FHR 2809 Class UB, 4% 9/15/17 | 8,452 | 7,944 | ||
Series 2750: | ||||
Class CZ, 5% 11/15/32 | 2,264 | 2,264 | ||
Class ZU, 5% 8/15/32 | 1,611 | 1,610 | ||
Series 2764: | ||||
Class ZA, 5% 10/15/32 | 153 | 152 | ||
Class ZB, 5% 3/15/33 | 675 | 675 | ||
Class ZC, 4.5% 3/15/19 | 242 | 242 | ||
Series 2769 Class ZA, 5% 9/15/32 | 305 | 304 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class: | ||||
Series 1994-4 Class KQ, 7.9875% 7/16/24 | 2,713 | 2,928 | ||
Series 1999-17 Class PC, 6.5% 10/16/27 | 492 | 492 | ||
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 2000-26 Class PK, 7.5% 9/20/30 | $ 10,905 | $ 11,318 | ||
Series 2000-5 Class PD, 7.5% 4/16/29 | 4,232 | 4,300 | ||
Series 2001-13 Class PC, 6.5% 12/20/28 | 9,043 | 9,210 | ||
Series 2001-45 Class GC, 6.5% 10/20/30 | 5,638 | 5,754 | ||
Series 2001-53: | ||||
Class PB, 6.5% 11/20/31 | 10,000 | 10,350 | ||
Class TA, 6% 12/20/30 | 3,649 | 3,697 | ||
Series 2001-60 Class PD, 6% 10/20/30 | 15,041 | 15,638 | ||
Series 2001-65 Class PH, 6% 11/20/28 | 6,323 | 6,569 | ||
Series 2002-19 Class PE, 6% 10/20/30 | 30,914 | 31,598 | ||
Series 2002-4 Class TB, 6.5% 3/20/31 | 1,877 | 1,914 | ||
Series 2002-41 Class PD, 6.5% 7/20/30 | 6,228 | 6,240 | ||
Series 2003-12 Class IO, 5.5% 11/16/25 (d) | 29,608 | 2,638 | ||
Series 2003-19: | ||||
Class IG, 5.5% 1/16/24 (d) | 2,755 | 149 | ||
Class IL, 5.5% 12/16/25 (d) | 3,318 | 404 | ||
Series 2003-20: | ||||
Class AI, 5.5% 6/16/22 (d) | 12,963 | 413 | ||
Class BI, 5.5% 5/16/27 (d) | 22,423 | 2,701 | ||
Series 2003-26 Class PI, 5.5% 1/16/32 (d) | 60,541 | 11,117 | ||
Series 2003-29: | ||||
Class IB, 5.5% 11/16/24 (d) | 43,472 | 2,703 | ||
Class IG, 5.5% 11/16/24 (d) | 3,682 | 375 | ||
Series 2003-31 Class PI, 5.5% 4/16/30 (d) | 58,214 | 6,421 | ||
Series 2003-33 Class NI, 5.5% 2/16/26 (d) | 73,441 | 5,957 | ||
Series 2003-34 Class IO, 5.5% 4/16/28 (d) | 55,411 | 6,924 | ||
Series 2003-4 Class LI, 5.5% 7/16/27 (d) | 23,632 | 2,367 | ||
Series 2003-7: | ||||
Class IN, 5.5% 1/16/28 (d) | 42,281 | 5,115 | ||
Class IP, 5.5% 10/16/25 (d) | 6,588 | 575 | ||
Series 2003-8 Class QI, 5.5% 1/16/27 (d) | 5,910 | 568 | ||
Series 2004 19 Class DP, 5.5% 3/20/34 | 3,895 | 3,952 | ||
Series 2008 28 Class PC, 5.5% 4/20/34 | 18,652 | 18,715 | ||
sequential pay: | ||||
Series 1995-4 Class CQ, 8% 6/20/25 | 2,326 | 2,450 | ||
Series 2000-12 Class B, 7.5% 12/16/28 | 1,028 | 1,032 | ||
Series 2001-15 Class VB, 6.5% 4/20/19 | 14,104 | 14,662 | ||
Series 2002 49 Class ZH, 6.5% 2/20/31 | 28,719 | 29,911 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: - continued | ||||
sequential pay: | ||||
Series 2002-29 Class SK, 8.25% 5/20/32 (c) | $ 1,465 | $ 1,530 | ||
Series 2002-41: | ||||
Class HB, 6% 8/16/27 | 2,486 | 2,519 | ||
Class VD, 6% 4/16/13 | 8,657 | 9,058 | ||
Series 2002-42 Class AD, 6% 12/20/28 | 4,241 | 4,282 | ||
Series 2002-54 Class GA, 6.5% 7/20/31 | 18,109 | 18,703 | ||
Series 2003-7 Class VP, 6% 11/20/13 | 6,794 | 7,178 | ||
sequential payer Series 1998 23 Class ZB, 6.5% 6/20/28 | 59,069 | 60,945 | ||
Series 1995-6 Class Z, 7% 9/20/25 | 6,652 | 7,052 | ||
TOTAL U.S. GOVERNMENT AGENCY | 382,821 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $389,955) | 389,902 | |||
Commercial Mortgage Securities - 3.0% | ||||
Fannie Mae: | ||||
sequential pay Series 2000-7 Class MB, 7.5075% 2/17/24 (c) | 14,591 | 15,760 | ||
Series 1997-M1 Class N, 0.445% 10/17/36 (c)(d) | 77,188 | 1,411 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
Series 1998-M3 Class IB, 0.9642% 1/17/38 (c)(d) | 56,375 | 2,213 | ||
Series 1998-M4 Class N, 1.2826% 2/25/35 (c)(d) | 34,164 | 1,319 | ||
Ginnie Mae guaranteed Multi-family pass thru securities: | ||||
sequential pay Series 2001-58 Class X, 1.6726% 9/16/41 (c)(d) | 243,846 | 15,612 | ||
Series 2001-12 Class X, 1.2345% 7/16/40 (c)(d) | 96,877 | 4,662 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay Series 2002-81 Class IO, 2.1016% 9/16/42 (c)(d) | 148,870 | 13,505 | ||
Series 2002-62 Class IO, 2.2057% 8/16/42 (c)(d) | 121,394 | 11,103 | ||
Series 2002-85 Class X, 2.564% 3/16/42 (c)(d) | 104,043 | 10,693 | ||
Series 2003-22 Class XA, 0.2466% 2/16/43 (c)(d) | 285,290 | 17,530 | ||
Series 2003-36 Class XA, 0.2815% 3/16/43 (d) | 333,882 | 22,824 | ||
Series 2003-47 Class XA, 0.2454% 6/16/43 (c)(d) | 45,711 | 2,321 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $136,407) | 118,953 | |||
Cash Equivalents - 1.2% | ||||
Maturity | Value (Note 1) | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) | $ 48,430 | $ 48,424 | ||
TOTAL INVESTMENT PORTFOLIO - 106.9% (Cost $4,248,517) | 4,253,078 | |||
NET OTHER ASSETS - (6.9)% | (276,059) | |||
NET ASSETS - 100% | $ 3,977,019 |
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. |
Income Tax Information |
The fund hereby designates approximately $12,893,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
At July 31, 2004, the fund had a capital loss carryforward of approximately $8,344,000 all of which will expire on July 31, 2012. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Ginnie Mae Fund
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amount) | July 31, 2004 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $48,424) (cost $4,248,517) - See accompanying schedule | $ 4,253,078 | |
Commitment to sell securities on a delayed delivery basis | $ (285,845) | |
Receivable for securities sold on a delayed delivery basis | 285,229 | (616) |
Receivable for investments sold, regular delivery | 13,247 | |
Receivable for fund shares sold | 3,947 | |
Interest receivable | 21,133 | |
Prepaid expenses | 10 | |
Other affiliated receivables | 7 | |
Total assets | 4,290,806 | |
Liabilities | ||
Payable to custodian bank | 67 | |
Payable for investments purchased | 61,725 | |
Delayed delivery | 244,862 | |
Payable for fund shares redeemed | 3,379 | |
Distributions payable | 1,572 | |
Accrued management fee | 1,411 | |
Other affiliated payables | 560 | |
Other payables and accrued expenses | 211 | |
Total liabilities | 313,787 | |
Net Assets | $ 3,977,019 | |
Net Assets consist of: | ||
Paid in capital | $ 3,982,427 | |
Undistributed net investment income | 2,901 | |
Accumulated undistributed net realized gain (loss) on investments | (12,255) | |
Net unrealized appreciation (depreciation) on investments | 3,946 | |
Net Assets, for 361,550 shares outstanding | $ 3,977,019 | |
Net Asset Value, offering price and redemption price per share ($3,977,019 ÷ 361,550 shares) | $ 11.00 |
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, 2004 | |
Investment Income | ||
Interest | $ 189,842 | |
Expenses | ||
Management fee | $ 19,102 | |
Transfer agent fees | 5,746 | |
Accounting fees and expenses | 1,060 | |
Non-interested trustees' compensation | 25 | |
Appreciation in deferred trustee compensation account | 1 | |
Custodian fees and expenses | 480 | |
Registration fees | 62 | |
Audit | 117 | |
Legal | 16 | |
Interest | 2 | |
Miscellaneous | 210 | |
Total expenses before reductions | 26,821 | |
Expense reductions | (4) | 26,817 |
Net investment income (loss) | 163,025 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | (684) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 20,421 | |
Delayed delivery commitments | (3,912) | |
Total change in net unrealized appreciation (depreciation) | 16,509 | |
Net gain (loss) | 15,825 | |
Net increase (decrease) in net assets resulting from operations | $ 178,850 |
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) | $ 163,025 | $ 212,645 |
Net realized gain (loss) | (684) | 80,749 |
Change in net unrealized appreciation (depreciation) | 16,509 | (96,615) |
Net increase (decrease) in net assets resulting | 178,850 | 196,779 |
Distributions to shareholders from net investment income | (155,883) | (231,003) |
Distributions to shareholders from net realized gain | (36,640) | - |
Total distributions | (192,523) | (231,003) |
Share transactions | 622,507 | 3,242,020 |
Reinvestment of distributions | 171,102 | 204,093 |
Cost of shares redeemed | (2,409,367) | (3,548,331) |
Net increase (decrease) in net assets resulting from share transactions | (1,615,758) | (102,218) |
Total increase (decrease) in net assets | (1,629,431) | (136,442) |
Net Assets | ||
Beginning of period | 5,606,450 | 5,742,892 |
End of period (including undistributed net investment income of $2,901 and distributions in excess of net investment income of $6,960, respectively) | $ 3,977,019 | $ 5,606,450 |
Other Information Shares | ||
Sold | 56,098 | 289,678 |
Issued in reinvestment of distributions | 15,437 | 18,225 |
Redeemed | (217,505) | (317,081) |
Net increase (decrease) | (145,970) | (9,178) |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2004 | 2003 | 2002 | 2001 | 2000 |
Selected Per-Share Data | |||||
Net asset value, | $ 11.05 | $ 11.11 | $ 10.91 | $ 10.42 | $ 10.46 |
Income from Investment Operations | |||||
Net investment income (loss) B | .404 | .364 | .563 D | .684 | .691 |
Net realized and unrealized gain (loss) | .027 | (.029) | .225 D | .487 | (.043) |
Total from investment operations | .431 | .335 | .788 | 1.171 | .648 |
Distributions from net investment income | (.391) | (.395) | (.588) | (.681) | (.688) |
Distributions from net realized gain | (.090) | - | - | - | - |
Total distributions | (.481) | (.395) | (.588) | (.681) | (.688) |
Net asset value, end of period | $ 11.00 | $ 11.05 | $ 11.11 | $ 10.91 | $ 10.42 |
Total Return A | 3.96% | 3.02% | 7.42% | 11.55% | 6.42% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .60% | .57% | .60% | .63% | .63% |
Expenses net of voluntary waivers, if any | .60% | .57% | .60% | .62% | .63% |
Expenses net of all reductions | .60% | .57% | .60% | .62% | .63% |
Net investment income (loss) | 3.64% | 3.25% | 5.15% D | 6.40% | 6.67% |
Supplemental Data | |||||
Net assets, end of period | $ 3,977 | $ 5,606 | $ 5,743 | $ 2,836 | $ 1,706 |
Portfolio turnover rate | 155% | 262% | 327% | 120% | 75% |
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. 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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Past 5 | Past 10 |
Fidelity Government Income Fund | 4.30% | 6.67% | 6.51% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Government Income Fund on July 31, 1994. 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 had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
For the 12 months ending July 31, 2004, the fund returned 4.30%. During the same period, the LipperSM General U.S. Government Funds Average returned 3.49% and the Lehman Brothers 75% U.S. Government/25% Mortgage-Backed Securities (MBS) index returned 4.17%. Aiding the fund's outperformance of its benchmarks was the portfolio's comparatively large stake in Treasury Inflation-Protected Securities (TIPS). These securities were boosted by strong demand from investors seeking them out as a hedge against inflation, which crept higher during the period. Another contributor to the fund's outperformance was its stake in mortgage securities, which outperformed Treasury and agency securities during the period. Security selection within the mortgage sector also helped. That said, the major disappointment during the period was that the fund didn't own even more mortgage securities. Still, maintaining a large weighting in agency securities and an underweighting in Treasuries relative to the index generally benefited the fund. Agencies outperformed Treasuries because of their attractive yields and reduced supply.
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, 2004 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.0 | 0.0 |
1 - 1.99% | 3.0 | 5.1 |
2 - 2.99% | 11.4 | 10.7 |
3 - 3.99% | 21.9 | 25.6 |
4 - 4.99% | 8.4 | 4.8 |
5 - 5.99% | 20.4 | 19.1 |
6 - 6.99% | 9.7 | 11.5 |
7 - 7.99% | 1.9 | 2.5 |
8 - 8.99% | 4.8 | 5.5 |
9% and over | 0.7 | 0.8 |
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, 2004 | ||
6 months ago | ||
Years | 6.3 | 7.5 |
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, 2004 | ||
6 months ago | ||
Years | 4.7 | 4.8 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2004* | As of January 31, 2004** | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 6.7% | ![]() | CMOs and Other Mortgage Related Securities 8.3% | ||||
![]() | U.S. Treasury | ![]() | U.S. Treasury | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Futures and Swaps | 0.0% | ** Futures and Swaps | 8.1% |
Percentages are adjusted for the effect of Futures Contracts and Swaps, if applicable. |
Annual Report
Fidelity Government Income Fund
Investments July 31, 2004
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 70.2% | ||||
Principal | Value (Note 1) (000s) | |||
U.S. Government Agency Obligations - 36.8% | ||||
Fannie Mae: | ||||
2.375% 12/15/05 | $ 80,000 | $ 79,834 | ||
2.375% 2/15/07 | 68,735 | 67,390 | ||
2.625% 11/15/06 | 45,430 | 45,018 | ||
3.25% 1/15/08 | 82,700 | 81,758 | ||
3.25% 2/15/09 | 248,550 | 241,151 | ||
5.125% 1/2/14 | 95,000 | 93,728 | ||
5.5% 3/15/11 | 6,695 | 7,064 | ||
6.25% 2/1/11 | 19,445 | 21,057 | ||
Farm Credit Systems Financial Assistance Corp. 8.8% 6/10/05 | 22,233 | 23,462 | ||
Federal Home Loan Bank: | ||||
1.5% 8/19/05 | 62,125 | 61,584 | ||
5.8% 9/2/08 | 13,440 | 14,379 | ||
Financing Corp. - coupon STRIPS 0% 8/3/05 | 1,989 | 1,944 | ||
Freddie Mac: | ||||
2.375% 4/15/06 | 133,000 | 132,228 | ||
2.875% 12/15/06 | 95,600 | 95,092 | ||
3.625% 9/15/08 | 14,060 | 13,922 | ||
4.5% 1/15/14 | 73,400 | 70,846 | ||
5.125% 8/20/12 | 73,640 | 73,727 | ||
5.5% 9/15/11 | 1,240 | 1,305 | ||
5.875% 3/21/11 | 34,550 | 36,716 | ||
Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06 | 3,358 | 3,559 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank): | ||||
Series 1994-A, 7.12% 4/15/06 | 3,457 | 3,607 | ||
Series 1994-F, 8.187% 12/15/04 | 104 | 106 | ||
Guaranteed Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) Series 1994-B, 7.5% 1/26/06 | 2,022 | 2,123 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates: | ||||
Series 1998-196A, 5.926% 6/15/05 | 2,772 | 2,832 | ||
6.77% 11/15/13 | 6,065 | 6,611 | ||
6.99% 5/21/16 | 18,447 | 20,715 | ||
Private Export Funding Corp. secured: | ||||
5.34% 3/15/06 | 21,700 | 22,590 | ||
5.66% 9/15/11 (b) | 11,160 | 11,801 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) (000s) | |||
U.S. Government Agency Obligations - continued | ||||
Private Export Funding Corp. secured: - continued | ||||
5.685% 5/15/12 | $ 30,825 | $ 32,646 | ||
6.49% 7/15/07 | 5,000 | 5,400 | ||
6.67% 9/15/09 | 2,120 | 2,356 | ||
7.17% 5/15/07 | 8,500 | 9,300 | ||
Small Business Administration guaranteed development participation certificates: | ||||
Series 2002-20J Class 1, 4.75% 10/1/22 | 9,280 | 9,162 | ||
Series 2002-20K Class 1, 5.08% 11/1/22 | 4,611 | 4,635 | ||
Series 2003 P10B, 5.136% 8/10/13 | 14,764 | 14,870 | ||
State of Israel (guaranteed by U.S. Government through Agency for International Development): | ||||
5.5% 9/18/23 | 110,500 | 110,040 | ||
5.89% 8/15/05 | 29,600 | 30,488 | ||
6.6% 2/15/08 | 35,170 | 37,270 | ||
6.8% 2/15/12 | 18,000 | 19,984 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 9,300 | 9,809 | ||
5.96% 8/1/09 | 9,930 | 10,433 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 1,557 | 1,661 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 1,534,203 | |||
U.S. Treasury Inflation Protected Obligations - 7.7% | ||||
U.S. Treasury Inflation-Indexed Bonds 3.625% 4/15/28 | 201,058 | 243,548 | ||
U.S. Treasury Inflation-Indexed Notes 1.875% 7/15/13 | 77,205 | 76,829 | ||
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | 320,377 | |||
U.S. Treasury Obligations - 25.7% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 60,000 | 66,912 | ||
8% 11/15/21 | 142,000 | 188,289 | ||
13.25% 5/15/14 | 15,000 | 21,243 | ||
U.S. Treasury Notes: | ||||
2.625% 3/15/09 | 80,000 | 76,634 | ||
2.75% 6/30/06 | 30,000 | 30,060 | ||
3.25% 1/15/09 | 433,200 | 427,360 | ||
4.25% 8/15/13 | 60,000 | 59,198 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) (000s) | |||
U.S. Treasury Obligations - continued | ||||
U.S. Treasury Notes: - continued | ||||
4.25% 11/15/13 | $ 15,000 | $ 14,766 | ||
4.75% 5/15/14 | 101,755 | 103,937 | ||
5% 8/15/11 | 23,030 | 24,244 | ||
5.75% 8/15/10 | 53,000 | 58,120 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 1,070,763 | |||
TOTAL U.S. GOVERNMENT AND (Cost $2,946,839) | 2,925,343 | |||
U.S. Government Agency - Mortgage Securities - 13.9% | ||||
Fannie Mae - 13.2% | ||||
4% 10/1/18 to 4/1/19 | 7,418 | 7,125 | ||
4% 8/1/19 (c) | 109,739 | 105,281 | ||
5% 8/1/34 (c) | 185,000 | 180,433 | ||
5.5% 5/1/09 to 3/1/34 | 166,123 | 168,795 | ||
6% 9/1/17 to 7/1/20 | 24,629 | 25,729 | ||
6.5% 1/1/13 to 4/1/33 | 38,505 | 40,491 | ||
6.5% 8/1/19 (c) | 1,492 | 1,576 | ||
6.5% 8/1/34 (c) | 4,587 | 4,786 | ||
7% 7/1/13 to 6/1/32 | 5,853 | 6,216 | ||
7.5% 8/1/10 to 10/1/15 | 405 | 431 | ||
8% 1/1/22 | 141 | 150 | ||
8.5% 1/1/15 to 4/1/16 | 1,305 | 1,411 | ||
9% 5/1/14 | 1,163 | 1,266 | ||
9.5% 11/15/09 to 10/1/20 | 2,020 | 2,248 | ||
10% 8/1/10 | 77 | 83 | ||
11% 3/1/10 | 11 | 11 | ||
11.5% 6/15/19 to 1/15/21 | 3,349 | 3,792 | ||
549,824 | ||||
Freddie Mac - 0.4% | ||||
5% 1/1/09 to 8/1/33 | 10,638 | 10,432 | ||
7% 4/1/11 | 6 | 7 | ||
7.5% 7/1/10 to 5/1/16 | 4,120 | 4,399 | ||
8% 1/1/10 to 6/1/11 | 108 | 113 | ||
8.5% 8/1/08 to 12/1/25 | 411 | 443 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) (000s) | |||
Freddie Mac - continued | ||||
9% 8/1/09 to 12/1/10 | $ 155 | $ 166 | ||
9.75% 8/1/14 | 392 | 434 | ||
15,994 | ||||
Government National Mortgage Association - 0.3% | ||||
6% 7/15/08 to 12/15/10 | 8,925 | 9,387 | ||
6.5% 5/15/28 to 11/15/32 | 2,933 | 3,071 | ||
7% 10/15/26 to 8/15/32 | 155 | 165 | ||
7.5% 3/15/28 to 8/15/28 | 210 | 226 | ||
8% 11/15/06 to 12/15/23 | 2,147 | 2,361 | ||
8.5% 10/15/08 to 2/15/31 | 155 | 165 | ||
9.5% 2/15/25 | 3 | 3 | ||
15,378 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $579,370) | 581,196 | |||
Collateralized Mortgage Obligations - 6.7% | ||||
U.S. Government Agency - 6.7% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1993-109 Class NZ, 6% 7/25/08 | 9,060 | 9,314 | ||
Series 1993-160 Class PK, 6.5% 11/25/22 | 7,298 | 7,382 | ||
Series 1993-207 Class H, 6.5% 11/25/23 | 18,360 | 19,616 | ||
Series 1994-23 Class PG, 6% 4/25/23 | 9,565 | 10,007 | ||
Series 1994-27 Class PJ, 6.5% 6/25/23 | 6,430 | 6,660 | ||
Series 1994-50 Class PJ, 6.5% 8/25/23 | 17,000 | 17,881 | ||
sequential pay Series 1997-41 Class J, 7.5% 6/18/27 | 7,860 | 8,205 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
Class 2004-29 Class JZ, 4.5% 5/25/19 | 3,114 | 3,108 | ||
planned amortization class: | ||||
Series 2002-25 Class PD, 6.5% 3/25/31 | 35,000 | 36,481 | ||
Series 2002-8 Class PD, 6.5% 7/25/30 | 8,533 | 8,756 | ||
sequential pay Series 2001-15 Class VA, 6% 6/25/10 | 518 | 520 | ||
Series 2002-50 Class LE, 7% 12/25/29 | 2,119 | 2,168 | ||
Series 2004-21 Class ZJ, 5.5% 6/25/32 | 1,600 | 1,602 | ||
Freddie Mac planned amortization class: | ||||
Series 1413 Class J, 4% 11/15/07 | 4,384 | 4,420 | ||
Series 2351 Class PX, 6.5% 7/15/30 | 756 | 766 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value (Note 1) (000s) | |||
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 | $ 9,826 | ||
Series 1560 Class PN, 7% 12/15/12 | 14,930 | 15,832 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
planned amortization class: | ||||
Class 2325 Class PL, 7% 1/15/31 | 9,912 | 10,236 | ||
Series 1614 Class L, 6.5% 7/15/23 | 8,138 | 8,663 | ||
Series 1727 Class H, 6.5% 8/15/23 | 12,200 | 12,697 | ||
Series 2295 Class PE, 6.5% 2/15/30 | 791 | 791 | ||
Series 2368 Class PQ, 6.5% 8/15/30 | 1,711 | 1,724 | ||
Series 2435 Class GD, 6.5% 2/15/30 | 2,435 | 2,451 | ||
Series 2461 Class PG, 6.5% 1/15/31 | 6,715 | 6,889 | ||
Series 2473 Class JB, 5.5% 2/15/29 | 1,472 | 1,478 | ||
Series 2557 Class MA, 4.5% 7/15/16 | 1,901 | 1,924 | ||
Series 2690 Class TB, 4.5% 12/15/17 | 8,366 | 8,527 | ||
sequential pay: | ||||
Series 2445 Class BD, 6.5% 6/15/30 | 500 | 501 | ||
Series 2448 Class XB, 6.5% 10/15/29 | 9,578 | 9,634 | ||
Series 2749 Class MZ, 5% 2/15/24 | 813 | 813 | ||
Series 2750 Class CZ, 5% 11/15/32 | 2,115 | 2,115 | ||
Series 2769 Class BU, 5% 3/15/34 | 11,185 | 11,110 | ||
Series 2802 Class Z, 5.5% 4/15/33 | 2,783 | 2,782 | ||
Series 2807: | ||||
Class TZ, 6% 12/15/31 | 1,448 | 1,456 | ||
Class ZK, 6% 12/15/31 | 684 | 683 | ||
target amortization class Series 2156 Class TC, 6.25% 5/15/29 | 14,576 | 15,233 | ||
Ginnie Mae guaranteed REMIC pass thru securities planned amortization class: | ||||
Series 1997-8 Class PE, 7.5% 5/16/27 | 13,604 | 14,392 | ||
Series 2001-53 Class TA, 6% 12/20/30 | 1,932 | 1,957 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $275,606) | 278,600 |
Cash Equivalents - 19.8% | |||
Maturity | Value (Note 1) (000s) | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) (a)(d) | $ 824,507 | $ 824,413 | |
TOTAL INVESTMENT PORTFOLIO - 110.6% (Cost $4,626,228) | 4,609,552 | ||
NET OTHER ASSETS - (10.6)% | (441,412) | ||
NET ASSETS - 100% | $ 4,168,140 |
Legend |
(a) Includes investment made with cash collateral received from securities on loan. |
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $11,801,000 or 0.3% of net assets. |
(c) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(d) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$824,413 due 8/2/04 | |
Banc of America Securities LLC | $ 304,928 |
Bank of America, National Association | 138,530 |
Bear Stearns & Co. Inc. | 34,632 |
BNP Paribas Securities Corp. | 34,632 |
Goldman, Sachs & Co. | 34,632 |
Morgan Stanley & Co. Incorporated | 277,059 |
$ 824,413 |
Income Tax Information |
The fund hereby designates approximately $21,676,000 as a 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) | July 31, 2004 | |
Assets | ||
Investment in securities, at value (including securities loaned of $180,990 and repurchase agreements of $824,413)(cost $4,626,228) - See accompanying schedule | $ 4,609,552 | |
Cash | 1 | |
Receivable for investments sold | 256 | |
Receivable for fund shares sold | 4,255 | |
Interest receivable | 34,512 | |
Prepaid expenses | 7 | |
Total assets | 4,648,583 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 291,702 | |
Payable for fund shares redeemed | 1,591 | |
Distributions payable | 224 | |
Accrued management fee | 1,472 | |
Other affiliated payables | 655 | |
Other payables and accrued expenses | 189 | |
Collateral on securities loaned, at value | 184,610 | |
Total liabilities | 480,443 | |
Net Assets | $ 4,168,140 | |
Net Assets consist of: | ||
Paid in capital | $ 4,178,255 | |
Undistributed net investment income | 6,532 | |
Accumulated undistributed net realized gain (loss) on investments | 29 | |
Net unrealized appreciation (depreciation) on investments | (16,676) | |
Net Assets, for 411,553 shares outstanding | $ 4,168,140 | |
Net Asset Value, offering price and redemption price per share ($4,168,140 ÷ 411,553 shares) | $ 10.13 |
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, 2004 | |
Investment Income | ||
Interest | $ 142,130 | |
Security lending | 765 | |
Total income | 142,895 | |
Expenses | ||
Management fee | $ 16,779 | |
Transfer agent fees | 6,492 | |
Accounting and security lending fees | 951 | |
Non-interested trustees' compensation | 21 | |
Custodian fees and expenses | 105 | |
Registration fees | 37 | |
Audit | 64 | |
Legal | 14 | |
Miscellaneous | 184 | |
Total expenses before reductions | 24,647 | |
Expense reductions | (42) | 24,605 |
Net investment income (loss) | 118,290 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 18,937 | |
Swap agreements | (4,459) | |
Total net realized gain (loss) | 14,478 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 23,892 | |
Swap agreements | 738 | |
Total change in net unrealized appreciation (depreciation) | 24,630 | |
Net gain (loss) | 39,108 | |
Net increase (decrease) in net assets resulting from operations | $ 157,398 |
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) | $ 118,290 | $ 123,105 |
Net realized gain (loss) | 14,478 | 105,749 |
Change in net unrealized appreciation (depreciation) | 24,630 | (135,914) |
Net increase (decrease) in net assets resulting | 157,398 | 92,940 |
Distributions to shareholders from net investment income | (116,019) | (120,943) |
Distributions to shareholders from net realized gain | (56,842) | (41,172) |
Total distributions | (172,861) | (162,115) |
Share transactions | 1,202,777 | 1,675,499 |
Reinvestment of distributions | 168,396 | 156,422 |
Cost of shares redeemed | (809,223) | (1,060,935) |
Net increase (decrease) in net assets resulting from share transactions | 561,950 | 770,986 |
Total increase (decrease) in net assets | 546,487 | 701,811 |
Net Assets | ||
Beginning of period | 3,621,653 | 2,919,842 |
End of period (including undistributed net investment income of $6,532 and undistributed net investment income of $1,162, respectively) | $ 4,168,140 | $ 3,621,653 |
Other Information Shares | ||
Sold | 117,744 | 159,482 |
Issued in reinvestment of distributions | 16,526 | 14,923 |
Redeemed | (79,300) | (101,206) |
Net increase (decrease) | 54,970 | 73,199 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2004 | 2003 | 2002 | 2001 | 2000 |
Selected Per-Share Data | |||||
Net asset value, | $ 10.16 | $ 10.30 | $ 9.98 | $ 9.49 | $ 9.54 |
Income from Investment Operations | |||||
Net investment income (loss) B | .307 | .374 | .452 D | .577 | .592 |
Net realized and unrealized gain (loss) | .124 | (.014) | .335 D | .525 | (.059) |
Total from investment operations | .431 | .360 | .787 | 1.102 | .533 |
Distributions from net investment income | (.301) | (.370) | (.467) | (.612) | (.583) |
Distributions from net realized gain | (.160) | (.130) | - | - | - |
Total distributions | (.461) | (.500) | (.467) | (.612) | (.583) |
Net asset value, end of period | $ 10.13 | $ 10.16 | $ 10.30 | $ 9.98 | $ 9.49 |
Total Return A | 4.30% | 3.45% | 8.08% | 11.92% | 5.81% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .63% | .65% | .69% | .61% | .66% |
Expenses net of voluntary waivers, if any | .63% | .65% | .69% | .61% | .66% |
Expenses net of all reductions | .63% | .65% | .68% | .60% | .65% |
Net investment income (loss) | 3.01% | 3.56% | 4.50% D | 5.91% | 6.27% |
Supplemental Data | |||||
Net assets, end of period | $ 4,168 | $ 3,622 | $ 2,920 | $ 2,154 | $ 1,421 |
Portfolio turnover rate | 224% | 253% | 284% | 214% | 131% |
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. 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. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2004 | Past 1 | Past 5 | Past 10 |
Fidelity Intermediate Govt Income Fund | 2.84% | 6.34% | 6.38% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Intermediate Government Income Fund on July 31, 1994. 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 had positive returns for the year ending July 31, 2004, as the Lehman Brothers® Aggregate Bond Index climbed 4.84% in an extremely volatile period. Early on, bonds benefited from the Federal Reserve Board's accommodative monetary policy - the Board kept the fed funds target rate at a 45-year low of 1.00%. Bonds continued to post gains through the first quarter of 2004 amid a backdrop of low inflation and weak employment levels. But that all changed in April, when a surge in job creation caused bond prices to plunge and investors to re-evaluate their expectations about the timing of future rate hikes. Bonds continued their descent in May, and the Fed confirmed investors' fears by hiking rates in June. Treasuries - the most interest-rate-sensitive bond category - fared the worst in this environment, but still posted a 3.85% advance for the year, according to the Lehman Brothers U.S. Treasury Index. Meanwhile, corporate bonds and mortgage securities fared best, as the Lehman Brothers Credit Bond and Mortgage-Backed Securities indexes rose 5.83% and 5.11%, respectively.
For the 12 months ending July 31, 2004, the fund returned 2.84%. During the same period, the LipperSM Short-Intermediate U.S. Government Funds Average returned 2.12% and the Lehman Brothers Intermediate Government Bond Index returned 2.74%. Aiding the fund's outperformance of its benchmarks was the portfolio's comparatively large stake in mortgage securities, which outperformed Treasury and agency securities during the period. Security selection within the mortgage sector also helped. That said, the major disappointment during the period was that the fund didn't own even more mortgage securities. Instead, the portfolio maintained a relatively large weighting in agency securities relative to the index and an underweighting in Treasuries, a strategy which generally benefited the fund. Agencies outperformed Treasuries in part because of their attractive yields and reduced supply. Treasuries also were hurt by the fact that their lower yields provided less of a cushion against rising rates and their liquidity meant they were more easily sold when the market declined.
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, 2004 | ||
% of fund's investments | % of fund's investments | |
1 - 1.99% | 1.3 | 15.8 |
2 - 2.99% | 21.0 | 21.0 |
3 - 3.99% | 6.0 | 4.6 |
4 - 4.99% | 7.9 | 2.4 |
5 - 5.99% | 29.1 | 19.2 |
6 - 6.99% | 22.2 | 26.7 |
7% and over | 3.9 | 4.4 |
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, 2004 | ||
6 months ago | ||
Years | 4.1 | 4.0 |
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, 2004 | ||
6 months ago | ||
Years | 3.4 | 3.4 |
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, 2004* | As of January 31, 2004** | ||||||
![]() | Mortgage Securities 7.3% | ![]() | Mortgage Securities 5.5% | ||||
![]() | CMOs and Other Mortgage Related Securities 6.0% | ![]() | CMOs and Other Mortgage Related Securities 6.7% | ||||
![]() | U.S. Treasury | ![]() | U.S. Treasury | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Futures and Swaps | 0.0% | ** Futures and Swaps | 9.0% |
Percentages are adjusted for the effect of Futures Contracts and Swaps, if applicable. |
Annual Report
Fidelity Intermediate Government Income Fund
Investments July 31, 2004
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 82.1% | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency Obligations - 52.2% | ||||
Fannie Mae: | ||||
2.375% 12/15/05 | $ 20,000 | $ 19,959 | ||
2.375% 2/15/07 | 18,045 | 17,692 | ||
2.5% 6/15/06 | 7,375 | 7,332 | ||
2.625% 11/15/06 | 11,930 | 11,822 | ||
3.25% 1/15/08 | 11,570 | 11,438 | ||
5.125% 1/2/14 | 36,000 | 35,518 | ||
5.5% 3/15/11 | 33,295 | 35,128 | ||
6% 5/15/11 | 55,860 | 60,492 | ||
6.25% 2/1/11 | 1,285 | 1,392 | ||
Farm Credit Systems Financial Assistance Corp. 8.8% 6/10/05 | 7,000 | 7,387 | ||
Federal Farm Credit Bank 9.15% 2/14/05 | 500 | 519 | ||
Federal Home Loan Bank: | ||||
5.8% 9/2/08 | 16,625 | 17,787 | ||
6.75% 4/10/06 | 1,000 | 1,066 | ||
Freddie Mac: | ||||
2.375% 4/15/06 | 67,125 | 66,735 | ||
2.875% 12/15/06 | 66,645 | 66,291 | ||
3.625% 9/15/08 | 17,391 | 17,220 | ||
4.375% 2/4/10 | 27,660 | 27,484 | ||
5.125% 8/20/12 | 9,600 | 9,611 | ||
5.5% 9/15/11 | 1,000 | 1,052 | ||
5.875% 3/21/11 | 1,075 | 1,142 | ||
Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06 | 3,950 | 4,187 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank): | ||||
Series 1993-C, 5.2% 10/15/04 | 55 | 55 | ||
Series 1993-D, 5.23% 5/15/05 | 147 | 149 | ||
Series 1994-F, 8.187% 12/15/04 | 55 | 56 | ||
Guaranteed Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank): | ||||
Series 1992-A, 7.02% 9/1/04 | 522 | 524 | ||
Series 1994-A, 7.39% 6/26/06 | 2,000 | 2,123 | ||
Series 1994-B, 7.5% 1/26/06 | 200 | 210 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates Series 1996-A1, 6.726% 9/15/10 | 2,261 | 2,483 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency Obligations - continued | ||||
Private Export Funding Corp. secured: | ||||
5.66% 9/15/11 (b) | $ 9,000 | $ 9,517 | ||
5.685% 5/15/12 | 7,180 | 7,604 | ||
State of Israel (guaranteed by U.S. Government through Agency for International Development): | ||||
5.89% 8/15/05 | 5,815 | 5,989 | ||
6.6% 2/15/08 | 20,670 | 21,904 | ||
6.8% 2/15/12 | 7,500 | 8,327 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 10,000 | 10,547 | ||
6.06% 8/1/10 | 10,000 | 10,538 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 1,608 | 1,715 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 502,995 | |||
U.S. Treasury Inflation Protected Obligations - 2.1% | ||||
U.S. Treasury Inflation-Indexed Notes 2% 1/15/14 | 20,464 | 20,512 | ||
U.S. Treasury Obligations - 27.8% | ||||
U.S. Treasury Notes: | ||||
3.25% 1/15/09 | 14,000 | 13,811 | ||
3.875% 5/15/09 | 18,000 | 18,164 | ||
4.75% 5/15/14 | 23,950 | 24,464 | ||
5.625% 5/15/08 | 125,116 | 135,053 | ||
5.75% 8/15/10 | 4,500 | 4,935 | ||
6% 8/15/09 | 64,000 | 70,663 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 267,090 | |||
TOTAL U.S. GOVERNMENT AND (Cost $791,813) | 790,597 | |||
U.S. Government Agency - Mortgage Securities - 7.3% | ||||
Fannie Mae - 5.9% | ||||
4% 8/1/19 (c) | 20,000 | 19,188 | ||
5.5% 1/1/09 to 11/1/17 | 9,770 | 10,068 | ||
6% 10/1/08 to 11/1/17 | 6,259 | 6,549 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) | |||
Fannie Mae - continued | ||||
6.5% 4/1/16 to 4/1/33 | $ 9,832 | $ 10,322 | ||
6.5% 8/1/19 (c) | 4,839 | 5,113 | ||
6.5% 8/1/34 (c) | 81 | 84 | ||
7% 7/1/10 to 9/1/31 | 1,215 | 1,288 | ||
9% 2/1/13 | 377 | 416 | ||
9.5% 11/15/09 | 474 | 520 | ||
10.25% 10/1/09 to 10/1/18 | 48 | 53 | ||
11% 8/1/10 to 1/1/16 | 885 | 997 | ||
11.25% 5/1/14 to 1/1/16 | 103 | 117 | ||
11.5% 9/1/11 to 6/15/19 | 600 | 679 | ||
12.25% 7/1/12 to 9/1/13 | 67 | 76 | ||
12.5% 3/1/12 to 7/1/16 | 488 | 555 | ||
12.75% 10/1/11 to 6/1/15 | 260 | 300 | ||
13% 7/1/13 to 7/1/15 | 200 | 228 | ||
13.25% 9/1/11 | 156 | 182 | ||
13.5% 11/1/14 to 12/1/14 | 19 | 22 | ||
14% 10/1/14 | 41 | 48 | ||
14.5% 7/1/14 | 16 | 19 | ||
15% 4/1/12 | 5 | 6 | ||
56,830 | ||||
Freddie Mac - 1.0% | ||||
5% 11/1/33 | 2,958 | 2,891 | ||
6.5% 5/1/08 | 209 | 222 | ||
8.5% 6/1/14 to 6/1/17 | 252 | 266 | ||
9% 11/1/09 to 8/1/16 | 108 | 117 | ||
9.5% 7/1/16 to 8/1/21 | 828 | 925 | ||
10% 7/1/09 to 3/1/21 | 1,604 | 1,771 | ||
10.5% 9/1/09 to 5/1/21 | 221 | 244 | ||
11% 2/1/11 to 9/1/20 | 105 | 118 | ||
11.25% 2/1/10 to 10/1/14 | 174 | 194 | ||
11.5% 10/1/15 to 8/1/19 | 177 | 201 | ||
11.75% 11/1/11 to 7/1/15 | 29 | 32 | ||
12% 10/1/09 to 11/1/19 | 311 | 350 | ||
12.25% 8/1/11 to 8/1/15 | 176 | 199 | ||
12.5% 10/1/09 to 6/1/19 | 1,759 | 1,996 | ||
12.75% 2/1/10 to 10/1/10 | 16 | 18 | ||
13% 9/1/10 to 5/1/17 | 268 | 306 | ||
13.25% 11/1/10 to 12/1/14 | 56 | 63 | ||
13.5% 11/1/10 to 10/1/14 | 93 | 105 | ||
14% 11/1/12 to 4/1/16 | 12 | 14 | ||
14.5% 12/1/10 | 2 | 3 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value (Note 1) | |||
Freddie Mac - continued | ||||
14.75% 3/1/10 | $ 4 | $ 5 | ||
16.25% 7/1/11 | 2 | 2 | ||
10,042 | ||||
Government National Mortgage Association - 0.4% | ||||
8% 9/15/06 to 12/15/23 | 1,232 | 1,348 | ||
8.5% 6/15/16 to 2/15/17 | 16 | 18 | ||
10.5% 9/15/15 to 10/15/21 | 1,497 | 1,687 | ||
10.75% 12/15/09 to 3/15/10 | 28 | 31 | ||
11% 7/20/15 to 1/20/21 | 78 | 88 | ||
12.5% 12/15/10 | 3 | 3 | ||
13% 1/15/11 to 3/15/14 | 160 | 183 | ||
13.25% 8/15/14 | 12 | 14 | ||
13.5% 5/15/10 to 12/15/14 | 107 | 123 | ||
14% 6/15/11 | 9 | 10 | ||
16% 4/15/13 | 29 | 34 | ||
17% 12/15/11 | 3 | 3 | ||
3,542 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $69,061) | 70,414 | |||
Collateralized Mortgage Obligations - 6.0% | ||||
U.S. Government Agency - 6.0% | ||||
Fannie Mae: | ||||
floater Series 1994-42 Class FK, 4.24% 4/25/24 (d) | 7,000 | 7,043 | ||
planned amortization class: | ||||
Series 1988-21 Class G, 9.5% 8/25/18 | 189 | 215 | ||
Series 1994-12 Class PH, 6.25% 1/25/09 | 3,099 | 3,232 | ||
sequential pay Series 1993-238 Class C, 6.5% 12/25/08 | 11,275 | 11,762 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
Class 2004-29 Class JZ, 4.5% 5/25/19 | 795 | 794 | ||
floater Series 2002-74 Class FV, 1.9% 11/25/32 (d) | 9,203 | 9,270 | ||
Series 2002-50 Class LE, 7% 12/25/29 | 566 | 580 | ||
Series 2004-21 Class ZJ, 5.5% 6/25/32 | 416 | 416 | ||
Series 2004-54 Class ZK, 5% 5/25/18 | 961 | 954 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
floater Series 2526 Class FC, 1.78% 11/15/32 (d) | 4,219 | 4,236 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value (Note 1) | |||
U.S. Government Agency - continued | ||||
Freddie Mac Multi-class participation certificates guaranteed: - continued | ||||
planned amortization class: | ||||
Series 1543 Class VK, 6.7% 1/15/23 | $ 7,258 | $ 7,489 | ||
Series 2435 Class EL, 6% 9/15/27 | 188 | 188 | ||
Series 2473 Class JB, 5.5% 2/15/29 | 561 | 563 | ||
sequential pay Series 1929 Class EZ, 7.5% 2/17/27 | 6,177 | 6,648 | ||
Series 2749 Class MZ, 5% 2/15/24 | 218 | 218 | ||
Series 2769 Class BU, 5% 3/15/34 | 2,731 | 2,713 | ||
Series 2807: | ||||
Class TZ, 6% 12/15/31 | 322 | 323 | ||
Class ZK, 6% 12/15/31 | 168 | 168 | ||
Ginnie Mae guaranteed REMIC pass thru securities planned amortization class Series 2001-53 Class TA, 6% 12/20/30 | 753 | 763 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $57,786) | 57,575 |
Cash Equivalents - 8.8% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.37%, dated 7/30/04 due 8/2/04) (a) | $ 84,785 | 84,775 | |
TOTAL INVESTMENT PORTFOLIO - 104.2% (Cost $1,003,435) | 1,003,361 | ||
NET OTHER ASSETS - (4.2)% | (40,307) | ||
NET ASSETS - 100% | $ 963,054 |
Legend |
(a) Includes investment made with cash collateral received from securities on loan. |
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $9,517,000 or 1.0% of net assets. |
(c) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Income Tax Information |
At July 31, 2004, the fund had a capital loss carryforward of approximately $26,658,000 of which $3,975,000, $11,910,000, $7,507,000 and $3,266,000 will expire on July 31, 2005, 2008, 2009 and 2012, respectively. Of the loss carryforwards expiring on July 31, 2005, $702,000 was acquired in a 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, 2004 | |
Assets | ||
Investment in securities, at value (including securities loaned of $24,429 and repurchase agreements of $84,775)(cost $1,003,435) - See accompanying schedule | $ 1,003,361 | |
Receivable for investments sold | 82 | |
Receivable for fund shares sold | 385 | |
Interest receivable | 10,610 | |
Prepaid expenses | 2 | |
Total assets | 1,014,440 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 24,406 | |
Payable for fund shares redeemed | 1,178 | |
Distributions payable | 333 | |
Accrued management fee | 342 | |
Other affiliated payables | 127 | |
Other payables and accrued expenses | 82 | |
Collateral on securities loaned, at value | 24,918 | |
Total liabilities | 51,386 | |
Net Assets | $ 963,054 | |
Net Assets consist of: | ||
Paid in capital | $ 993,072 | |
Undistributed net investment income | 746 | |
Accumulated undistributed net realized gain (loss) on investments | (30,690) | |
Net unrealized appreciation (depreciation) on investments | (74) | |
Net Assets, for 94,590 shares outstanding | $ 963,054 | |
Net Asset Value, offering price and redemption price per share ($963,054 ÷ 94,590 shares) | $ 10.18 |
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, 2004 | |
Investment Income | ||
Interest | $ 35,789 | |
Security lending | 112 | |
Total income | 35,901 | |
Expenses | ||
Management fee | $ 4,681 | |
Transfer agent fees | 1,470 | |
Accounting and security lending fees | 244 | |
Non-interested trustees' compensation | 6 | |
Custodian fees and expenses | 58 | |
Registration fees | 47 | |
Audit | 56 | |
Legal | 5 | |
Miscellaneous | 52 | |
Total expenses before reductions | 6,619 | |
Expense reductions | (1) | 6,618 |
Net investment income (loss) | 29,283 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | (3,101) | |
Swap agreements | (1,077) | |
Total net realized gain (loss) | (4,178) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 6,848 | |
Swap agreements | 243 | |
Total change in net unrealized appreciation (depreciation) | 7,091 | |
Net gain (loss) | 2,913 | |
Net increase (decrease) in net assets resulting from operations | $ 32,196 |
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) | $ 29,283 | $ 43,060 |
Net realized gain (loss) | (4,178) | 52,507 |
Change in net unrealized appreciation (depreciation) | 7,091 | (47,827) |
Net increase (decrease) in net assets resulting | 32,196 | 47,740 |
Distributions to shareholders from net investment income | (29,700) | (42,381) |
Share transactions | 161,283 | 755,118 |
Reinvestment of distributions | 25,722 | 37,055 |
Cost of shares redeemed | (509,767) | (621,342) |
Net increase (decrease) in net assets resulting from share transactions | (322,762) | 170,831 |
Total increase (decrease) in net assets | (320,266) | 176,190 |
Net Assets | ||
Beginning of period | 1,283,320 | 1,107,130 |
End of period (including undistributed net investment income of $746 and undistributed net investment income of $795, respectively) | $ 963,054 | $ 1,283,320 |
Other Information Shares | ||
Sold | 15,687 | 73,202 |
Issued in reinvestment of distributions | 2,506 | 3,579 |
Redeemed | (49,761) | (60,120) |
Net increase (decrease) | (31,568) | 16,661 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2004 | 2003 | 2002 | 2001 | 2000 |
Selected Per-Share Data | |||||
Net asset value, | $ 10.17 | $ 10.11 | $ 9.77 | $ 9.32 | $ 9.46 |
Income from Investment Operations | |||||
Net investment income (loss) B | .274 | .329 | .457 D | .607 | .616 |
Net realized and unrealized gain (loss) | .014 | .056 | .353 D | .452 | (.151) |
Total from investment operations | .288 | .385 | .810 | 1.059 | .465 |
Distributions from net investment income | (.278) | (.325) | (.470) | (.609) | (.605) |
Net asset value, end of period | $ 10.18 | $ 10.17 | $ 10.11 | $ 9.77 | $ 9.32 |
Total Return A | 2.84% | 3.80% | 8.51% | 11.68% | 5.11% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .60% | .60% | .59% | .64% | .65% |
Expenses net of voluntary waivers, if any | .60% | .60% | .59% | .61% | .63% |
Expenses net of all reductions | .60% | .60% | .59% | .60% | .63% |
Net investment income (loss) | 2.67% | 3.18% | 4.63% D | 6.34% | 6.59% |
Supplemental Data | |||||
Net assets, end of period | $ 963 | $ 1,283 | $ 1,107 | $ 844 | $ 728 |
Portfolio turnover rate | 152% | 229% | 145% | 114% | 66% |
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. 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, 2004
(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, including restricted 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 valuation models. If prices are not readily available or do not accurately reflect fair value for a security, or if a security's value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded, that security may be valued by another method that the Board of Trustees believes accurately reflects fair value. A security's valuation may differ depending on the method used for determining value. 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 is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.
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, and are marked-to-market. 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 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, certain funds 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 book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to prior period premium and discount on debt securities, market discount, financing transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows for each fund:
Cost for Federal | Unrealized | Unrealized | Net Unrealized | |
Ginnie Mae Fund | $ 4,251,662 | $ 43,951 | $ (42,535) | $ 1,416 |
Government Income Fund | 4,628,048 | 26,382 | (44,878) | (18,496) |
Intermediate Government | 1,005,230 | 6,223 | (8,092) | (1,869) |
Undistributed | Undistributed Long-term | Capital Loss | |
Ginnie Mae Fund | $ 15,201 | $ - | $ (8,344) |
Government Income Fund | 15,310 | 2,020 | - |
Intermediate Government | 2,446 | - | (26,658) |
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, 2004 | |||
Ordinary | Long-term | Total | |
Ginnie Mae Fund | $ 183,260 | $ 9,263 | $ 192,523 |
Government Income Fund | 156,624 | 16,237 | 172,861 |
Intermediate Government | 29,700 | - | 29,700 |
July 31, 2003 | |||
Ordinary | Long-term | Total | |
Ginnie Mae Fund | $ 231,003 | $ - | $ 231,003 |
Government Income Fund | 152,613 | 9,502 | 162,115 |
Intermediate Government | 42,381 | - | 42,381 |
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. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral 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 each applicable fund's Schedule of Investments. Each fund may receive compensation for interest forgone in
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, each fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.
Restricted Securities. 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 at the end of each applicable fund's Schedule of Investments.
Swap Agreements. Certain funds may invest in swaps for the purpose of managing their 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. Periodic payments received or made by each applicable fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact each applicable fund.
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 may 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 sale 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. 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 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, each fund's annual management fee rate expressed as a percentage of each fund's average net assets was as follows:
Individual Rate | Group Rate | 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 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 | .13% | | |
Government Income Fund | .17% | |
Intermediate Government Income Fund | .13% |
Accounting and Security Lending Fees. FSC maintains each fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
4. Committed Line of Credit.
Certain funds participate with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
5. 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
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
5. Security Lending - continued
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 funds and any additional required collateral is delivered to the funds 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 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.
6. Bank Borrowings.
Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each fund has established borrowing arrangements with certain banks. The interest rate on the borrowings is the bank's base rate, as revised from time to time. At period end, there were no bank borrowings outstanding. Each applicable fund's activity in this program during the period was as follows:
Average Daily | Weighted Average | |
Ginnie Mae Fund | $ 23,744 | 1.53% |
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 | Transfer | |
Ginnie Mae Fund | $ 4 | $ - |
Government Income Fund | 5 | 37 |
Intermediate Government Income Fund | 1 | - |
8. Other Information.
At the end of the period, Fidelity Freedom 2010 Fund and Fidelity Freedom 2020 Fund were the owners of record of approximately 26% and 15%, respectively, 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 58% of the total outstanding shares of the Fidelity Government Income Fund.
Annual Report
Report of Independent Registered Public Accounting Firm
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, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States), 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, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 13, 2004
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 295 funds advised by FMR or an affiliate. Mr. McCoy oversees 297 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (74)** | |
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 (42)** | |
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 (50) | |
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 (52) | |
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 (61) | |
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), The Dow Chemical Company (2000), and Northrop Grumman Corporation (global defense technology, 2003). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Council of the Public Company Accounting Oversight Board (PCAOB), 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 (72) | |
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. | |
Robert M. Gates (60) | |
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), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001), and Brinker International (restaurant management, 2003). 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. | |
George H. Heilmeier (68) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), 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. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), and Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002). | |
Donald J. Kirk (71) | |
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. (leadership education for arts and culture). 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 (57) | |
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) 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 (60) | |
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 Co-Chairman and a Director of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (71) | |
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 served as CEO until April 1998, retired as Chairman May 1999, and 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. He is a member of the Executive Committee of the Independent Director's Council 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 (70) | |
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), and Progress Energy, Inc. (electric utility). 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 (65) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board (2000), CEO (2002), a position he previously held from 1995-2000, Chairman of the Executive Committee (2000), and a Member of the Board of Directors 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; 2002-2003). 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 and the University of Notre Dame Advisory Council for the College of Science. |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Dirks and Ms. Small 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 Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Dennis J. Dirks (56) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). | |
Peter S. Lynch (61) | |
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. | |
Cornelia M. Small (60) | |
Year of Election or Appointment: 2004 Member of the Advisory Board of Fidelity Income Fund. Ms. Small is a member (2000) and Chairperson (2002) of the Investment Committee, and a member (2002) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1998). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
Dwight D. Churchill (50) | |
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 (43) | |
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 (43) | |
Year of Election or Appointment: 2002 or 2003 Vice President of Government Income (2002) and Intermediate Government Income (2003). Mr. Fischer also serves as 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 (43) | |
Year of Election or Appointment: 1997 Vice President of Ginnie Mae. Mr. Silvia also serves as Vice President of other funds advised by FMR. | |
Eric D. Roiter (55) | |
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 (44) | |
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. | |
Christine Reynolds (45) | |
Year of Election or Appointment: 2004 President, Treasurer, and Anti-Money Laundering (AML) officer of Ginnie Mae, Government Income, and Intermediate Government Income. Ms. Reynolds also serves as President, Treasurer, and AML officer of other Fidelity funds (2004) and is a Vice President (2003) and an employee (2002) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
Timothy F. Hayes (53) | |
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). | |
Kenneth A. Rathgeber (57) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004) and Executive Vice President of Risk Oversight for Fidelity Investments (2002). Previously, he served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
John R. Hebble (46) | |
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). | |
Kimberley H. Monasterio (40) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
John H. Costello (57) | |
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. (57) | |
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). | |
Peter L. Lydecker (50) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (49) | |
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. | |
Kenneth B. Robins (34) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Robins also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Thomas J. Simpson (46) | |
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 each fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Fund | Pay | Record | Capital |
Fidelity Government Income Fund | 09/07/04 | 09/03/04 | $0.005 |
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 | 38.33% |
Fidelity Intermediate Government Income Fund | 41.74% |
The funds will notify shareholders in January 2005 of amounts for use in preparing 2004 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on April 14, 2004. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To amend the Declaration of Trust to allow the Board of Trustees, if permitted by applicable law, to authorize fund mergers without shareholder approval.* | ||
# of | % of | |
Affirmative | 5,733,332,096.96 | 79.506 |
Against | 1,101,900,754.51 | 15.280 |
Abstain | 290,226,743.09 | 4.025 |
Broker | 85,743,565.56 | 1.189 |
TOTAL | 7,211,203,160.12 | 100.000 |
PROPOSAL 2 | ||
To elect a Board of Trustees.* | ||
# of | % of | |
J. Michael Cook | ||
Affirmative | 6,892,332,738.84 | 95.578 |
Withheld | 318,870,421.28 | 4.422 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ralph F. Cox | ||
Affirmative | 6,882,315,606.74 | 95.439 |
Withheld | 328,887,553.38 | 4.561 |
TOTAL | 7,211,203,160.12 | 100.000 |
Laura B. Cronin | ||
Affirmative | 6,880,811,550.36 | 95.418 |
Withheld | 330,391,609.76 | 4.582 |
TOTAL | 7,211,203,160.12 | 100.000 |
Robert M. Gates | ||
Affirmative | 6,887,483,173.36 | 95.511 |
Withheld | 323,719,986.76 | 4.489 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
George H. Heilmeier | ||
Affirmative | 6,886,148,619.46 | 95.492 |
Withheld | 325,054,540.66 | 4.508 |
TOTAL | 7,211,203,160.12 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 6,864,733,447.98 | 95.195 |
Withheld | 346,469,712.14 | 4.805 |
TOTAL | 7,211,203,160.12 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 6,862,922,095.94 | 95.170 |
Withheld | 348,281,064.18 | 4.830 |
TOTAL | 7,211,203,160.12 | 100.000 |
Donald J. Kirk | ||
Affirmative | 6,885,864,179.00 | 95.488 |
Withheld | 325,338,981.12 | 4.512 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marie L. Knowles | ||
Affirmative | 6,893,357,743.67 | 95.592 |
Withheld | 317,845,416.45 | 4.408 |
TOTAL | 7,211,203,160.12 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 6,893,877,983.36 | 95.600 |
Withheld | 317,325,176.76 | 4.400 |
TOTAL | 7,211,203,160.12 | 100.000 |
Marvin L. Mann | ||
Affirmative | 6,885,633,341.18 | 95.485 |
Withheld | 325,569,818.94 | 4.515 |
TOTAL | 7,211,203,160.12 | 100.000 |
William O. McCoy | ||
Affirmative | 6,886,446,432.81 | 95.490 |
Withheld | 324,756,727.31 | 4.504 |
TOTAL | 7,211,203,160.12 | 100.000 |
# of | % of | |
Robert L. Reynolds | ||
Affirmative | 6,883,572,713.71 | 95.457 |
Withheld | 327,630,446.41 | 4.543 |
TOTAL | 7,211,203,160.12 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 6,890,488,924.39 | 95.553 |
Withheld | 320,714,235.73 | 4.447 |
TOTAL | 7,211,203,160.12 | 100.000 |
* Denotes trust-wide proposals and voting results. |
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Management & Research
(U.K.) Inc.; Ginnie Mae and
Intermediate Government Income
Fidelity Management & Research
(Far East) Inc.; Ginnie Mae and
Intermediate Government Income
Fidelity Investments
Money Management, Inc.
Fidelity Investments Japan Limited;
Ginnie Mae and Intermediate
Government Income
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
The Bank of New York
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
Mortgage Securities
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Total Bond
Ultra-Short Bond
U.S. Bond Index
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
GVT-UANN-0904
1.789246.101
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
Item 2. Code of Ethics
As of the end of the period, July 31, 2004, Fidelity Income Fund (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Marie L. Knowles 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
(a) Audit Fees.
For the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate Audit Fees billed by PricewaterhouseCoopers LLP (PwC) for professional services rendered for the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, for the Fidelity Ginnie Mae Fund, Fidelity Government Income Fund, Fidelity Intermediate Government Income Fund, Fidelity Total Bond Fund and Fidelity Ultra-Short Bond Fund (the funds) and for all funds in the Fidelity Group of Funds are shown in the table below.
Fund | 2004A | 2003A, B, C |
Fidelity Ginnie Mae Fund | $80,000 | $64,000 |
Fidelity Government Income Fund | $64,000 | $53,000 |
Fidelity Intermediate Government Income Fund | $62,000 | $51,000 |
Fidelity Total Bond Fund | $49,000 | $41,000 |
Fidelity Ultra-Short Bond Fund | $39,000 | $31,000 |
All funds in the Fidelity Group of Funds audited by PwC | $10,600,000 | $9,600,000 |
A | Aggregate amounts may reflect rounding. |
B | Fidelity Total Bond Fund commenced operations on October 15, 2002. |
C | Fidelity Ultra-Short Bond Fund commenced operations on August 29, 2002. |
(b) Audit-Related Fees.
In each of the fiscal years ended July 31, 2004 and July 31, 2003 the aggregate Audit-Related Fees billed by PwC for services rendered for assurance and related services to each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Fund | 2004A | 2003A,B,C,D |
Fidelity Ginnie Mae Fund | $0 | $0 |
Fidelity Government Income Fund | $0 | $0 |
Fidelity Intermediate Government Income Fund | $0 | $0 |
Fidelity Total Bond Fund | $0 | $0 |
Fidelity Ultra-Short Bond Fund | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | Fidelity Total Bond Fund commenced operations on October 15, 2002. |
D | Fidelity Ultra-Short Bond Fund commenced operations on August 29, 2002. |
In each of the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate Audit-Related Fees that were billed by PwC that were required to be approved by the Audit Committee for services rendered on behalf of Fidelity Management & Research Company (FMR) and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the funds ("Fund Service Providers") for assurance and related services that relate directly to the operations and financial reporting of each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Billed By | 2004A | 2003A,B,C |
PwC | $50,000 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | May include amounts billed prior to Fidelity Total Bond Fund's and Fidelity Ultra-Short Bond Fund's commencement of operations. |
Fees included in the audit-related category comprise assurance and related services (e.g., due diligence services) that are traditionally performed by the independent registered public accounting firm. These audit-related services include due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
(c) Tax Fees.
In each of the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate Tax Fees billed by PwC for professional services rendered for tax compliance, tax advice, and tax planning for each fund is shown in the table below.
Fund | 2004A | 2003A,B,C,D |
Fidelity Ginnie Mae Fund | $2,300 | $2,100 |
Fidelity Government Income Fund | $2,300 | $2,100 |
Fidelity Intermediate Government Income Fund | $2,300 | $2,100 |
Fidelity Total Bond Fund | $2,100 | $2,000 |
Fidelity Ultra-Short Bond Fund | $2,100 | $2,000 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | Fidelity Total Bond Fund commenced operations on October 15, 2002. |
D | Fidelity Ultra-Short Bond Fund commenced operations on August 29, 2002. |
In each of the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate Tax Fees billed by PwC that were required to be approved by the Audit Committee for professional services rendered on behalf of the Fund Service Providers for tax compliance, tax advice, and tax planning that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2004A | 2003A,B,C |
PwC | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | May include amounts billed prior to Fidelity Total Bond Fund's and Fidelity Ultra-Short Bond Fund's commencement of operations. |
Fees included in the Tax Fees category comprise all services performed by professional staff in the independent registered public accounting firm's tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
(d) All Other Fees.
In each of the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate Other Fees billed by PwC for all other non-audit services rendered to the funds is shown in the table below.
Fund | 2004A | 2003A,B,C,D |
Fidelity Ginnie Mae Fund | $5,200 | $6,600 |
Fidelity Government Income Fund | $4,500 | $4,200 |
Fidelity Intermediate Government Income Fund | $2,200 | $2,400 |
Fidelity Total Bond Fund | $1,400 | $900 |
Fidelity Ultra-Short Bond Fund | $1,500 | $900 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | Fidelity Total Bond Fund commenced operations on October 15, 2002. |
D | Fidelity Ultra-Short Bond Fund commenced operations on August 29, 2002. |
In each of the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate Other Fees billed by PwC that were required to be approved by the Audit Committee for all other non-audit services rendered on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2004A | 2003A,B,C |
PwC | $280,000 | $300,000 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | May include amounts billed prior to Fidelity Total Bond Fund's and Fidelity Ultra-Short Bond Fund's commencement of operations. |
Fees included in the All Other Fees category include services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the fund.
(e) (1) | Audit Committee Pre-Approval Policies and Procedures: |
The trust's Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity Fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (Covered Service) are subject to approval by the Audit Committee before such service is provided. Non-audit services provided by a fund audit firm for a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund (Non-Covered Service) but that are expected to exceed $50,000 are also subject to pre-approval by the Audit Committee.
All Covered Services, as well as Non-Covered Services that are expected to exceed $50,000, must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee. Neither pre-approval nor advance notice of Non-Covered Service engagements for which fees are not expected to exceed $50,000 is required; such engagements are to be reported to the Audit Committee monthly.
(e) (2) | Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: |
Audit-Related Fees:
There were no amounts, including amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time, that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2004 and July 31, 2003 on behalf of each fund.
There were no amounts, including amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time, that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2004 and July 31, 2003 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
Tax Fees:
There were no amounts, including amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time, that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2004 and July 31, 2003 on behalf of each fund.
There were no amounts, including amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time, that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2004 and July 31, 2003 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
All Other Fees:
There were no amounts, including amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time, that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2004 and July 31, 2003 on behalf of each fund.
There were no amounts, including amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time, that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2004 and July 31, 2003 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
(f) According to PwC for the fiscal year ended July 31, 2004, the percentage of hours spent on the audit of each fund's financial statements for the most recent fiscal year that were attributed to work performed by persons who are not full-time, permanent employees of PwC is as follows:
Fund | 2004 |
Fidelity Ginnie Mae Fund | 0% |
Fidelity Government Income Fund | 0% |
Fidelity Intermediate Government Income Fund | 0% |
Fidelity Total Bond Fund | 0% |
Fidelity Ultra-Short Bond Fund | 0% |
(g) For the fiscal years ended July 31, 2004 and July 31, 2003, the aggregate fees billed by PwC of $1,900,000A and $2,050,000A,B,C for non-audit services rendered on behalf of the funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and Fund Service Providers relating to Covered Services and Non-Covered Services are shown in the table below.
2004A | 2003A,B,C | |
Covered Services | $400,000 | $350,000 |
Non-Covered Services | $1,500,000 | $1,700,000 |
A | Aggregate amounts may reflect rounding. |
B | Includes amounts related to non-audit services prior to May 6, 2003 that would have been subject to pre-approval if the SEC rules relating to the pre-approval of non-audit services had been in effect at that time. |
C | May include amounts billed prior to Fidelity Total Bond Fund's and Fidelity Ultra-Short Bond Fund's commencement of operations. |
(h) The trust's Audit Committee has considered Non-Covered Services that were not pre-approved that were provided by PwC to Fund Service Providers to be compatible with maintaining the independence of PwC in its audit of the funds, taking into account representations from PwC, in accordance with Independence Standards Board Standard No.1, regarding its independence from the funds and their related entities.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the trust's Board of Trustees.
Item 10. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the 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 11. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Income Fund
By: | /s/Christine Reynolds |
Christine Reynolds | |
President and Treasurer | |
Date: | September 23, 2004 |
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/Christine Reynolds |
Christine Reynolds | |
President and Treasurer | |
Date: | September 23, 2004 |
By: | /s/Timothy F. Hayes |
Timothy F. Hayes | |
Chief Financial Officer | |
Date: | September 23, 2004 |