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, 2006 |
This report on Form N-CSR relates solely to the Registrant's Fidelity Ginnie Mae Fund, Fidelity Government Income Fund, Fidelity Intermediate Government Income Fund, and Fidelity Ultra-Short Bond Fund series (each, a "Fund" and collectively, the "Funds").
Item 1. Reports to Stockholders
Fidelity® Ginnie Mae Fund
Fidelity Government Income Fund
Fidelity Intermediate Government Income Fund
Annual Report
July 31, 2006
(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 | ||
Board Approval of Investment Advisory Contracts and Management Fees |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit 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.
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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com/holdings.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the funds nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
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, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table 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 accompanying table 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.
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.
Annual Report
Shareholder Expense Example - continued
Beginning | Ending | Expenses Paid | |
Ginnie Mae Fund | |||
Actual | $ 1,000.00 | $ 1,004.20 | $ 2.24 |
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Government Income Fund | |||
Actual | $ 1,000.00 | $ 1,005.60 | $ 2.24 |
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Intermediate Government Income Fund | |||
Actual | $ 1,000.00 | $ 1,009.70 | $ 2.24 |
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 |
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 181/365 (to reflect the one-half year period).
Annualized | |
Ginnie Mae Fund | .45% |
Government Income Fund | .45% |
Intermediate Government Income Fund | .45% |
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, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity® Ginnie Mae Fund | 1.70% | 4.02% | 5.67% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Ginnie Mae Fund on July 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® GNMA Index performed over the same period.
Annual Report
Fidelity Ginnie Mae Fund
Management's Discussion of Fund Performance
Comments from William Irving, Portfolio Manager of Fidelity® Ginnie Mae Fund
The domestic investment-grade bond market struggled during the 12-month period ending July 31, 2006, finishing with a modest 1.46% return as measured by the Lehman Brothers® Aggregate Bond Index. Bonds were negative in the first and third quarters of the period, and positive in the second and fourth quarters. The negative momentum was typically a result of rising levels of core inflation, Federal Reserve Board interest rate hikes aimed to keep inflation at bay, and a yield curve that was sometimes inverted, meaning short-term yields exceeded long-term yields - a phenomenon that's often a precursor of a recession. In all, the Fed bumped up rates eight times during the period, hoisting the federal funds target rate from 3.25% to 5.25%, its highest level in five years. On the plus side, bonds scored well in the final quarter of the period, advancing 1.46%, which was identical to the debt market's return for the entire one-year period. Investors turned to high-quality debt in the last three months of the period for a number of reasons: Equity performance stumbled; GDP (gross domestic product) growth in the second quarter of 2006 gave strong evidence of a slowing economy; and the Fed supported that notion by announcing there was a good possibility of a pause in its rate hike campaign.
For the 12 months ending July 31, 2006, the fund returned 1.70%, while the Lehman Brothers GNMA Index returned 2.35%. The fund's underperformance of the Lehman Brothers index can be traced mainly to my out-of-index holdings in interest-only project loans issued by Ginnie Mae. These securities posted disappointing returns for the year, hurt by faster-than-expected prepayments. Prepayment speeds are key factors in determining mortgage bond valuations because if they rise or fall more than expected, they can hurt the securities' returns. On the flip side, performance was helped by favorable yield-curve positioning, a function of how I distributed the fund's holdings across bonds of various maturities. Having a modestly shorter duration than the index helped insulate the fund somewhat as interest rates rose. Also working in the fund's favor was security selection among 30-year pass-through securities, with its overweighting in deep-discount bonds helping the most. Elsewhere, out-of-index holdings in hybrid adjustable-rate mortgages benefited returns, as market inefficiencies afforded us opportunities to buy these securities at cheap prices relative to what we believed to be their fair value.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Ginnie Mae Fund
Investment Changes
Coupon Distribution as of July 31, 2006 | ||
% of fund's investments | % of fund's investments | |
Less than 4% | 4.7 | 3.5 |
4 - 4.99% | 7.8 | 10.0 |
5 - 5.99% | 55.4 | 46.9 |
6 - 6.99% | 25.1 | 22.4 |
7 - 7.99% | 5.5 | 4.6 |
8% and over | 0.9 | 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, 2006 | ||
6 months ago | ||
Years | 6.9 | 5.8 |
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, 2006 | ||
6 months ago | ||
Years | 4.1 | 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, 2006*A | As of January 31, 2006**B | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 19.1% | ![]() | CMOs and Other Mortgage Related Securities 21.5% | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* GNMA Securities | 97.7% | ** GNMA Securities | 88.0% | ||||
A Futures and Swaps | 2.4% | B Futures and Swaps | (0.7)% |
(dagger) Short-Term Investments and Net Other Assets are not included in the pie chart. |
Annual Report
Fidelity Ginnie Mae Fund
Investments July 31, 2006
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 84.4% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - 2.6% | ||||
3.752% 7/1/34 (c) | $ 2,080 | $ 2,045 | ||
3.757% 10/1/33 (c) | 529 | 517 | ||
3.82% 10/1/33 (c) | 4,528 | 4,424 | ||
3.837% 4/1/33 (c) | 1,523 | 1,495 | ||
4.172% 3/1/35 (c) | 2,198 | 2,174 | ||
4.249% 1/1/34 (c) | 1,307 | 1,284 | ||
4.292% 3/1/33 (c) | 230 | 223 | ||
4.3% 10/1/34 (c) | 166 | 164 | ||
4.307% 3/1/33 (c) | 611 | 604 | ||
4.307% 10/1/33 (c) | 219 | 216 | ||
4.323% 6/1/33 (c) | 271 | 268 | ||
4.333% 9/1/34 (c) | 642 | 641 | ||
4.348% 9/1/34 (c) | 1,544 | 1,541 | ||
4.366% 4/1/35 (c) | 334 | 330 | ||
4.396% 10/1/34 (c) | 2,672 | 2,617 | ||
4.396% 5/1/35 (c) | 1,560 | 1,543 | ||
4.498% 8/1/34 (c) | 2,181 | 2,186 | ||
4.513% 10/1/35 (c) | 182 | 180 | ||
4.529% 7/1/34 (c) | 639 | 635 | ||
4.545% 7/1/35 (c) | 1,907 | 1,886 | ||
4.553% 1/1/35 (c) | 1,031 | 1,023 | ||
4.555% 9/1/34 (c) | 1,835 | 1,832 | ||
4.586% 2/1/35 (c) | 2,129 | 2,083 | ||
4.593% 8/1/34 (c) | 607 | 605 | ||
4.643% 1/1/33 (c) | 326 | 324 | ||
4.658% 3/1/35 (c) | 239 | 238 | ||
4.684% 9/1/34 (c) | 188 | 190 | ||
4.708% 10/1/32 (c) | 104 | 104 | ||
4.73% 2/1/33 (c) | 92 | 92 | ||
4.732% 10/1/32 (c) | 140 | 141 | ||
4.746% 1/1/35 (c) | 93 | 93 | ||
4.774% 1/1/35 (c) | 1,833 | 1,802 | ||
4.791% 12/1/34 (c) | 545 | 536 | ||
4.811% 8/1/34 (c) | 523 | 521 | ||
4.815% 5/1/33 (c) | 32 | 32 | ||
4.817% 2/1/33 (c) | 721 | 718 | ||
4.838% 9/1/34 (c) | 946 | 936 | ||
4.861% 10/1/35 (c) | 1,293 | 1,274 | ||
4.988% 11/1/32 (c) | 382 | 383 | ||
4.989% 12/1/32 (c) | 53 | 53 | ||
5% 9/1/34 (c) | 801 | 795 | ||
5.016% 2/1/35 (c) | 205 | 204 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
5.023% 7/1/34 (c) | $ 273 | $ 271 | ||
5.063% 11/1/34 (c) | 127 | 128 | ||
5.094% 9/1/34 (c) | 472 | 469 | ||
5.097% 5/1/35 (c) | 3,411 | 3,401 | ||
5.151% 7/1/35 (c) | 2,213 | 2,208 | ||
5.184% 8/1/33 (c) | 718 | 716 | ||
5.202% 6/1/35 (c) | 2,374 | 2,371 | ||
5.24% 3/1/35 (c) | 284 | 282 | ||
5.294% 7/1/35 (c) | 295 | 295 | ||
5.349% 12/1/34 (c) | 792 | 790 | ||
5.5% 11/1/13 to 3/1/25 | 25,498 | 25,236 | ||
6.5% 10/1/17 to 12/1/24 | 6,111 | 6,206 | ||
7% 11/1/16 to 3/1/17 | 2,089 | 2,133 | ||
7.5% 1/1/07 to 4/1/17 | 3,489 | 3,572 | ||
8.5% 12/1/27 | 374 | 399 | ||
9.5% 9/1/30 | 472 | 519 | ||
10.25% 10/1/18 | 14 | 15 | ||
11.5% 5/1/14 to 9/1/15 | 36 | 41 | ||
12.5% 11/1/13 to 7/1/16 | 81 | 91 | ||
13.25% 9/1/11 | 53 | 60 | ||
88,155 | ||||
Freddie Mac - 0.9% | ||||
4.783% 10/1/32 (c) | 95 | 95 | ||
4.86% 3/1/33 (c) | 274 | 272 | ||
5.321% 6/1/35 (c) | 2,222 | 2,203 | ||
5.5% 11/1/17 to 3/1/25 | 25,786 | 25,315 | ||
5.639% 4/1/32 (c) | 126 | 128 | ||
8.5% 2/1/09 to 6/1/25 | 76 | 80 | ||
9% 7/1/08 to 7/1/21 | 218 | 225 | ||
9.5% 7/1/30 to 8/1/30 | 157 | 174 | ||
9.75% 12/1/08 to 4/1/13 | 10 | 11 | ||
10% 1/1/09 to 11/1/20 | 510 | 555 | ||
10.25% 2/1/09 to 11/1/16 | 209 | 220 | ||
10.5% 5/1/10 | 4 | 4 | ||
11.25% 2/1/10 | 17 | 18 | ||
11.75% 11/1/11 | 11 | 12 | ||
12% 5/1/10 to 2/1/17 | 75 | 84 | ||
12.5% 11/1/12 to 5/1/15 | 111 | 124 | ||
13% 5/1/14 to 11/1/14 | 12 | 14 | ||
13.5% 1/1/13 to 12/1/14 | 6 | 7 | ||
29,541 | ||||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Government National Mortgage Association - 80.9% | ||||
3% 4/20/35 (c) | $ 3,871 | $ 3,771 | ||
3.5% 3/20/34 | 1,265 | 1,072 | ||
3.5% 5/20/34 (c) | 1,650 | 1,620 | ||
3.5% 5/20/35 (c) | 2,001 | 1,934 | ||
3.5% 6/20/35 (c) | 2,133 | 2,061 | ||
3.5% 6/20/35 (c) | 6,142 | 6,072 | ||
3.75% 1/20/34 (c) | 19,930 | 19,675 | ||
3.75% 6/20/34 (c) | 6,414 | 6,311 | ||
3.75% 5/20/35 (c) | 9,694 | 9,412 | ||
3.75% 6/20/35 (c) | 5,428 | 5,270 | ||
4% 11/20/33 | 1,699 | 1,502 | ||
4% 2/20/35 (c) | 20,368 | 19,921 | ||
4.25% 7/20/34 (c) | 1,387 | 1,368 | ||
4.5% 4/15/18 to 4/20/34 | 147,820 | 139,620 | ||
4.5% 9/20/34 (c) | 6,813 | 6,738 | ||
4.5% 2/20/35 (c) | 29,160 | 28,746 | ||
4.5% 3/20/35 (c) | 1,352 | 1,333 | ||
5% 4/15/24 to 7/20/36 | 623,667 | 595,593 | ||
5% 2/20/35 (c) | 146 | 145 | ||
5% 6/20/35 (c) | 6,653 | 6,533 | ||
5% 6/20/35 (c) | 17,405 | 17,276 | ||
5.5% 12/20/18 to 6/20/36 | 804,340 | 786,561 | ||
5.5% 8/1/36 (a) | 50,000 | 48,805 | ||
5.5% 8/1/36 (a) | 1,828 | 1,790 | ||
5.75% 8/20/35 (c) | 757 | 754 | ||
6% 8/15/17 to 9/20/34 | 470,606 | 471,585 | ||
6% 8/1/36 (a)(b) | 1,800 | 1,797 | ||
6% 8/1/36 (a)(b) | 30,000 | 29,957 | ||
6.5% 4/15/23 to 11/20/34 | 201,465 | 205,575 | ||
6.5% 8/1/36 (a) | 10,000 | 10,183 | ||
6.5% 8/1/36 (a) | 25,000 | 25,457 | ||
6.5% 8/1/36 (a) | 30,000 | 30,548 | ||
6.5% 8/1/36 (a)(b) | 27,900 | 28,410 | ||
7% 3/15/22 to 9/20/34 | 117,123 | 121,312 | ||
7.25% 9/15/27 to 12/15/30 | 356 | 371 | ||
7.5% 2/15/07 to 9/20/32 | 56,355 | 58,904 | ||
8% 11/15/06 to 7/15/32 | 13,431 | 14,127 | ||
8.5% 7/15/08 to 2/15/31 | 5,376 | 5,716 | ||
9% 5/15/08 to 5/15/30 | 2,088 | 2,253 | ||
9.5% 12/20/15 to 4/20/17 | 715 | 782 | ||
10.5% 1/15/14 to 9/15/19 | 738 | 823 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Government National Mortgage Association - continued | ||||
13% 2/15/11 to 1/15/15 | $ 169 | $ 194 | ||
13.5% 7/15/10 to 1/15/15 | 28 | 31 | ||
2,721,908 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $2,882,807) | 2,839,604 | |||
Asset-Backed Securities - 0.8% | ||||
Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 5.535% 9/25/35 (c) | 28,756 | 28,822 | ||
Collateralized Mortgage Obligations - 17.7% | ||||
U.S. Government Agency - 17.7% | ||||
Fannie Mae: | ||||
Series 2003-39 Class IA, 5.5% 10/25/22 (c)(d) | 5,268 | 946 | ||
Series 2006-48 Class LF, 0% 8/25/34 (c) | 1,894 | 1,881 | ||
target amortization class Series G94-2 Class D, 6.45% 1/25/24 | 4,376 | 4,437 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
planned amortization class Series 2006-51 Class PB, 5.5% 8/25/33 | 15,690 | 15,369 | ||
Series 2005-69 Class ZL, 4.5% 8/25/25 | 299 | 298 | ||
Freddie Mac floater Series 2344 Class FP, 6.3188% 8/15/31 (c) | 2,619 | 2,676 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
floater: | ||||
Series 2406: | ||||
Class FP, 6.3488% 1/15/32 (c) | 5,130 | 5,268 | ||
Class PF, 6.3488% 12/15/31 (c) | 5,002 | 5,148 | ||
Series 2410 Class PF, 6.3488% 2/15/32 (c) | 10,330 | 10,644 | ||
Series 2412 Class GF, 6.3188% 2/15/32 (c) | 2,169 | 2,233 | ||
Series 2861 Class JF, 5.6688% 4/15/17 (c) | 3,581 | 3,587 | ||
Series 3094 Class UF, 0% 9/15/34 (c) | 781 | 768 | ||
planned amortization class: | ||||
Series 2220 Class PD, 8% 3/15/30 | 5,392 | 5,729 | ||
Series 2535 Class IP, 6% 6/15/29 (d) | 400 | 2 | ||
Series 2787 Class OI, 5.5% 10/15/24 (d) | 8,067 | 461 | ||
Series 40 Class K, 6.5% 8/17/24 | 2,154 | 2,196 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Freddie Mac Multi-class participation certificates guaranteed: - continued | ||||
sequential pay: | ||||
Series 2601 Class TI, 5.5% 10/15/22 (d) | $ 21,791 | $ 3,821 | ||
Series 2750 Class ZT, 5% 2/15/34 | 5,776 | 4,889 | ||
Series 2866 Class CY, 4.5% 10/15/19 | 4,491 | 4,084 | ||
Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-71 Class Z, 5.5% 10/20/32 | 43,199 | 41,057 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class: | ||||
Series 1994-4 Class KQ, 7.9875% 7/16/24 | 1,416 | 1,479 | ||
Series 2000-26 Class PK, 7.5% 9/20/30 | 4,173 | 4,231 | ||
Series 2001-65 Class PH, 6% 11/20/28 | 6,323 | 6,373 | ||
Series 2002-5 Class PD, 6.5% 5/16/31 | 18,410 | 18,518 | ||
Series 2003-103 Class PC, 5.5% 11/20/33 | 18,843 | 17,634 | ||
Series 2003-20 Class BI, 5.5% 5/16/27 (d) | 4,017 | 62 | ||
Series 2003-29 Class PD, 5.5% 4/16/33 | 25,000 | 23,302 | ||
Series 2003-31 Class PI, 5.5% 4/16/30 (d) | 9,464 | 657 | ||
Series 2003-34 Class IO, 5.5% 4/16/28 (d) | 13,559 | 633 | ||
Series 2003-4 Class LI, 5.5% 7/16/27 (d) | 5,464 | 172 | ||
Series 2003-7: | ||||
Class IN, 5.5% 1/16/28 (d) | 13,361 | 881 | ||
Class IP, 5.5% 10/16/25 (d) | 27 | 1 | ||
Series 2003-70 CLass LE, 5% 7/20/32 | 44,000 | 41,072 | ||
Series 2003-79 Class PV, 5.5% 10/20/23 | 27,869 | 26,917 | ||
Series 2003-8 Class QI, 5.5% 1/16/27 (d) | 170 | 1 | ||
Series 2004-19: | ||||
Class DJ, 4.5% 3/20/34 | 3,669 | 3,569 | ||
Class DP, 5.5% 3/20/34 | 3,895 | 3,843 | ||
Series 2004-30: | ||||
Class PC, 5% 11/20/30 | 19,736 | 19,063 | ||
Class UA, 3.5% 2/20/32 | 7,373 | 7,016 | ||
Series 2004-64 Class KE, 5.5% 12/20/33 | 22,978 | 22,209 | ||
Series 2004-98 Class IG, 5.5% 2/20/30 (d) | 2,581 | 462 | ||
Series 2005-17 Class IA, 5.5% 8/20/33 (d) | 10,061 | 1,592 | ||
Series 2005-24 Class TC, 5.5% 3/20/35 | 5,403 | 5,096 | ||
Series 2005-54 Class BM, 5% 7/20/35 | 9,658 | 9,250 | ||
Series 2005-57 Class PB, 5.5% 7/20/35 | 5,673 | 5,386 | ||
Series 2005-58 Class NJ, 4.5% 8/20/35 | 40,000 | 38,713 | ||
Series 2008-28 Class PC, 5.5% 4/20/34 | 18,652 | 18,231 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: - continued | ||||
sequential pay: | ||||
Series 1995-4 Class CQ, 8% 6/20/25 | $ 1,064 | $ 1,116 | ||
Series 2001-15 Class VB, 6.5% 4/20/19 | 1,628 | 1,629 | ||
Series 2002-29 Class SK, 8.25% 5/20/32 (c) | 538 | 568 | ||
Series 2002-88 Class GZ, 5.5% 12/20/32 | 24,346 | 22,012 | ||
Series 2003-7 Class VP, 6% 11/20/13 | 5,634 | 5,734 | ||
Series 2004-105 Class VD, 5.5% 6/17/16 | 11,770 | 11,669 | ||
Series 2004-65 Class VE, 5.5% 7/20/15 | 5,133 | 5,106 | ||
Series 2004-86 Class G, 6% 10/20/34 | 6,273 | 6,173 | ||
Series 2005-28 Class AJ, 5.5% 4/20/35 | 94,037 | 93,090 | ||
Series 2005-47 Class ZY, 6% 6/20/35 | 4,268 | 4,009 | ||
Series 2005-6 Class EX, 5.5% 11/20/34 | 1,001 | 944 | ||
Series 2005-82 Class JV, 5% 6/20/35 | 3,500 | 3,133 | ||
Series 1995-6 Class Z, 7% 9/20/25 | 3,013 | 3,093 | ||
Series 2003-24 Class PA, 5% 10/20/28 | 2,160 | 2,150 | ||
Series 2005-6 Class EY, 5.5% 11/20/33 | 1,016 | 944 | ||
Series 2006-13 Class DS, 3.0328% 3/20/36 (c) | 51,646 | 43,260 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $621,357) | 596,487 | |||
Commercial Mortgage Securities - 1.4% | ||||
Fannie Mae Series 1997-M1 Class N, 0.445% 10/17/36 (c)(d) | 44,630 | 442 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
Series 1998-M3 Class IB, 0.9124% 1/17/38 (c)(d) | 44,162 | 1,063 | ||
Series 1998-M4 Class N, 1.1513% 2/25/35 (c)(d) | 19,187 | 452 | ||
Ginnie Mae guaranteed Multi-family pass thru securities: | ||||
sequential pay Series 2001-58 Class X, 1.3729% 9/16/41 (c)(d) | 197,113 | 7,805 | ||
Series 2001-12 Class X, 0.9523% 7/16/40 (c)(d) | 48,954 | 1,834 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay Series 2002-81 Class IO, 1.8846% 9/16/42 (c)(d) | 122,024 | 8,175 | ||
Series 2002-62 Class IO, 1.5373% 8/16/42 (c)(d) | 91,712 | 5,694 | ||
Series 2002-85 Class X, 1.9143% 3/16/42 (c)(d) | 83,958 | 5,142 | ||
Commercial Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Ginnie Mae guaranteed REMIC pass thru securities: - continued | ||||
Series 2003-36 Class XA, 0.8635% 3/16/43 (c)(d) | $ 303,501 | $ 13,634 | ||
Series 2003-47 Class XA, 0.1793% 6/16/43 (c)(d) | 37,228 | 2,037 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $76,586) | 46,278 | |||
Cash Equivalents - 0.6% | ||||
Maturity | ||||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations), in a joint trading account at 5.3%, dated 7/31/06 due 8/1/06 | $ 19,177 | 19,174 | ||
TOTAL INVESTMENT PORTFOLIO - 104.9% (Cost $3,628,680) | 3,530,365 | |||
NET OTHER ASSETS - (4.9)% | (165,370) | |||
NET ASSETS - 100% | $ 3,364,995 |
Swap Agreements | |||||
Expiration Date | Notional Amount (000s) | Value (000s) | |||
Interest Rate Swaps | |||||
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.234% with Lehman Brothers, Inc. | March 2036 | $ 18,000 | $ 846 | ||
Receive semi-annually a fixed rate equal to 5.132% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | March 2009 | 99,000 | 654 | ||
$ 117,000 | $ 1,500 |
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 |
At July 31, 2006, the fund had a capital loss carryforward of approximately $9,594,000 all of which will expire on July 31, 2014. |
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, 2006 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $19,174) - Unaffiliated issuers (cost $3,628,680) | $ 3,530,365 | |
Commitment to sell securities on a delayed delivery basis | $ (163,282) | |
Receivable for securities sold on a delayed delivery basis | 162,219 | (1,063) |
Receivable for investments sold, regular delivery | 96 | |
Cash | 33 | |
Receivable for fund shares sold | 1,702 | |
Interest receivable | 16,585 | |
Swap agreements, at value | 1,500 | |
Other receivables | 53 | |
Total assets | 3,549,271 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 176,730 | |
Payable for fund shares redeemed | 4,707 | |
Distributions payable | 1,524 | |
Accrued management fee | 895 | |
Other affiliated payables | 420 | |
Total liabilities | 184,276 | |
Net Assets | $ 3,364,995 | |
Net Assets consist of: | ||
Paid in capital | $ 3,507,776 | |
Distributions in excess of net investment income | (10,001) | |
Accumulated undistributed net realized gain (loss) on investments | (34,902) | |
Net unrealized appreciation (depreciation) on investments | (97,878) | |
Net Assets, for 316,861 shares outstanding | $ 3,364,995 | |
Net Asset Value, offering price and redemption price per share ($3,364,995 ÷ 316,861 shares) | $ 10.62 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended July 31, 2006 | |
Investment Income | ||
Interest | $ 187,780 | |
Expenses | ||
Management fee | $ 11,930 | |
Transfer agent fees | 3,713 | |
Fund wide operations fee | 1,048 | |
Independent trustees' compensation | 15 | |
Appreciation in deferred trustee compensation account | 1 | |
Miscellaneous | 8 | |
Total expenses before reductions | 16,715 | |
Expense reductions | (54) | 16,661 |
Net investment income | 171,119 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | (35,304) | |
Swap agreements | 1,178 | |
Total net realized gain (loss) | (34,126) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (76,763) | |
Swap agreements | 1,500 | |
Delayed delivery commitments | (1,087) | |
Total change in net unrealized appreciation (depreciation) | (76,350) | |
Net gain (loss) | (110,476) | |
Net increase (decrease) in net assets resulting from operations | $ 60,643 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Ginnie Mae Fund
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income | $ 171,119 | $ 161,629 |
Net realized gain (loss) | (34,126) | 25,145 |
Change in net unrealized appreciation (depreciation) | (76,350) | (25,474) |
Net increase (decrease) in net assets resulting | 60,643 | 161,300 |
Distributions to shareholders from net investment income | (186,731) | (162,997) |
Distributions to shareholders from net realized gain | (7,297) | - |
Total distributions | (194,028) | (162,997) |
Share transactions | 426,203 | 798,447 |
Reinvestment of distributions | 172,335 | 144,222 |
Cost of shares redeemed | (1,133,635) | (884,514) |
Net increase (decrease) in net assets resulting from share transactions | (535,097) | 58,155 |
Total increase (decrease) in net assets | (668,482) | 56,458 |
Net Assets | ||
Beginning of period | 4,033,477 | 3,977,019 |
End of period (including distributions in excess of net investment income of $10,001 and undistributed net investment income of $7,375, respectively) | $ 3,364,995 | $ 4,033,477 |
Other Information Shares | ||
Sold | 39,460 | 72,083 |
Issued in reinvestment of distributions | 15,990 | 13,026 |
Redeemed | (105,330) | (79,918) |
Net increase (decrease) | (49,880) | 5,191 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, | $ 11.00 | $ 11.00 | $ 11.05 | $ 11.11 | $ 10.91 |
Income from Investment Operations | |||||
Net investment income B | .497 | .443 | .404 | .364 | .563 |
Net realized and unrealized gain (loss) | (.315) | .004 C | .027 | (.029) | .225 |
Total from investment operations | .182 | .447 | .431 | .335 | .788 |
Distributions from net investment income | (.542) | (.447) | (.391) | (.395) | (.588) |
Distributions from net realized gain | (.020) | - | (.090) | - | - |
Total distributions | (.562) | (.447) | (.481) | (.395) | (.588) |
Net asset value, end of period | $ 10.62 | $ 11.00 | $ 11.00 | $ 11.05 | $ 11.11 |
Total Return A | 1.70% | 4.11% | 3.96% | 3.02% | 7.42% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | .45% | .57% | .60% | .57% | .60% |
Expenses net of fee waivers, | .45% | .57% | .60% | .57% | .60% |
Expenses net of all reductions | .45% | .57% | .60% | .57% | .60% |
Net investment income | 4.61% | 4.00% | 3.64% | 3.25% | 5.15% |
Supplemental Data | |||||
Net assets, end of period | $ 3,365 | $ 4,033 | $ 3,977 | $ 5,606 | $ 5,743 |
Portfolio turnover rate | 183% | 160% | 155% | 262% | 327% |
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 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.
D Expense ratios reflect operating expenses of the Fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.
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, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity Government Income Fund | 1.56% | 4.31% | 5.76% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Government Income Fund on July 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers Government Bond Index performed 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
The domestic investment-grade bond market struggled during the year ending July 31, 2006, finishing with a 1.46% return as measured by the Lehman Brothers® Aggregate Bond Index. The negative momentum was fueled by rising levels of core inflation and Federal Reserve Board interest rate hikes aimed to keep inflation at bay. In all, the Fed bumped up rates eight times during the period, hoisting the federal funds target rate to 5.25%, its highest level in five years. On the plus side, bonds scored well in the final quarter of the period, advancing 1.46%. Investors turned to high-quality debt in the last three months for a number of reasons: Equity performance stumbled; gross domestic product growth in the second quarter of 2006 gave strong evidence of a slowing economy; and the Fed supported that notion by announcing the possibility of a pause in its rate hike campaign.
The fund returned 1.56% during the past year, while the Lehman Brothers 75% U.S. Government/25% Mortgage-Backed Securities Index gained 1.51%. One of the biggest boosts to the fund's performance relative to the index was my significant overweighting in agency securities and substantial underweighting in Treasury securities. Agencies, helped by their higher yields and more-favorable supply and demand conditions, outpaced Treasuries. An allocation to Treasury Inflation-Protected Securities also helped, as inflation ran at a much higher-than-expected rate during the year. That said, my decision to underweight plain-vanilla 30-year mortgage pass-through securities modestly detracted, as these securities outpaced Treasuries for the year overall. Offsetting that setback to a certain extent was my decision to invest outside the index in hybrid adjustable-rate mortgage securities and collateralized mortgage obligations, both of which posed decent gains. Another strategy that worked in the fund's favor was effective yield-curve positioning, which refers to how I distributed the fund's assets across a range of maturities.
Note to shareholders: On April 20, 2006, the Board of Trustees agreed to present a proposal to shareholders to merge Spartan® Government Income Fund and Fidelity Advisor Government Investment Fund into Fidelity Government Income Fund. Shareholders of Spartan Government Income and Fidelity Advisor Government Investment will meet on September 20, 2006, to vote on the approval of the proposal. If approved, the mergers will occur on or about October 27, 2006.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Government Income Fund
Investment Changes
Coupon Distribution as of July 31, 2006 | ||
% of fund's investments | % of fund's investments | |
Less than 2% | 7.1 | 4.1 |
2 - 2.99% | 6.7 | 4.6 |
3 - 3.99% | 7.0 | 26.6 |
4 - 4.99% | 30.5 | 27.4 |
5 - 5.99% | 24.2 | 23.1 |
6 - 6.99% | 9.4 | 8.1 |
7% and over | 3.9 | 4.5 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of July 31, 2006 | ||
6 months ago | ||
Years | 5.8 | 6.8 |
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, 2006 | ||
6 months ago | ||
Years | 4.6 | 4.2 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006* | As of January 31, 2006** | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 12.5% | ![]() | CMOs and Other Mortgage Related Securities 9.3% | ||||
![]() | U.S. Treasury | ![]() | U.S. Treasury | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Futures and Swaps | 4.6% | ** Futures and Swaps | 0.0% |
Annual Report
Fidelity Government Income Fund
Investments July 31, 2006
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 65.7% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency Obligations - 28.6% | ||||
Fannie Mae: | ||||
3.25% 2/15/09 | $ 120,030 | $ 114,451 | ||
4% 9/2/08 | 10,120 | 9,852 | ||
4.5% 10/15/08 | 107,340 | 105,760 | ||
4.625% 1/15/08 | 82,408 | 81,607 | ||
4.625% 10/15/13 | 2,800 | 2,683 | ||
4.75% 12/15/10 | 286,876 | 281,060 | ||
4.875% 4/15/09 | 77,610 | 76,933 | ||
5.125% 4/15/11 | 210,000 | 208,670 | ||
5.125% 1/2/14 | 19,730 | 19,228 | ||
6.25% 2/1/11 | 19,445 | 20,070 | ||
6.375% 6/15/09 | 39,220 | 40,416 | ||
Federal Home Loan Bank: | ||||
4.5% 10/14/08 | 37,865 | 37,285 | ||
5.375% 8/19/11 | 33,970 | 34,150 | ||
5.8% 9/2/08 | 7,750 | 7,815 | ||
Freddie Mac: | ||||
4% 8/17/07 | 5,305 | 5,231 | ||
4.25% 7/15/09 | 57,056 | 55,570 | ||
4.875% 11/15/13 | 14,070 | 13,673 | ||
5.125% 4/18/08 | 60,000 | 59,839 | ||
5.25% 7/18/11 | 26,000 | 25,963 | ||
5.75% 1/15/12 | 1,223 | 1,249 | ||
5.75% 6/27/16 | 17,500 | 17,699 | ||
5.875% 3/21/11 | 34,550 | 35,133 | ||
Israeli State (guaranteed by U.S. Government through Agency for International Development): | ||||
5.5% 9/18/23 | 100,500 | 100,714 | ||
6.6% 2/15/08 | 18,725 | 18,861 | ||
6.8% 2/15/12 | 18,000 | 18,973 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates: | ||||
6.77% 11/15/13 | 4,788 | 4,923 | ||
6.99% 5/21/16 | 16,071 | 17,122 | ||
Private Export Funding Corp.: | ||||
secured: | ||||
5.66% 9/15/11 (c) | 11,160 | 11,316 | ||
5.685% 5/15/12 | 16,815 | 17,113 | ||
6.49% 7/15/07 | 5,000 | 5,045 | ||
6.67% 9/15/09 | 2,120 | 2,210 | ||
7.17% 5/15/07 | 8,500 | 8,611 | ||
4.974% 8/15/13 | 16,940 | 16,637 | ||
Small Business Administration guaranteed development participation certificates: | ||||
Series 2002-20J Class 1, 4.75% 10/1/22 | 7,491 | 7,175 | ||
Series 2002-20K Class 1, 5.08% 11/1/22 | 4,012 | 3,915 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency Obligations - continued | ||||
Small Business Administration guaranteed development participation certificates: - continued | ||||
Series 2003 P10B, 5.136% 8/10/13 | $ 11,386 | $ 11,139 | ||
Series 2004-20H Class 1, 5.17% 8/1/24 | 3,595 | 3,509 | ||
Tennessee Valley Authority 5.375% 4/1/56 | 4,768 | 4,596 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 9,300 | 9,300 | ||
5.96% 8/1/09 | 9,930 | 9,981 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 311 | 315 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 1,525,792 | |||
U.S. Treasury Inflation Protected Obligations - 12.8% | ||||
U.S. Treasury Inflation-Indexed Notes: | ||||
0.875% 4/15/10 | 215,885 | 204,400 | ||
1.875% 7/15/13 | 82,679 | 79,940 | ||
2% 7/15/14 | 42,965 | 41,709 | ||
2.375% 4/15/11 | 354,981 | 355,065 | ||
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | 681,114 | |||
U.S. Treasury Obligations - 24.3% | ||||
U.S. Treasury Bonds: | ||||
6.125% 8/15/29 | 171,035 | 193,256 | ||
8% 11/15/21 | 142,000 | 184,112 | ||
U.S. Treasury Notes: | ||||
3.125% 9/15/08 | 19,000 | 18,306 | ||
3.75% 5/15/08 | 247,079 | 241,867 | ||
4.25% 8/15/13 (b) | 11,275 | 10,819 | ||
4.25% 11/15/14 (b) | 308,500 | 293,665 | ||
4.25% 8/15/15 | 32,500 | 30,799 | ||
4.5% 11/15/15 (b) | 260,000 | 250,778 | ||
4.75% 5/15/14 (b) | 75,381 | 74,380 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 1,297,982 | |||
TOTAL U.S. GOVERNMENT AND (Cost $3,553,039) | 3,504,888 | |||
U.S. Government Agency - Mortgage Securities - 20.4% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - 17.2% | ||||
3.732% 1/1/35 (e) | $ 939 | $ 919 | ||
3.735% 10/1/33 (e) | 810 | 790 | ||
3.746% 12/1/34 (e) | 699 | 683 | ||
3.75% 1/1/34 (e) | 721 | 701 | ||
3.757% 10/1/33 (e) | 654 | 638 | ||
3.77% 12/1/34 (e) | 144 | 141 | ||
3.791% 6/1/34 (e) | 2,928 | 2,840 | ||
3.81% 6/1/33 (e) | 488 | 479 | ||
3.837% 4/1/33 (e) | 2,214 | 2,174 | ||
3.84% 1/1/35 (e) | 1,776 | 1,739 | ||
3.843% 1/1/35 (e) | 558 | 546 | ||
3.851% 10/1/33 (e) | 18,910 | 18,519 | ||
3.866% 1/1/35 (e) | 1,071 | 1,052 | ||
3.879% 6/1/33 (e) | 2,458 | 2,414 | ||
3.897% 10/1/34 (e) | 686 | 676 | ||
3.923% 5/1/34 (e) | 208 | 209 | ||
3.926% 12/1/34 (e) | 563 | 554 | ||
3.94% 11/1/34 (e) | 1,177 | 1,163 | ||
3.951% 1/1/35 (e) | 725 | 714 | ||
3.952% 12/1/34 (e) | 562 | 555 | ||
3.952% 12/1/34 (e) | 3,931 | 3,875 | ||
3.957% 5/1/33 (e) | 217 | 213 | ||
3.987% 12/1/34 (e) | 707 | 695 | ||
3.997% 12/1/34 (e) | 380 | 374 | ||
3.997% 1/1/35 (e) | 476 | 469 | ||
4% 1/1/18 to 6/1/20 | 16,145 | 15,086 | ||
4.004% 2/1/35 (e) | 539 | 532 | ||
4.015% 12/1/34 (e) | 1,040 | 1,027 | ||
4.022% 1/1/35 (e) | 1,080 | 1,065 | ||
4.037% 1/1/35 (e) | 445 | 439 | ||
4.037% 1/1/35 (e) | 283 | 279 | ||
4.039% 2/1/35 (e) | 497 | 490 | ||
4.049% 10/1/18 (e) | 560 | 549 | ||
4.065% 1/1/35 (e) | 1,000 | 986 | ||
4.077% 2/1/35 (e) | 968 | 955 | ||
4.082% 4/1/33 (e) | 210 | 207 | ||
4.084% 2/1/35 (e) | 370 | 364 | ||
4.089% 2/1/35 (e) | 371 | 366 | ||
4.092% 11/1/34 (e) | 844 | 835 | ||
4.1% 2/1/35 (e) | 1,831 | 1,808 | ||
4.106% 1/1/35 (e) | 1,102 | 1,087 | ||
4.114% 1/1/35 (e) | 1,071 | 1,057 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
4.116% 2/1/35 (e) | $ 1,227 | $ 1,211 | ||
4.129% 1/1/35 (e) | 1,870 | 1,846 | ||
4.144% 1/1/35 (e) | 1,639 | 1,622 | ||
4.149% 2/1/35 (e) | 994 | 982 | ||
4.161% 1/1/35 (e) | 1,919 | 1,907 | ||
4.172% 1/1/35 (e) | 1,333 | 1,296 | ||
4.177% 1/1/35 (e) | 951 | 939 | ||
4.179% 10/1/34 (e) | 1,620 | 1,607 | ||
4.179% 11/1/34 (e) | 240 | 236 | ||
4.202% 1/1/35 (e) | 575 | 569 | ||
4.249% 1/1/34 (e) | 1,904 | 1,869 | ||
4.25% 2/1/35 (e) | 677 | 659 | ||
4.25% 2/1/35 (e) | 361 | 357 | ||
4.274% 8/1/33 (e) | 1,262 | 1,246 | ||
4.275% 3/1/35 (e) | 621 | 613 | ||
4.283% 7/1/34 (e) | 476 | 475 | ||
4.289% 12/1/34 (e) | 357 | 352 | ||
4.292% 3/1/33 (e) | 320 | 311 | ||
4.3% 10/1/34 (e) | 166 | 164 | ||
4.306% 5/1/35 (e) | 862 | 852 | ||
4.307% 3/1/33 (e) | 863 | 853 | ||
4.307% 10/1/33 (e) | 308 | 304 | ||
4.314% 3/1/33 (e) | 331 | 322 | ||
4.323% 6/1/33 (e) | 384 | 380 | ||
4.333% 9/1/34 (e) | 951 | 948 | ||
4.348% 9/1/34 (e) | 2,241 | 2,237 | ||
4.355% 1/1/35 (e) | 690 | 672 | ||
4.362% 2/1/34 (e) | 1,445 | 1,421 | ||
4.366% 4/1/35 (e) | 421 | 416 | ||
4.392% 11/1/34 (e) | 7,824 | 7,776 | ||
4.396% 10/1/34 (e) | 3,874 | 3,794 | ||
4.396% 2/1/35 (e) | 1,021 | 994 | ||
4.396% 5/1/35 (e) | 1,945 | 1,924 | ||
4.429% 10/1/34 (e) | 2,971 | 2,955 | ||
4.431% 1/1/35 (e) | 794 | 786 | ||
4.44% 3/1/35 (e) | 921 | 897 | ||
4.459% 8/1/34 (e) | 1,963 | 1,931 | ||
4.473% 5/1/35 (e) | 660 | 653 | ||
4.486% 1/1/35 (e) | 935 | 927 | ||
4.498% 8/1/34 (e) | 1,233 | 1,236 | ||
4.5% 7/1/18 to 5/1/21 | 75,158 | 71,815 | ||
4.513% 10/1/35 (e) | 364 | 359 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
4.525% 2/1/35 (e) | $ 11,659 | $ 11,498 | ||
4.529% 7/1/34 (e) | 916 | 911 | ||
4.536% 2/1/35 (e) | 4,069 | 4,034 | ||
4.545% 2/1/35 (e) | 634 | 629 | ||
4.545% 7/1/35 (e) | 2,418 | 2,391 | ||
4.547% 2/1/35 (e) | 433 | 430 | ||
4.553% 1/1/35 (e) | 1,432 | 1,420 | ||
4.555% 9/1/34 (e) | 2,589 | 2,586 | ||
4.573% 9/1/34 (e) | 19,299 | 18,970 | ||
4.575% 7/1/35 (e) | 2,917 | 2,886 | ||
4.586% 2/1/35 (e) | 3,151 | 3,083 | ||
4.593% 8/1/34 (e) | 867 | 864 | ||
4.61% 7/1/34 (e) | 27,362 | 27,188 | ||
4.643% 1/1/33 (e) | 457 | 454 | ||
4.658% 3/1/35 (e) | 342 | 339 | ||
4.684% 9/1/34 (e) | 267 | 269 | ||
4.708% 10/1/32 (e) | 144 | 143 | ||
4.726% 7/1/34 (e) | 1,849 | 1,824 | ||
4.73% 2/1/33 (e) | 129 | 128 | ||
4.732% 10/1/32 (e) | 196 | 198 | ||
4.733% 10/1/34 (e) | 2,754 | 2,716 | ||
4.746% 1/1/35 (e) | 120 | 119 | ||
4.791% 12/1/34 (e) | 689 | 677 | ||
4.797% 12/1/32 (e) | 876 | 873 | ||
4.811% 8/1/34 (e) | 736 | 733 | ||
4.811% 6/1/35 (e) | 3,374 | 3,350 | ||
4.815% 5/1/33 (e) | 42 | 42 | ||
4.817% 2/1/33 (e) | 1,082 | 1,076 | ||
4.82% 11/1/34 (e) | 2,210 | 2,176 | ||
4.861% 10/1/35 (e) | 1,939 | 1,911 | ||
4.876% 10/1/34 (e) | 8,579 | 8,478 | ||
4.882% 7/1/34 (e) | 10,157 | 10,056 | ||
4.988% 11/1/32 (e) | 538 | 539 | ||
4.989% 12/1/32 (e) | 73 | 73 | ||
5% 12/1/15 to 8/1/35 | 165,206 | 157,775 | ||
5.016% 2/1/35 (e) | 287 | 286 | ||
5.023% 7/1/34 (e) | 389 | 386 | ||
5.063% 11/1/34 (e) | 178 | 179 | ||
5.082% 9/1/34 (e) | 6,823 | 6,775 | ||
5.094% 9/1/34 (e) | 708 | 703 | ||
5.097% 5/1/35 (e) | 4,325 | 4,313 | ||
5.184% 8/1/33 (e) | 1,012 | 1,009 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
5.202% 6/1/35 (e) | $ 2,998 | $ 2,994 | ||
5.24% 3/1/35 (e) | 426 | 423 | ||
5.294% 7/1/35 (e) | 413 | 413 | ||
5.349% 12/1/34 (e) | 1,172 | 1,170 | ||
5.5% 4/1/09 to 12/1/35 | 351,990 | 344,196 | ||
5.506% 2/1/36 (e) | 13,363 | 13,331 | ||
5.636% 1/1/36 (e) | 3,727 | 3,727 | ||
5.927% 1/1/36 (e) | 2,763 | 2,770 | ||
6% 9/1/17 to 10/1/32 | 34,316 | 34,405 | ||
6.5% 3/1/13 to 3/1/35 | 26,261 | 26,657 | ||
7% 7/1/13 to 5/1/30 | 3,250 | 3,349 | ||
7.5% 8/1/10 to 10/1/15 | 187 | 191 | ||
8% 1/1/22 | 47 | 48 | ||
8.5% 1/1/15 to 4/1/16 | 636 | 660 | ||
9% 5/1/14 | 616 | 614 | ||
9.5% 11/15/09 to 10/1/20 | 1,023 | 1,105 | ||
10% 8/1/10 | 11 | 12 | ||
11.5% 6/15/19 to 1/15/21 | 1,747 | 1,952 | ||
915,484 | ||||
Freddie Mac - 2.2% | ||||
4.042% 12/1/34 (e) | 699 | 687 | ||
4.086% 12/1/34 (e) | 1,004 | 988 | ||
4.133% 1/1/35 (e) | 877 | 863 | ||
4.26% 3/1/35 (e) | 872 | 859 | ||
4.288% 5/1/35 (e) | 1,560 | 1,538 | ||
4.3% 12/1/34 (e) | 1,005 | 975 | ||
4.33% 2/1/35 (e) | 1,797 | 1,771 | ||
4.331% 1/1/35 (e) | 2,112 | 2,084 | ||
4.441% 2/1/34 (e) | 886 | 870 | ||
4.445% 3/1/35 (e) | 933 | 907 | ||
4.457% 6/1/35 (e) | 1,302 | 1,283 | ||
4.461% 3/1/35 (e) | 1,034 | 1,005 | ||
4.5% 4/1/19 | 5,554 | 5,298 | ||
4.545% 2/1/35 (e) | 1,481 | 1,443 | ||
4.704% 9/1/35 (e) | 32,709 | 32,305 | ||
4.783% 10/1/32 (e) | 130 | 131 | ||
4.86% 3/1/33 (e) | 390 | 387 | ||
5% 1/1/09 to 9/1/35 | 8,868 | 8,406 | ||
5.004% 4/1/35 (e) | 4,765 | 4,733 | ||
5.133% 4/1/35 (e) | 4,928 | 4,863 | ||
5.321% 6/1/35 (e) | 3,440 | 3,411 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Freddie Mac - continued | ||||
5.5% 11/1/20 | $ 26,558 | $ 26,263 | ||
5.512% 8/1/33 (e) | 377 | 377 | ||
5.566% 1/1/36 (e) | 6,527 | 6,496 | ||
5.639% 4/1/32 (e) | 177 | 180 | ||
6% 5/1/33 | 8,320 | 8,314 | ||
7% 4/1/11 | 5 | 5 | ||
7.5% 5/1/11 to 5/1/16 | 1,981 | 2,040 | ||
8% 1/1/10 to 6/1/11 | 20 | 20 | ||
8.5% 8/1/08 to 12/1/25 | 101 | 105 | ||
9% 8/1/09 to 12/1/10 | 67 | 69 | ||
9.75% 8/1/14 | 167 | 177 | ||
118,853 | ||||
Government National Mortgage Association - 1.0% | ||||
4.25% 7/20/34 (e) | 1,387 | 1,368 | ||
6% 7/15/08 to 12/15/10 | 3,195 | 3,236 | ||
6.5% 5/15/28 to 11/15/32 | 1,010 | 1,032 | ||
6.5% 8/1/36 (d) | 44,335 | 45,145 | ||
7% 10/15/26 to 8/15/32 | 50 | 52 | ||
7.5% 3/15/28 to 8/15/28 | 148 | 155 | ||
8% 11/15/06 to 12/15/23 | 1,057 | 1,110 | ||
8.5% 10/15/08 to 1/15/25 | 29 | 30 | ||
9.5% 2/15/25 | 1 | 1 | ||
52,129 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,111,038) | 1,086,466 | |||
Asset-Backed Securities - 0.7% | ||||
Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 5.535% 9/25/35 (e) | 37,030 | 37,115 | ||
Collateralized Mortgage Obligations - 12.5% | ||||
U.S. Government Agency - 12.5% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1993-109 Class NZ, 6% 7/25/08 | 2,578 | 2,575 | ||
Series 1993-207 Class H, 6.5% 11/25/23 | 18,360 | 18,942 | ||
Series 1994-23 Class PG, 6% 4/25/23 | 9,122 | 9,140 | ||
Series 1994-27 Class PJ, 6.5% 6/25/23 | 1,346 | 1,347 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
planned amortization class: | ||||
Series 1994-50 Class PJ, 6.5% 8/25/23 | $ 12,594 | $ 12,671 | ||
Series 1996-28 Class PK, 6.5% 7/25/25 | 3,430 | 3,530 | ||
Series 2003-24 CLass PB, 4.5% 12/25/12 | 11,841 | 11,725 | ||
Series 2003-28 Class KG, 5.5% 4/25/23 | 4,225 | 4,068 | ||
Series 2006-45 Class OP, 6/25/36 (f) | 5,705 | 4,247 | ||
Series 2006-62 Class KP, 4/25/36 (f) | 11,095 | 7,727 | ||
sequential pay Series 1997-41 Class J, 7.5% 6/18/27 | 3,785 | 3,971 | ||
Fannie Mae Grantor Trust: | ||||
floater Series 2005-93: | ||||
Class MF, 5.635% 8/25/34 (e) | 30,578 | 30,466 | ||
Class NF, 5.635% 8/25/34 (e) | 19,227 | 19,158 | ||
planned amortization class Series 2005-84 Class MB, 5.75% 10/25/35 | 15,536 | 15,552 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
floater: | ||||
Series 2003-122 Class FL, 5.735% 7/25/29 (e) | 2,916 | 2,932 | ||
Series 2003-131 Class FM, 5.785% 12/25/29 (e) | 2,133 | 2,140 | ||
Series 2004-33 Class FW, 5.785% 8/25/25 (e) | 5,021 | 5,038 | ||
planned amortization class: | ||||
Series 2002-25 Class PD, 6.5% 3/25/31 | 13,332 | 13,430 | ||
Series 2003-91 Class HA, 4.5% 11/25/16 | 8,590 | 8,379 | ||
Series 2005-102 Class CO, 11/25/35 (f) | 7,326 | 5,337 | ||
Series 2006-12 Class BO, 10/25/35 (f) | 25,902 | 19,049 | ||
Series 2006-37 Class OW, 5/25/36 (f) | 5,582 | 4,011 | ||
sequential pay: | ||||
Series 2002-79 Class Z, 5.5% 11/25/22 | 21,194 | 20,386 | ||
Series 2004-3 Class BA, 4% 7/25/17 | 670 | 640 | ||
Series 2004-86 Class KC, 4.5% 5/25/19 | 2,921 | 2,800 | ||
Series 2004-91 Class AH, 4.5% 5/25/29 | 5,778 | 5,582 | ||
Series 2005-41 Class WY, 5.5% 5/25/25 | 15,330 | 14,643 | ||
Series 2002-50 Class LE, 7% 12/25/29 | 331 | 332 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2344 Class FP, 6.3188% 8/15/31 (e) | 3,777 | 3,860 | ||
Series 3028 Class FM, 5.6188% 9/15/35 (e) | 18,682 | 18,646 | ||
planned amortization class: | ||||
Series 1413 Class J, 4% 11/15/07 | 899 | 892 | ||
Series 3140 Class XO, 3/15/36 (f) | 7,606 | 5,503 | ||
Series 3145 Class GO, 4/15/36 (f) | 9,671 | 6,797 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Freddie Mac: - continued | ||||
planned amortization class: | ||||
Series 3149 Class OD, 5/15/36 (f) | $ 27,511 | $ 18,866 | ||
Series 3151 Class PO, 5/15/36 (f) | 10,288 | 7,129 | ||
sequential pay: | ||||
Series 2114 Class ZM, 6% 1/15/29 | 2,333 | 2,344 | ||
Series 2516 Class AH, 5% 1/15/16 | 2,853 | 2,826 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed: | ||||
planned amortization class Series 1681 Class PJ, 7% 12/15/23 | 8,559 | 8,736 | ||
Series 1560 Class PN, 7% 12/15/12 | 12,131 | 12,252 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
floater: | ||||
Series 2406: | ||||
Class FP, 6.3488% 1/15/32 (e) | 6,501 | 6,677 | ||
Class PF, 6.3488% 12/15/31 (e) | 6,340 | 6,525 | ||
Series 2410 Class PF, 6.3488% 2/15/32 (e) | 13,089 | 13,488 | ||
Series 2412 Class GF, 6.3188% 2/15/32 (e) | 3,163 | 3,256 | ||
Series 2861 Class GF, 5.6688% 1/15/21 (e) | 2,921 | 2,922 | ||
Series 2994 Class FB, 5.5188% 6/15/20 (e) | 4,067 | 4,057 | ||
planned amortization class: | ||||
Series 1614 Class L, 6.5% 7/15/23 | 7,663 | 7,783 | ||
Series 1727 Class H, 6.5% 8/15/23 | 1,980 | 1,981 | ||
Series 2006-15 Class OP, 3/25/36 (f) | 6,631 | 4,643 | ||
Series 2628 Class OE, 4.5% 6/15/18 | 9,400 | 8,799 | ||
Series 2690: | ||||
Class PD, 5% 2/15/27 | 12,900 | 12,679 | ||
Class TB, 4.5% 12/15/17 | 2,729 | 2,718 | ||
Series 2755 Class LC, 4% 6/15/27 | 9,685 | 9,225 | ||
Series 2760 Class EC, 4.5% 4/15/17 | 8,098 | 7,677 | ||
Series 2763 Class PD, 4.5% 12/15/17 | 10,335 | 9,808 | ||
Series 2770 Class UD, 4.5% 5/15/17 | 15,620 | 14,867 | ||
Series 2780 Class OC, 4.5% 3/15/17 | 4,980 | 4,814 | ||
Series 2802 Class OB, 6% 5/15/34 | 7,795 | 7,788 | ||
Series 2828 Class JA, 4.5% 1/15/10 | 4,544 | 4,519 | ||
Series 2831 Class PB, 5% 7/15/19 | 5,035 | 4,831 | ||
Series 2885 Class PC, 4.5% 3/15/18 | 6,710 | 6,461 | ||
Series 2937 Class KC, 4.5% 2/15/20 | 19,686 | 18,167 | ||
Series 2966 Class XC, 5.5% 1/15/31 | 25,111 | 24,760 | ||
Series 3077 Class TO, 4/15/35 (f) | 14,598 | 10,266 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Freddie Mac Multi-class participation certificates guaranteed: - continued | ||||
planned amortization class: | ||||
Series 3100 Class PO, 1/15/36 (f) | $ 6,323 | $ 4,642 | ||
Series 3102 Class OH, 1/15/36 (f) | 6,550 | 4,758 | ||
Series 3110 Class OP, 9/15/35 (f) | 13,656 | 9,765 | ||
Series 3121 Class KO, 3/15/36 (f) | 5,840 | 4,267 | ||
Series 3122 Class OP, 3/15/36 (f) | 11,385 | 8,192 | ||
Series 3123 Class LO, 3/15/36 (f) | 10,635 | 7,407 | ||
sequential pay: | ||||
Series 2608 Class FJ, 5.7688% 3/15/17 (e) | 9,904 | 9,969 | ||
Series 2638 Class FA, 5.7688% 11/15/16 (e) | 9,230 | 9,266 | ||
Series 2644 Class EF, 5.7188% 2/15/18 (e) | 10,466 | 10,521 | ||
Series 2809 Class UA, 4% 12/15/14 | 3,879 | 3,788 | ||
Series 2866 Class N, 4.5% 12/15/18 | 5,873 | 5,713 | ||
Series 2998 Class LY, 5.5% 7/15/25 | 1,720 | 1,647 | ||
Series 3007 Class EW, 5.5% 7/15/25 | 6,620 | 6,296 | ||
Series 2769 Class BU, 5% 3/15/34 | 4,912 | 4,386 | ||
Series 3119 Class PO, 2/15/36 (f) | 16,427 | 11,437 | ||
target amortization class Series 2156 Class TC, 6.25% 5/15/29 | 6,881 | 6,950 | ||
Ginnie Mae guaranteed REMIC pass thru securities planned amortization class: | ||||
Series 1997-8 Class PE, 7.5% 5/16/27 | 5,975 | 6,163 | ||
Series 2005-58 Class NJ, 4.5% 8/20/35 | 16,000 | 15,485 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $677,209) | 667,032 |
Cash Equivalents - 12.3% | |||
Maturity Amount (000s) | Value (Note 1) (000s) | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations), in a joint trading account dated 7/31/06 due 8/1/06: | |||
at 5.3%(g) | $ 40,166 | $ 40,160 | |
at 5.3% (a)(g) | 616,773 | 616,682 | |
TOTAL CASH EQUIVALENTS (Cost $656,842) | 656,842 | ||
TOTAL INVESTMENT PORTFOLIO - 111.6% (Cost $6,035,158) | 5,952,343 | ||
NET OTHER ASSETS - (11.6)% | (620,968) | ||
NET ASSETS - 100% | $ 5,331,375 |
Swap Agreements | |||||
Expiration Date | Notional Amount (000s) | Value | |||
Interest Rate Swaps | |||||
Receive quarterly a floating rate based on 3-month LIBOR and pay semi-annually a fixed rate equal to 5.234% with Lehman Brothers, Inc. | March 2036 | $ 55,000 | $ 2,584 | ||
Receive semi-annually a fixed rate equal to 5.132% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | March 2009 | 300,000 | 1,983 | ||
$ 355,000 | $ 4,567 |
Legend |
(a) Includes investment made with cash collateral received from securities on loan. |
(b) Security or a portion of the security is on loan at period end. |
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $11,316,000 or 0.2% of net assets. |
(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(f) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
(g) Additional information on each counterparty to the repurchase agreement is as follows: |
Repurchase Agreement/ | Value |
$40,160,000 due 8/1/06 at 5.3% | |
Banc of America, National Association | $ 1,900 |
Bank of America Securities LLC. | 14,103 |
Barclays Capital Inc. | 10,785 |
BNP Paribas Securities Corp. | 2,715 |
Citigroup Global Markets Inc.. | 204 |
Countrywide Securities Corporation | 950 |
Credit Suisse First Boston LLC | 2,036 |
Goldman Sachs & Co. | 679 |
UBS Securities LLC | 6,788 |
$ 40,160 | |
$616,682,000 due 8/1/06 at 5.3% | |
Banc of America Securities LLC. | $ 616,682 |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $10,715,000 all of which will expire on July 31, 2014. |
The fund intends to elect to defer to its fiscal year ending July 31, 2007 approximately $55,923,000 of losses recognized during the period November 1, 2005 to July 31, 2006. |
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, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $604,591 and repurchase agreements of $656,842) - See accompanying schedule: Unaffiliated issuers (cost $6,035,158) | $ 5,952,343 | |
Commitment to sell securities on a delayed delivery basis | $ (43,116) | |
Receivable for securities sold on a delayed delivery basis | 43,054 | (62) |
Receivable for investments sold, regular delivery | 1,488 | |
Cash | 1 | |
Receivable for fund shares sold | 1,451 | |
Interest receivable | 44,717 | |
Swap agreements, at value | 4,567 | |
Total assets | 6,004,505 | |
Liabilities | ||
Payable for investments purchased | $ 33 | |
Delayed delivery | 45,319 | |
Payable for fund shares redeemed | 8,715 | |
Distributions payable | 297 | |
Accrued management fee | 1,441 | |
Other affiliated payables | 586 | |
Other payables and accrued expenses | 57 | |
Collateral on securities loaned, at value | 616,682 | |
Total liabilities | 673,130 | |
Net Assets | $ 5,331,375 | |
Net Assets consist of: | ||
Paid in capital | $ 5,460,389 | |
Undistributed net investment income | 11,750 | |
Accumulated undistributed net realized gain (loss) on investments | (62,454) | |
Net unrealized appreciation (depreciation) on investments | (78,310) | |
Net Assets, for 535,907 shares outstanding | $ 5,331,375 | |
Net Asset Value, offering price and redemption price per share ($5,331,375 ÷ 535,907 shares) | $ 9.95 |
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, 2006 | |
Investment Income | ||
Interest | $ 260,311 | |
Expenses | ||
Management fee | $ 17,751 | |
Transfer agent fees | 5,525 | |
Fund wide operations fee | 1,566 | |
Independent trustees' compensation | 22 | |
Miscellaneous | 11 | |
Total expenses before reductions | 24,875 | |
Expense reductions | (389) | 24,486 |
Net investment income | 235,825 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | (60,092) | |
Swap agreements | (3,030) | |
Total net realized gain (loss) | (63,122) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (98,041) | |
Swap agreements | 4,567 | |
Delayed delivery commitments | (62) | |
Total change in net unrealized appreciation (depreciation) | (93,536) | |
Net gain (loss) | (156,658) | |
Net increase (decrease) in net assets resulting from operations | $ 79,167 |
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 | $ 235,825 | $ 148,489 |
Net realized gain (loss) | (63,122) | 6,387 |
Change in net unrealized appreciation (depreciation) | (93,536) | 31,902 |
Net increase (decrease) in net assets resulting | 79,167 | 186,778 |
Distributions to shareholders from net investment income | (223,332) | (144,880) |
Distributions to shareholders from net realized gain | - | (15,082) |
Total distributions | (223,332) | (159,962) |
Share transactions | 1,289,378 | 1,285,690 |
Reinvestment of distributions | 219,740 | 156,778 |
Cost of shares redeemed | (1,160,953) | (510,049) |
Net increase (decrease) in net assets resulting from share transactions | 348,165 | 932,419 |
Total increase (decrease) in net assets | 204,000 | 959,235 |
Net Assets | ||
Beginning of period | 5,127,375 | 4,168,140 |
End of period (including undistributed net investment income of $11,750 and undistributed net investment income of $8,741, respectively) | $ 5,331,375 | $ 5,127,375 |
Other Information Shares | ||
Sold | 127,904 | 125,500 |
Issued in reinvestment of distributions | 21,894 | 15,297 |
Redeemed | (116,476) | (49,765) |
Net increase (decrease) | 33,322 | 91,032 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, | $ 10.20 | $ 10.13 | $ 10.16 | $ 10.30 | $ 9.98 |
Income from Investment Operations | |||||
Net investment income B | .429 | .329 | .307 | .374 | .452 |
Net realized and unrealized gain (loss) | (.274) | .097 | .124 | (.014) | .335 |
Total from investment operations | .155 | .426 | .431 | .360 | .787 |
Distributions from net investment income | (.405) | (.321) | (.301) | (.370) | (.467) |
Distributions from net realized gain | - | (.035) | (.160) | (.130) | - |
Total distributions | (.405) | (.356) | (.461) | (.500) | (.467) |
Net asset value, end of period | $ 9.95 | $ 10.20 | $ 10.13 | $ 10.16 | $ 10.30 |
Total Return A | 1.56% | 4.24% | 4.30% | 3.45% | 8.08% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .45% | .58% | .63% | .65% | .69% |
Expenses net of fee waivers, | .45% | .58% | .63% | .65% | .69% |
Expenses net of all reductions | .44% | .58% | .63% | .65% | .68% |
Net investment income | 4.27% | 3.21% | 3.01% | 3.56% | 4.50% |
Supplemental Data | |||||
Net assets, end of period | $ 5,331 | $ 5,127 | $ 4,168 | $ 3,622 | $ 2,920 |
Portfolio turnover rate | 108% | 114% | 224% | 253% | 284% |
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 expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.
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, 2006 | Past 1 | Past 5 | Past 10 |
Fidelity Intermediate Govt Income Fund | 1.97% | 3.89% | 5.44% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Intermediate Government Income Fund on July 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers Intermediate Government Bond Index performed 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
The domestic investment-grade bond market struggled during the 12-month period ending July 31, 2006, finishing with a modest 1.46% return as measured by the Lehman Brothers® Aggregate Bond Index. Bonds were negative in the first and third quarters of the period, and positive in the second and fourth quarters. The negative momentum was typically a result of rising levels of core inflation, Federal Reserve Board interest rate hikes aimed to keep inflation at bay, and a yield curve that was sometimes inverted, meaning short-term yields exceeded long-term yields-a phenomenon that's often a precursor of a recession. In all, the Fed bumped up rates eight times during the period, hoisting the federal funds target rate from 3.25% to 5.25%, its highest level in five years. On the plus side, bonds scored well in the final quarter of the period, advancing 1.46%, which was identical to the debt market's return for the entire one-year period. Investors turned to high-quality debt in the last three months of the period for a number of reasons: Equity performance stumbled; GDP (gross domestic product) growth in the second quarter of 2006 gave strong evidence of a slowing economy; and the Fed supported that notion by announcing there was a good possibility of a pause in its rate hike campaign.
During the past year, Fidelity Intermediate Government Income Fund rose 1.97%, while the Lehman Brothers Intermediate Government Bond Index gained 1.99%. One of the biggest boosts to the fund's performance relative to the index was my out-of-index exposure to mortgage pass-through securities. These bonds outpaced comparable-duration Treasuries because of their higher yields, reduced interest rate sensitivity relative to Treasuries and strong investor demand. My decision to invest outside the index in collateralized mortgage obligations also proved beneficial because they were among the mortgage sector's better performers. An out-of-index allocation to Treasury Inflation-Protected Securities also proved advantageous amid mounting inflation pressures and growing concerns about the future level of inflation. While my yield-curve positioning - which refers to how I invested in bonds of various maturities - worked against the fund in recent months, it was a net positive for the period overall. Elsewhere, the key disappointment was my decision not to own even more mortgage securities, given how well they performed during the past year.
Note to shareholders: Effective October 1, 2006, Brett Kozlowski will become Portfolio Manager of the fund.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Fidelity Intermediate Government Income Fund
Investment Changes
Coupon Distribution as of July 31, 2006 | ||
% of fund's investments | % of fund's investments | |
Less than 2% | 3.1 | 8.6 |
2 - 2.99% | 9.6 | 2.6 |
3 - 3.99% | 12.8 | 27.2 |
4 - 4.99% | 37.0 | 27.0 |
5 - 5.99% | 21.5 | 18.7 |
6 - 6.99% | 8.8 | 14.0 |
7% and over | 1.4 | 1.9 |
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, 2006 | ||
6 months ago | ||
Years | 4.3 | 4.6 |
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, 2006 | ||
6 months ago | ||
Years | 3.2 | 3.2 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006 | As of January 31, 2006 | ||||||
![]() | Mortgage | ![]() | Mortgage | ||||
![]() | CMOs and Other Mortgage Related Securities 11.8% | ![]() | CMOs and Other Mortgage Related Securities 13.6% | ||||
![]() | U.S. Treasury | ![]() | U.S. Treasury | ||||
![]() | U.S. Government | ![]() | U.S. Government | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | Short-Term | ![]() | Short-Term |
Annual Report
Fidelity Intermediate Government Income Fund
Investments July 31, 2006
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 73.2% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency Obligations - 29.8% | ||||
Fannie Mae: | ||||
3.25% 1/15/08 | $ 370 | $ 359 | ||
3.25% 2/15/09 | 745 | 710 | ||
4.5% 10/15/08 | 5,240 | 5,163 | ||
4.625% 10/15/13 | 570 | 546 | ||
4.75% 12/15/10 | 58,500 | 57,314 | ||
4.875% 4/15/09 | 5,500 | 5,452 | ||
5.125% 1/2/14 | 6,000 | 5,847 | ||
6.25% 2/1/11 | 1,285 | 1,326 | ||
6.375% 6/15/09 | 11,870 | 12,232 | ||
Federal Home Loan Bank: | ||||
4.5% 10/14/08 | 1,850 | 1,822 | ||
5.375% 8/19/11 | 16,960 | 17,050 | ||
5.8% 9/2/08 | 9,595 | 9,676 | ||
Freddie Mac: | ||||
4.25% 7/15/09 | 7,160 | 6,973 | ||
5.125% 4/18/08 | 10,000 | 9,973 | ||
5.25% 7/18/11 | 42,808 | 42,746 | ||
5.75% 1/15/12 | 986 | 1,007 | ||
5.875% 3/21/11 | 1,075 | 1,093 | ||
Israeli State (guaranteed by U.S. Government through Agency for International Development): | ||||
6.6% 2/15/08 | 11,005 | 11,085 | ||
6.8% 2/15/12 | 7,500 | 7,906 | ||
Private Export Funding Corp.: | ||||
secured: | ||||
5.66% 9/15/11 (c) | 9,000 | 9,125 | ||
5.685% 5/15/12 | 3,915 | 3,984 | ||
4.974% 8/15/13 | 3,435 | 3,373 | ||
Small Business Administration guaranteed development participation certificates Series 2004-20H Class 1, 5.17% 8/1/24 | 833 | 813 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A, 6.06% 8/1/10 | 10,000 | 10,086 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 322 | 325 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 225,986 | |||
U.S. Treasury Inflation Protected Obligations - 13.1% | ||||
U.S. Treasury Inflation-Indexed Notes: | ||||
0.875% 4/15/10 | 25,650 | 24,285 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Treasury Inflation Protected Obligations - continued | ||||
U.S. Treasury Inflation-Indexed Notes: - continued | ||||
2% 1/15/14 | $ 21,915 | $ 21,309 | ||
2.375% 4/15/11 | 54,063 | 54,075 | ||
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | 99,669 | |||
U.S. Treasury Obligations - 30.3% | ||||
U.S. Treasury Notes: | ||||
3.375% 9/15/09 | 68,842 | 65,780 | ||
3.75% 5/15/08 | 24,942 | 24,416 | ||
4.25% 11/15/14 (b) | 29,000 | 27,606 | ||
4.25% 8/15/15 | 8,000 | 7,581 | ||
4.375% 12/15/10 | 49,060 | 48,039 | ||
4.75% 3/31/11 | 38,000 | 37,736 | ||
4.75% 5/15/14 | 19,058 | 18,805 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 229,963 | |||
TOTAL U.S. GOVERNMENT AND (Cost $563,122) | 555,618 | |||
U.S. Government Agency - Mortgage Securities - 11.5% | ||||
Fannie Mae - 9.0% | ||||
3.732% 1/1/35 (e) | 197 | 192 | ||
3.746% 12/1/34 (e) | 127 | 124 | ||
3.757% 10/1/33 (e) | 109 | 106 | ||
3.77% 12/1/34 (e) | 26 | 26 | ||
3.791% 6/1/34 (e) | 544 | 528 | ||
3.81% 6/1/33 (e) | 103 | 101 | ||
3.84% 1/1/35 (e) | 363 | 355 | ||
3.843% 1/1/35 (e) | 124 | 121 | ||
3.851% 10/1/33 (e) | 2,671 | 2,616 | ||
3.866% 1/1/35 (e) | 222 | 218 | ||
3.879% 6/1/33 (e) | 523 | 513 | ||
3.897% 10/1/34 (e) | 143 | 141 | ||
3.923% 5/1/34 (e) | 32 | 32 | ||
3.926% 12/1/34 (e) | 127 | 125 | ||
3.94% 11/1/34 (e) | 251 | 248 | ||
3.951% 1/1/35 (e) | 158 | 155 | ||
3.952% 12/1/34 (e) | 112 | 111 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
3.952% 12/1/34 (e) | $ 793 | $ 781 | ||
3.957% 5/1/33 (e) | 38 | 38 | ||
3.987% 12/1/34 (e) | 147 | 145 | ||
3.997% 12/1/34 (e) | 83 | 81 | ||
3.997% 1/1/35 (e) | 98 | 97 | ||
4% 9/1/18 | 1,927 | 1,802 | ||
4.004% 2/1/35 (e) | 108 | 106 | ||
4.015% 12/1/34 (e) | 225 | 223 | ||
4.022% 1/1/35 (e) | 223 | 220 | ||
4.037% 1/1/35 (e) | 89 | 88 | ||
4.037% 1/1/35 (e) | 57 | 56 | ||
4.039% 2/1/35 (e) | 99 | 98 | ||
4.049% 10/1/18 (e) | 104 | 102 | ||
4.065% 1/1/35 (e) | 215 | 212 | ||
4.077% 2/1/35 (e) | 200 | 198 | ||
4.082% 4/1/33 (e) | 43 | 43 | ||
4.084% 2/1/35 (e) | 70 | 69 | ||
4.089% 2/1/35 (e) | 65 | 64 | ||
4.092% 11/1/34 (e) | 169 | 167 | ||
4.1% 2/1/35 (e) | 369 | 365 | ||
4.106% 1/1/35 (e) | 222 | 219 | ||
4.114% 1/1/35 (e) | 227 | 224 | ||
4.116% 2/1/35 (e) | 252 | 249 | ||
4.129% 1/1/35 (e) | 381 | 377 | ||
4.144% 1/1/35 (e) | 332 | 328 | ||
4.149% 2/1/35 (e) | 179 | 177 | ||
4.161% 1/1/35 (e) | 393 | 390 | ||
4.172% 1/1/35 (e) | 251 | 244 | ||
4.177% 1/1/35 (e) | 190 | 188 | ||
4.179% 10/1/34 (e) | 321 | 318 | ||
4.179% 11/1/34 (e) | 54 | 54 | ||
4.202% 1/1/35 (e) | 115 | 114 | ||
4.249% 1/1/34 (e) | 287 | 282 | ||
4.25% 2/1/35 (e) | 120 | 116 | ||
4.25% 2/1/35 (e) | 60 | 60 | ||
4.274% 8/1/33 (e) | 233 | 230 | ||
4.275% 3/1/35 (e) | 110 | 108 | ||
4.283% 7/1/34 (e) | 100 | 100 | ||
4.289% 12/1/34 (e) | 81 | 80 | ||
4.3% 10/1/34 (e) | 55 | 55 | ||
4.306% 5/1/35 (e) | 159 | 158 | ||
4.307% 3/1/33 (e) | 134 | 132 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
4.307% 10/1/33 (e) | $ 48 | $ 47 | ||
4.314% 3/1/33 (e) | 66 | 64 | ||
4.323% 6/1/33 (e) | 61 | 60 | ||
4.333% 9/1/34 (e) | 128 | 128 | ||
4.348% 9/1/34 (e) | 349 | 348 | ||
4.351% 9/1/34 (e) | 924 | 920 | ||
4.355% 1/1/35 (e) | 122 | 119 | ||
4.362% 2/1/34 (e) | 281 | 277 | ||
4.366% 4/1/35 (e) | 70 | 69 | ||
4.392% 11/1/34 (e) | 1,696 | 1,686 | ||
4.396% 10/1/34 (e) | 601 | 589 | ||
4.396% 2/1/35 (e) | 193 | 188 | ||
4.396% 5/1/35 (e) | 346 | 343 | ||
4.429% 10/1/34 (e) | 591 | 588 | ||
4.431% 1/1/35 (e) | 141 | 140 | ||
4.44% 3/1/35 (e) | 184 | 179 | ||
4.459% 8/1/34 (e) | 370 | 364 | ||
4.473% 5/1/35 (e) | 147 | 145 | ||
4.486% 1/1/35 (e) | 167 | 166 | ||
4.498% 8/1/34 (e) | 246 | 247 | ||
4.513% 10/1/35 (e) | 91 | 90 | ||
4.525% 2/1/35 (e) | 1,627 | 1,604 | ||
4.529% 7/1/34 (e) | 149 | 148 | ||
4.536% 2/1/35 (e) | 765 | 758 | ||
4.545% 2/1/35 (e) | 115 | 114 | ||
4.545% 7/1/35 (e) | 413 | 408 | ||
4.547% 2/1/35 (e) | 84 | 83 | ||
4.553% 1/1/35 (e) | 223 | 222 | ||
4.555% 9/1/34 (e) | 400 | 400 | ||
4.573% 9/1/34 (e) | 2,795 | 2,747 | ||
4.575% 7/1/35 (e) | 394 | 390 | ||
4.586% 2/1/35 (e) | 468 | 458 | ||
4.593% 8/1/34 (e) | 134 | 133 | ||
4.61% 7/1/34 (e) | 3,810 | 3,786 | ||
4.643% 1/1/33 (e) | 71 | 70 | ||
4.646% 7/1/36 (e) | 782 | 778 | ||
4.658% 3/1/35 (e) | 51 | 51 | ||
4.666% 3/1/35 (e) | 936 | 930 | ||
4.684% 9/1/34 (e) | 47 | 47 | ||
4.708% 10/1/32 (e) | 20 | 20 | ||
4.726% 7/1/34 (e) | 352 | 348 | ||
4.73% 2/1/33 (e) | 21 | 21 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
4.732% 10/1/32 (e) | $ 32 | $ 32 | ||
4.733% 10/1/34 (e) | 393 | 388 | ||
4.746% 1/1/35 (e) | 13 | 13 | ||
4.791% 12/1/34 (e) | 112 | 110 | ||
4.797% 12/1/32 (e) | 159 | 159 | ||
4.811% 8/1/34 (e) | 113 | 113 | ||
4.811% 6/1/35 (e) | 454 | 451 | ||
4.815% 5/1/33 (e) | 11 | 11 | ||
4.817% 2/1/33 (e) | 149 | 148 | ||
4.82% 11/1/34 (e) | 312 | 307 | ||
4.861% 10/1/35 (e) | 266 | 262 | ||
4.876% 10/1/34 (e) | 1,181 | 1,167 | ||
4.988% 11/1/32 (e) | 84 | 84 | ||
4.989% 12/1/32 (e) | 11 | 11 | ||
5.016% 2/1/35 (e) | 45 | 44 | ||
5.023% 7/1/34 (e) | 60 | 60 | ||
5.063% 11/1/34 (e) | 25 | 26 | ||
5.082% 9/1/34 (e) | 946 | 940 | ||
5.094% 9/1/34 (e) | 94 | 94 | ||
5.097% 5/1/35 (e) | 756 | 754 | ||
5.184% 8/1/33 (e) | 157 | 156 | ||
5.202% 6/1/35 (e) | 520 | 519 | ||
5.24% 3/1/35 (e) | 71 | 70 | ||
5.294% 7/1/35 (e) | 64 | 64 | ||
5.349% 12/1/34 (e) | 158 | 158 | ||
5.5% 1/1/09 to 3/1/20 | 13,697 | 13,575 | ||
5.506% 2/1/36 (e) | 1,807 | 1,803 | ||
5.636% 1/1/36 (e) | 504 | 504 | ||
5.927% 1/1/36 (e) | 401 | 402 | ||
6% 4/1/16 to 11/1/17 | 1,700 | 1,718 | ||
6% 8/1/21 (d) | 36 | 36 | ||
6.5% 2/1/17 to 3/1/35 | 6,153 | 6,245 | ||
7% 12/1/08 to 9/1/31 | 568 | 580 | ||
9% 2/1/13 | 154 | 161 | ||
9.5% 11/15/09 | 201 | 210 | ||
10.25% 10/1/09 to 10/1/18 | 10 | 11 | ||
11% 8/1/10 to 1/1/16 | 430 | 461 | ||
11.25% 5/1/14 to 1/1/16 | 62 | 70 | ||
11.5% 9/1/11 to 6/15/19 | 267 | 295 | ||
12.25% 7/1/12 to 8/1/13 | 14 | 15 | ||
12.5% 9/1/12 to 7/1/16 | 196 | 223 | ||
12.75% 10/1/11 to 6/1/15 | 155 | 172 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Fannie Mae - continued | ||||
13% 7/1/13 to 7/1/15 | $ 85 | $ 98 | ||
13.25% 9/1/11 | 87 | 98 | ||
13.5% 11/1/14 to 12/1/14 | 17 | 19 | ||
15% 4/1/12 | 3 | 4 | ||
67,984 | ||||
Freddie Mac - 2.2% | ||||
4% 1/1/19 to 4/1/19 | 2,149 | 2,005 | ||
4.042% 12/1/34 (e) | 127 | 125 | ||
4.086% 12/1/34 (e) | 175 | 173 | ||
4.133% 1/1/35 (e) | 563 | 554 | ||
4.26% 3/1/35 (e) | 168 | 165 | ||
4.288% 5/1/35 (e) | 287 | 283 | ||
4.3% 12/1/34 (e) | 193 | 188 | ||
4.33% 2/1/35 (e) | 347 | 342 | ||
4.441% 2/1/34 (e) | 170 | 167 | ||
4.445% 3/1/35 (e) | 174 | 169 | ||
4.457% 6/1/35 (e) | 230 | 226 | ||
4.461% 3/1/35 (e) | 203 | 197 | ||
4.545% 2/1/35 (e) | 296 | 289 | ||
4.704% 9/1/35 (e) | 4,783 | 4,724 | ||
4.783% 10/1/32 (e) | 24 | 24 | ||
4.86% 3/1/33 (e) | 60 | 59 | ||
5% 9/1/35 | 65 | 61 | ||
5.004% 4/1/35 (e) | 871 | 865 | ||
5.06% 9/1/32 (e) | 401 | 399 | ||
5.133% 4/1/35 (e) | 682 | 673 | ||
5.321% 6/1/35 (e) | 466 | 462 | ||
5.5% 11/1/20 | 149 | 147 | ||
5.512% 8/1/33 (e) | 87 | 87 | ||
5.566% 1/1/36 (e) | 879 | 874 | ||
5.639% 4/1/32 (e) | 27 | 28 | ||
6.5% 5/1/08 | 58 | 59 | ||
8.5% 6/1/14 to 6/1/17 | 77 | 78 | ||
9% 11/1/09 to 8/1/16 | 53 | 56 | ||
9.5% 7/1/16 to 8/1/21 | 401 | 433 | ||
10% 7/1/09 to 3/1/21 | 886 | 962 | ||
10.5% 9/1/09 to 5/1/21 | 74 | 78 | ||
11% 2/1/11 to 9/1/20 | 44 | 48 | ||
11.25% 2/1/10 to 8/1/14 | 108 | 118 | ||
11.5% 10/1/15 to 8/1/19 | 61 | 68 | ||
11.75% 11/1/11 to 7/1/15 | 13 | 14 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Freddie Mac - continued | ||||
12% 10/1/09 to 11/1/19 | $ 190 | $ 209 | ||
12.25% 12/1/11 to 8/1/15 | 128 | 145 | ||
12.5% 10/1/09 to 6/1/19 | 965 | 1,080 | ||
12.75% 2/1/10 to 10/1/10 | 10 | 11 | ||
13% 9/1/10 to 5/1/17 | 155 | 176 | ||
13.25% 11/1/10 to 10/1/13 | 39 | 44 | ||
13.5% 11/1/10 to 8/1/11 | 42 | 47 | ||
14% 11/1/12 to 4/1/16 | 6 | 7 | ||
14.5% 12/1/10 | 1 | 2 | ||
14.75% 3/1/10 | 2 | 2 | ||
16.25% 7/1/11 | 1 | 1 | ||
16,924 | ||||
Government National Mortgage Association - 0.3% | ||||
8% 8/15/07 to 12/15/23 | 558 | 585 | ||
8.5% 6/15/16 to 2/15/17 | 8 | 9 | ||
10.5% 9/15/15 to 10/15/21 | 908 | 1,028 | ||
10.75% 12/15/09 to 3/15/10 | 15 | 16 | ||
11% 7/20/15 to 1/20/21 | 45 | 51 | ||
12.5% 12/15/10 | 2 | 2 | ||
13% 1/15/11 to 3/15/14 | 93 | 104 | ||
13.25% 8/15/14 | 11 | 13 | ||
13.5% 7/15/11 to 12/15/14 | 16 | 18 | ||
14% 6/15/11 | 7 | 8 | ||
17% 12/15/11 | 2 | 3 | ||
1,837 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $87,672) | 86,745 | |||
Asset-Backed Securities - 0.8% | ||||
Fannie Mae Grantor Trust Series 2005-T4 Class A1C, 5.535% 9/25/35 (e) | 6,285 | 6,299 | ||
Collateralized Mortgage Obligations - 11.8% | ||||
U.S. Government Agency - 11.8% | ||||
Fannie Mae: | ||||
floater Series 1994-42 Class FK, 4.68% 4/25/24 (e) | 4,337 | 4,218 | ||
planned amortization class: | ||||
Series 1988-21 Class G, 9.5% 8/25/18 | 104 | 112 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Fannie Mae: - continued | ||||
planned amortization class: | ||||
Series 1994-12 Class PH, 6.25% 1/25/09 | $ 1,048 | $ 1,051 | ||
Series 2003-24 CLass PB, 4.5% 12/25/12 | 1,648 | 1,632 | ||
Series 2003-28 Class KG, 5.5% 4/25/23 | 725 | 698 | ||
Series 2003-39 Class PV, 5.5% 9/25/22 | 1,905 | 1,891 | ||
sequential pay Series 1993-238 Class C, 6.5% 12/25/08 | 4,564 | 4,569 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
floater: | ||||
Series 2001-38 Class QF, 6.365% 8/25/31 (e) | 917 | 943 | ||
Series 2002-60 Class FV, 6.385% 4/25/32 (e) | 294 | 304 | ||
Series 2002-68 Class FH, 5.8688% 10/18/32 (e) | 1,167 | 1,184 | ||
Series 2002-74 Class FV, 5.835% 11/25/32 (e) | 4,529 | 4,563 | ||
Series 2002-75 Class FA, 6.385% 11/25/32 (e) | 602 | 622 | ||
Series 2003-122 Class FL, 5.735% 7/25/29 (e) | 495 | 497 | ||
Series 2003-131 Class FM, 5.785% 12/25/29 (e) | 346 | 348 | ||
Series 2003-15 Class WF, 5.735% 8/25/17 (e) | 609 | 612 | ||
Series 2004-33 Class FW, 5.785% 8/25/25 (e) | 851 | 854 | ||
planned amortization class: | ||||
Series 2002-11 Class QB, 5.5% 3/25/15 | 317 | 316 | ||
Series 2002-16 Class PG, 6% 4/25/17 | 1,273 | 1,288 | ||
Series 2002-18 Class PC, 5.5% 4/25/17 | 1,045 | 1,042 | ||
Series 2003-91 Class HA, 4.5% 11/25/16 | 1,485 | 1,449 | ||
sequential pay: | ||||
Series 2002-56 Class MC, 5.5% 9/25/17 | 537 | 534 | ||
Series 2002-79 Class Z, 5.5% 11/25/22 | 3,593 | 3,456 | ||
Series 2005-4 Class ED, 5% 6/25/27 | 5,000 | 4,930 | ||
Series 2005-41 Class WY, 5.5% 5/25/25 | 2,600 | 2,483 | ||
Series 2002-50 Class LE, 7% 12/25/29 | 89 | 89 | ||
Series 2005-69 Class ZL, 4.5% 8/25/25 | 65 | 65 | ||
Freddie Mac: | ||||
floater: | ||||
Series 2344 Class FP, 6.3188% 8/15/31 (e) | 572 | 585 | ||
Series 3028 Class FM, 5.6188% 9/15/35 (e) | 2,869 | 2,864 | ||
planned amortization class Series 2356 Class GD, 6% 9/15/16 | 605 | 611 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
U.S. Government Agency - continued | ||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
floater: | ||||
Series 2406: | ||||
Class FP, 6.3488% 1/15/32 (e) | $ 1,124 | $ 1,155 | ||
Class PF, 6.3488% 12/15/31 (e) | 1,095 | 1,127 | ||
Series 2410 Class PF, 6.3488% 2/15/32 (e) | 2,264 | 2,333 | ||
Series 2412 Class GF, 6.3188% 2/15/32 (e) | 476 | 490 | ||
Series 2526 Class FC, 5.7688% 11/15/32 (e) | 1,214 | 1,221 | ||
Series 2861 Class GF, 5.6688% 1/15/21 (e) | 473 | 473 | ||
Series 2994 Class FB, 5.5188% 6/15/20 (e) | 691 | 689 | ||
planned amortization class: | ||||
Series 1543 Class VK, 6.7% 1/15/23 | 916 | 917 | ||
Series 2640: | ||||
Class GE, 4.5% 7/15/18 | 3,690 | 3,452 | ||
Class GR, 3% 3/15/10 | 145 | 145 | ||
Series 2752 Class PW, 4% 4/15/22 | 2,600 | 2,541 | ||
Series 2802 Class OB, 6% 5/15/34 | 1,355 | 1,354 | ||
Series 2810 Class PD, 6% 6/15/33 | 1,020 | 1,016 | ||
Series 2828 Class JA, 4.5% 1/15/10 | 918 | 913 | ||
sequential pay: | ||||
Series 1929 Class EZ, 7.5% 2/17/27 | 2,950 | 3,066 | ||
Series 2608 Class FJ, 5.7688% 3/15/17 (e) | 1,501 | 1,511 | ||
Series 2617 Class GW, 3.5% 6/15/16 | 2,028 | 1,971 | ||
Series 2638 Class FA, 5.7688% 11/15/16 (e) | 1,400 | 1,405 | ||
Series 2644 Class EF, 5.7188% 2/15/18 (e) | 1,587 | 1,595 | ||
Series 2866 Class N, 4.5% 12/15/18 | 1,340 | 1,304 | ||
Series 2998 Class LY, 5.5% 7/15/25 | 295 | 282 | ||
Series 3007 Class EW, 5.5% 7/15/25 | 1,125 | 1,070 | ||
Series 3013 Class VJ, 5% 1/15/14 | 2,239 | 2,201 | ||
Series 2689 Class CN, 4.5% 2/15/23 | 10,000 | 9,622 | ||
Series 2769 Class BU, 5% 3/15/34 | 1,199 | 1,071 | ||
Ginnie Mae guaranteed REMIC pass thru securities planned amortization class Series 2005-58 Class NJ, 4.5% 8/20/35 | 3,100 | 3,000 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $91,434) | 89,734 |
Cash Equivalents - 5.8% | |||
Maturity | Value (Note 1) (000s) | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations), in a joint trading account dated 7/31/06 due 8/1/06: | |||
at 5.3% | $ 15,812 | $ 15,810 | |
at 5.3% (a) | 28,337 | 28,333 | |
TOTAL CASH EQUIVALENTS (Cost $44,143) | 44,143 | ||
TOTAL INVESTMENT PORTFOLIO - 103.1% (Cost $792,656) | 782,539 | ||
NET OTHER ASSETS - (3.1)% | (23,675) | ||
NET ASSETS - 100% | $ 758,864 |
Legend |
(a) Includes investment made with cash collateral received from securities on loan. |
(b) Security or a portion of the security is on loan at period end. |
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $9,125,000 or 1.2% of net assets. |
(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(e) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $29,117,000 of which $11,911,000, $7,507,000, $3,266,000, $414,000 and $6,019,000 will expire on July 31, 2008, 2009, 2012, 2013 and 2014, respectively. |
The fund intends to elect to defer to its fiscal year ending July 31, 2007 approximately $10,533,000 of losses recognized during the period November 1, 2005 to July 31, 2006. |
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, 2006 | |
Assets | ||
Investment in securities, at value (including securities loaned of $27,777 and repurchase agreements of $44,143) - See accompanying schedule: Unaffiliated issuers (cost $792,656) | $ 782,539 | |
Cash | 2 | |
Receivable for investments sold | 326 | |
Receivable for fund shares sold | 173 | |
Interest receivable | 6,199 | |
Total assets | 789,239 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 36 | |
Payable for fund shares redeemed | 1,336 | |
Distributions payable | 378 | |
Accrued management fee | 202 | |
Other affiliated payables | 85 | |
Other payables and accrued expenses | 5 | |
Collateral on securities loaned, at value | 28,333 | |
Total liabilities | 30,375 | |
Net Assets | $ 758,864 | |
Net Assets consist of: | ||
Paid in capital | $ 804,887 | |
Undistributed net investment income | 3,867 | |
Accumulated undistributed net realized gain (loss) on investments | (39,773) | |
Net unrealized appreciation (depreciation) on investments | (10,117) | |
Net Assets, for 76,491 shares outstanding | $ 758,864 | |
Net Asset Value, offering price and redemption price per share ($758,864 ÷ 76,491 shares) | $ 9.92 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended July 31, 2006 | |
Investment Income | ||
Interest | $ 37,507 | |
Expenses | ||
Management fee | $ 2,624 | |
Transfer agent fees | 817 | |
Fund wide operations fee | 231 | |
Independent trustees' compensation | 3 | |
Miscellaneous | 3 | |
Total expenses before reductions | 3,678 | |
Expense reductions | (16) | 3,662 |
Net investment income | 33,845 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | (12,088) | |
Change in net unrealized appreciation (depreciation) on investment securities | (5,860) | |
Net gain (loss) | (17,948) | |
Net increase (decrease) in net assets resulting from operations | $ 15,897 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Fidelity Intermediate Government Income Fund
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income | $ 33,845 | $ 30,102 |
Net realized gain (loss) | (12,088) | (3,505) |
Change in net unrealized appreciation (depreciation) | (5,860) | (4,183) |
Net increase (decrease) in net assets resulting | 15,897 | 22,414 |
Distributions to shareholders from net investment income | (31,447) | (28,832) |
Share transactions | 83,463 | 92,102 |
Reinvestment of distributions | 26,830 | 24,669 |
Cost of shares redeemed | (219,836) | (189,450) |
Net increase (decrease) in net assets resulting from share transactions | (109,543) | (72,679) |
Total increase (decrease) in net assets | (125,093) | (79,097) |
Net Assets | ||
Beginning of period | 883,957 | 963,054 |
End of period (including undistributed net investment income of $3,867 and undistributed net investment income of $1,945, respectively) | $ 758,864 | $ 883,957 |
Other Information Shares | ||
Sold | 8,353 | 9,010 |
Issued in reinvestment of distributions | 2,687 | 2,416 |
Redeemed | (22,008) | (18,557) |
Net increase (decrease) | (10,968) | (7,131) |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, | $ 10.11 | $ 10.18 | $ 10.17 | $ 10.11 | $ 9.77 |
Income from Investment Operations | |||||
Net investment income B | .414 | .330 | .274 | .329 | .457 |
Net realized and unrealized gain (loss) | (.219) | (.084) | .014 | .056 | .353 |
Total from investment operations | .195 | .246 | .288 | .385 | .810 |
Distributions from net investment income | (.385) | (.316) | (.278) | (.325) | (.470) |
Net asset value, end of period | $ 9.92 | $ 10.11 | $ 10.18 | $ 10.17 | $ 10.11 |
Total Return A | 1.97% | 2.43% | 2.84% | 3.80% | 8.51% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .45% | .57% | .60% | .60% | .59% |
Expenses net of fee waivers, | .45% | .57% | .60% | .60% | .59% |
Expenses net of all reductions | .45% | .57% | .60% | .60% | .59% |
Net investment income | 4.14% | 3.23% | 2.67% | 3.18% | 4.63% |
Supplemental Data | |||||
Net assets, end of period | $ 759 | $ 884 | $ 963 | $ 1,283 | $ 1,107 |
Portfolio turnover rate | 97% | 90% | 152% | 229% | 145% |
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 expense offset arrangements and do not represent the amount paid by the Fund during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the Fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
(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. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, each Fund uses independent pricing services approved by the Board of Trustees to value their investments. Debt securities, including restricted securities, for which quotes are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
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. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
1. Significant Accounting Policies - continued
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan) for Fidelity Ginnie Mae Fund, Independent 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 invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.
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.
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, prior period premium and discount on debt securities, market discount, deferred trustees compensation, 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 | $ 3,636,813 | $ 9,313 | $ (115,761) | $ (106,448) |
Government Income Fund | 6,028,437 | 15,522 | (91,616) | (76,094) |
Intermediate Government Income Fund | 791,312 | 1,278 | (10,051) | (8,773) |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
Undistributed | Undistributed | Capital Loss | |
Ginnie Mae Fund | $ - | $ - | $ (9,594) |
Government Income Fund | 13,722 | - | (10,715) |
Intermediate Government Income Fund | 2,404 | - | (29,117) |
The tax character of distributions paid was as follows:
July 31, 2006 | Ordinary | Long-term | Total |
Ginnie Mae Fund | $ 186,731 | $ 7,297 | $ 194,028 |
Government Income Fund | 223,332 | - | 223,332 |
Intermediate Government Income Fund | 31,447 | - | 31,447 |
July 31, 2005 | Ordinary | Long-term | Total |
Ginnie Mae Fund | $ 162,997 | $ - | $ 162,997 |
Government Income Fund | 157,882 | 2,080 | 159,962 |
Intermediate Government Income Fund | 28,832 | - | 28,832 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. While not expected to have a material impact on the Fund's financial statements, management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations.
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 certain Funds and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. Certain Funds may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Each applicable Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued
Annual Report
2. Operating Policies - continued
Repurchase Agreements - continued
interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Delayed Delivery Transactions and When-Issued Securities. Certain Funds 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. Certain Funds may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, each applicable Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in each applicable fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract'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 a fund.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
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 a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on each applicable Fund's Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in each applicable Fund's Schedule of Investments under the caption "Swap Agreements."
Mortgage Dollar Rolls. 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, a fund's right to repurchase or sell securities may be limited.
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
Annual Report
3. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
management decrease. For the period, each Fund's annual management fee rate expressed as a percentage of each Fund's average net assets was as follows:
Individual | Group | Total | |
Ginnie Mae Fund | .20% | .12% | .32% |
Government Income Fund | .20% | .12% | .32% |
Intermediate Government Income Fund | .20% | .12% | .32% |
Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the Funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives an asset-based fee of .10% of each Fund's average net assets. FSC pays for typesetting, printing and mailing of shareholder reports, except proxy statements.
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, the compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fees were equivalent to the following annual rates expressed as a percentage of average net assets:
Ginnie Mae Fund | .03% | |
Government Income Fund | .03% | |
Intermediate Government Income Fund | .03% |
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, which is reflected in Miscellaneous Expense on the Statement of Operations, and is as follows:
Ginnie Mae Fund | $ 8 | |
Government Income Fund | 11 | |
Intermediate Government Income Fund | 2 |
During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
5. Security Lending.
Certain Funds lend portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, each applicable Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the 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. Any cash collateral received 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. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented on each applicable Fund's Statement of Operations as a component of interest income. Net income from lending portfolio securities during the period amounted to:
Government Income Fund | $ 391 | |
Intermediate Government Income Fund | 36 |
6. 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.
Management | Transfer | |
Ginnie Mae Fund | $ 9 | $ 45 |
Government Income Fund | 9 | 380 |
Intermediate Government Income Fund | 4 | 12 |
7. Other.
The Funds' organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Funds. In the normal course of business, the Funds may also enter into contracts that provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Funds. The risk of material loss from such claims is considered remote.
Annual Report
7. Other - continued
At the end of the period, Fidelity Freedom 2010 and Fidelity Freedom 2020 were the owners of record of approximately 22% and 19% of the total outstanding shares of Fidelity Government Income Fund. The Fidelity Freedom Funds were the owners of record, in the aggregate, of approximately 60% of the total outstanding shares of Fidelity Government Income Fund.
8. Proposed Reorganization and New Expense Contract
On April 20, 2006, the Board of Trustees of Fidelity Government Income Fund (the Fund) approved Agreements and Plans of Reorganization between the Fund and each of Fidelity Advisor Government Investment Fund and Spartan Government Income Fund (each referred to as a "Target Fund"). Each agreement provides for the transfer of all the assets and the assumption of all of the liabilities of the Target Fund in exchange solely for the number of shares of classes of the Fund having the same relative net asset value as the outstanding shares of the corresponding classes of the Target Fund on the day that the reorganization is effective.
Shareholder meetings are expected to be held on September 20, 2006 to vote on the reorganizations. If approved by shareholders of the Target Funds , each reorganization is expected to become effective on or about October 27, 2006. Each reorganization is expected to qualify as a tax-free transaction with no gain or loss recognized by the funds or their shareholders.
New share classes will be created for the purpose of the reorganization with Fidelity Advisor Government Investment Fund and the Fund's existing class will be renamed the "Fidelity Government Income" share class. The new share classes will not commence operations until approximately the date of the reorganization. Effective upon the completion of the reorganization with Spartan Government Income Fund, a new expense contract will be entered into by the Fund with FMR requiring shareholder approval to increase expenses for the Fidelity Government Income share class above the current limit of .45% of the class' average net assets.
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, 2006, and the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 2006
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 and Albert R. Gamper, Jr., each of the Trustees oversees 345 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate. Mr. Gamper oversees 292 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board 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 may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Ginnie Mae (2005-present), Government Income (2005-present), and Intermediate Government Income (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005- present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003- present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). 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.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 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). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
Robert M. Gates (62) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). 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-present), and Brinker International (restaurant management, 2003-present). 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). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
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-present). 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 (62) | |
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. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
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 Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) 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 (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman Emeritus 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), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). 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. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes 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 | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2006 Vice President of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005- present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006- present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
David L. Murphy (58) | |
Year of Election or Appointment: 2005 Vice President of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Murphy also serves as Vice President of Fidelity's Money Market Funds (2002-present), certain Asset Allocation Funds (2003-present), Fixed-Income Funds (2005-present), and Balanced Funds (2005-present). He serves as Senior Vice President (2000-present) and Head (2004-present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of Fidelity Investments Money Management, Inc. (2003-present) and an Executive Vice President of FMR (2005-present). Previously, Mr. Murphy served as Money Market Group Leader (2002-2004), Bond Group Leader (2000-2002), and Vice President of Fidelity's Taxable Bond Funds (2000-2002) and Fidelity's Municipal Bond Funds (2001-2002). | |
Thomas J. Silvia (45) | |
Year of Election or Appointment: 2005 Vice President of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Silvia also serves as Vice President of Fidelity's Fixed-Income Funds (2005-present), certain Balanced Funds (2005- present), certain Asset Allocation Funds (2005-present), and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed-Income Division (2005-present). Previously, Mr. Silvia served as Director of Fidelity's Taxable Bond portfolio managers (2002-2004) and a portfolio manager in the Bond Group (1997-2004). | |
George Fischer (45) | |
Year of Election or Appointment: 2002 or 2003 Vice President of Intermediate Government Income (2002-present) and Government Income (2003-present). Mr. Fischer also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer worked as a research analyst and portfolio manager. | |
William Irving (42) | |
Year of Election or Appointment: 2004 Vice President of Ginnie Mae. Dr. Irving also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Dr. Irving worked as a quantitative analyst and portfolio manager. | |
Eric D. Roiter (57) | |
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; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
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-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) 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. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
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-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005- present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
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). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004- present). 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). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
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. | |
Peter L. Lydecker (52) | |
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 (51) | |
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. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Ginnie Mae, Government Income, and Intermediate Government Income. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
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 Gains |
Fidelity Government Income Fund | 09/11/2006 | 09/08/2006 | $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 | 39.78% |
Fidelity Intermediate Government Income Fund | 38.31% |
The funds hereby designate the amounts noted below as distributions paid during the period January 1, 2006 to July 31, 2006 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders:
Fund | |
Fidelity Ginnie Mae Fund | $92,027,000 |
Fidelity Government Income Fund | $134,275,000 |
Fidelity Intermediate Government Income Fund | $17,724,000 |
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of each fund's shareholders was held on January 18, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 8,252,035,677.61 | 97.347 |
Withheld | 224,894,685.16 | 2.653 |
TOTAL | 8,476,930,362.77 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 8,252,680,829.70 | 97.355 |
Withheld | 224,249,533.07 | 2.645 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert M. Gates | ||
Affirmative | 8,239,007,314.92 | 97.193 |
Withheld | 237,923,047.85 | 2.807 |
TOTAL | 8,476,930,362.77 | 100.000 |
George H. Heilmeier | ||
Affirmative | 8,242,547,667.10 | 97.235 |
Withheld | 234,382,695.67 | 2.765 |
TOTAL | 8,476,930,362.77 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 8,207,133,817.28 | 96.817 |
Withheld | 269,796,545.49 | 3.183 |
TOTAL | 8,476,930,362.77 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 8,205,030,635.55 | 96.792 |
Withheld | 271,899,727.22 | 3.208 |
TOTAL | 8,476,930,362.77 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 8,239,700,661.39 | 97.201 |
Withheld | 237,229,701.38 | 2.799 |
TOTAL | 8,476,930,362.77 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 8,246,135,458.96 | 97.277 |
Withheld | 230,794,903.81 | 2.723 |
TOTAL | 8,476,930,362.77 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 8,247,874,320.21 | 97.298 |
Withheld | 229,056,042.56 | 2.702 |
TOTAL | 8,476,930,362.77 | 100.000 |
William O. McCoy | ||
Affirmative | 8,229,632,189.68 | 97.083 |
Withheld | 247,298,173.09 | 2.917 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 8,241,271,395.49 | 97.220 |
Withheld | 235,658,967.28 | 2.780 |
TOTAL | 8,476,930,362.77 | 100.000 |
Cornelia M. Small | ||
Affirmative | 8,249,991,018.59 | 97.323 |
Withheld | 226,939,344.18 | 2.677 |
TOTAL | 8,476,930,362.77 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 8,236,371,332.54 | 97.162 |
Withheld | 240,559,030.23 | 2.838 |
TOTAL | 8,476,930,362.77 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 8,244,328,417.87 | 97.256 |
Withheld | 232,601,944.90 | 2.744 |
TOTAL | 8,476,930,362.77 | 100.000 |
A Denotes trust-wide proposal and voting results. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Ginnie Mae Fund / Fidelity Government Income Fund / Fidelity Intermediate Government Income Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for each fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of each fund's Advisory Contracts, including the services and support provided to each fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Fixed-Income Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its June 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for each fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to each fund and its shareholders (including the investment performance of each fund); (ii) the competitiveness of the management fee and total expenses of each fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with each fund; (iv) the extent to which economies of scale would be realized as each fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for each fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contracts is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in each fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that each fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in that fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the funds' portfolio managers and the funds' investment objectives and disciplines. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for each fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, each fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of a fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying a sales charge. The Board noted that, since the last Advisory Contract renewals in June 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance. The Board considered whether each fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed each fund's absolute investment performance, as well as each fund's relative investment performance measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. For each fund, the following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the fund's cumulative total returns, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten number noted below each chart corresponds to the percentile box and represents the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the fund.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Ginnie Mae Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the second quartile for the one- and five-year periods and the first quartile for the three-year period. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown.
Fidelity Government Income Fund
Annual Report
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the first quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown.
Fidelity Intermediate Government Income Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of the fund was in the first quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to each fund will benefit each fund's shareholders, particularly in light of the Board's view that each fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered each fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the charts below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than a fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than a fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which a fund's management fee ranked, is also included in the charts and considered by the Board.
Fidelity Ginnie Mae Fund
Annual Report
Fidelity Government Income Fund
Fidelity Intermediate Government Income Fund
The Board noted that each fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to each fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that each fund's chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that each fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each fund's total expenses, the Board considered the fund's management fee as well as other fund expenses, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each fund compared to competitive fund median expenses. Each fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that it had approved changes (effective June 1, 2005) in the contractual arrangements for each fund that (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee to 10 basis points, and (iii) limit each fund's total expenses to 45 basis points. These contractual arrangements may not be increased without Board approval.
The Board noted that each fund's total expenses ranked below its competitive median for 2005. The Board considered that each class's total expenses reflect the contractual arrangements for 2005, as if the contractual arrangements were in effect for the entire year.
The Board recognized that each fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board noted that because the contractual arrangements that went into effect June 1, 2005 set each fund's total fund-level expenses at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses. The Board realized, however, that the 35 basis point fee rate was below the lowest management fee rate available under the contractual arrangements that existed prior to June 1, 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that each fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing each fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for each fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the funds' business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of each fund and determined that the amount of profit is a fair entrepreneurial profit for the management of each fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including each fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which each fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions. The Board also noted that the reduction in each fund's individual fund fee rate by 10 basis points delivers significant economies to fund shareholders. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) funds and accounts managed by Fidelity other than the Fidelity funds, including fee arrangements; (iii) the total expenses of certain funds and classes relative to competitors; (iv) fund performance trends; and (v) Fidelity's fee structures.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that each fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
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Fidelity Automated
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2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
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5 To change your PIN.
*0 To speak to a Fidelity representative.
By PC
Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.
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Fidelity's Web Site
www.fidelity.com
* When you call the quotes line, please remember that a fund's yield and return will vary and, except for money market funds, share price will also vary. This means that you may have a gain or loss when you sell your shares. There is no assurance that money market funds will be able to maintain a stable $1 share price; an investment in a money market fund is not insured or guaranteed by the U.S. government. Total returns are historical and include changes in share price, reinvestment of dividends and capital gains, and the effects of any sales charges.
Annual Report
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Ginnie Mae and Intermediate
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Fidelity®
Ultra-Short Bond
Fund
Annual Report
July 31, 2006
(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 | ||
Board Approval of Investment Advisory Contracts and Management Fees |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit 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.
Annual Report
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com/holdings.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of 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, 2006 | Past 1 | Life of |
Fidelity® Ultra-Short Bond | 4.23% | 2.51% |
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 changed, and also shows how the Lehman Brothers® 6 Month Swap Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Andrew Dudley, Portfolio Manager of Fidelity® Ultra-Short Bond Fund
The domestic investment-grade bond market struggled during the 12-month period ending July 31, 2006, finishing with a 1.46% return as measured by the Lehman Brothers® Aggregate Bond Index. The negative momentum was typically a result of rising levels of core inflation, Federal Reserve Board interest rate hikes aimed to keep inflation at bay, and a yield curve that was sometimes inverted, meaning short-term yields exceeded long-term yields - a phenomenon that's often a precursor of a recession. In all, the Fed bumped up rates eight times during the period, hoisting the federal funds target rate to 5.25%, its highest level in five years. On the plus side, bonds scored well in the final quarter of the period, advancing 1.46%, which was identical to the debt market's return for the entire one-year period. Investors turned to high-quality debt in the last three months for a number of reasons: Equity performance stumbled; gross domestic product growth in the second quarter of 2006 gave strong evidence of a slowing economy; and the Fed supported that notion by announcing there was a good possibility of a pause in its rate hike campaign.
During the past year, Ultra-Short Bond returned 4.23%, while the Lehman Brothers 6 Month Swap Index returned 4.22%. Boosting the fund's performance relative to the index was yield-curve positioning, with a large position in the Fidelity Ultra-Short Central Fund - a diversified internal pool of short-term assets designed to outperform cash-like instruments with similar risk characteristics - and an overweighting in bonds with maturities in the one-to-two year range. Also to the fund's benefit was advantageous sector positioning, led by a heavy emphasis on non-government bonds, including structured products such as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities. These structured securities, which I held directly and also indirectly through our investment in the Fidelity Ultra-Short Central Fund, significantly outpaced the index. Modestly detracting from returns were out-of-index exposures to corporate and mortgage pass-through securities, both of which slightly lagged the index during the period.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including 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, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
Shareholder Expense Example - continued
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,022.30 | $ 3.51 |
HypotheticalA | $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Class T | |||
Actual | $ 1,000.00 | $ 1,022.50 | $ 3.46 |
HypotheticalA | $ 1,000.00 | $ 1,021.37 | $ 3.46 |
Ultra-Short Bond | |||
Actual | $ 1,000.00 | $ 1,023.70 | $ 2.26 |
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,023.50 | $ 2.41 |
HypotheticalA | $ 1,000.00 | $ 1,022.41 | $ 2.41 |
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 181/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central fund in which the fund invests are not included in the fund's annualized expense ratio.
Annualized | |
Class A | .70% |
Class T | .69% |
Ultra-Short Bond | .45% |
Institutional Class | .48% |
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2006 | As of January 31, 2006 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 25.9% | ![]() | AAA 26.8% | ||||
![]() | AA 11.5% | ![]() | AA 11.0% | ||||
![]() | A 13.0% | ![]() | A 11.2% | ||||
![]() | BBB 16.9% | ![]() | BBB 14.5% | ||||
![]() | BB and Below 0.6% | ![]() | BB and Below 0.5% | ||||
![]() | Not Rated 4.8% | ![]() | Not Rated 1.4% | ||||
![]() | 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, 2006 | ||
6 months ago | ||
Years | 1.9 | 1.7 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2006 | ||
6 months ago | ||
Years | 0.5 | 0.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006* | As of January 31, 2006** | ||||||
![]() | Corporate Bonds 10.6% | ![]() | Corporate Bonds 8.7% | ||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 23.1% | ![]() | CMOs and Other Mortgage Related Securities 22.8% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 14.9% | ** Foreign investments | 11.0% | ||||
* Futures and Swaps | 18.0% | ** Futures and Swaps | 18.3% |
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
For an unaudited list of holdings for each fixed-income central fund, visit fidelity.com and/or advisor.fidelity.com, as applicable. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Nonconvertible Bonds - 8.6% | |||
Principal Amount | Value | ||
CONSUMER DISCRETIONARY - 1.7% | |||
Auto Components - 0.5% | |||
DaimlerChrysler NA Holding Corp.: | |||
5.74% 3/13/09 (d) | $ 1,800,000 | $ 1,801,874 | |
5.78% 9/10/07 (d) | 1,230,000 | 1,233,707 | |
Johnson Controls, Inc. 5.5988% 1/17/08 (d) | 1,515,000 | 1,517,862 | |
4,553,443 | |||
Media - 1.2% | |||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 900,000 | 902,359 | |
Cox Communications, Inc.: | |||
(Reg. S) 5.8694% 12/14/07 (d) | 2,330,000 | 2,341,387 | |
7.75% 8/15/06 | 360,000 | 360,184 | |
Liberty Media Corp. 6.8294% 9/17/06 (d) | 3,033,000 | 3,036,852 | |
Univision Communications, Inc. 2.875% 10/15/06 | 1,210,000 | 1,201,709 | |
Viacom, Inc. 5.6906% 6/16/09 (a)(d) | 2,000,000 | 1,999,848 | |
9,842,339 | |||
TOTAL CONSUMER DISCRETIONARY | 14,395,782 | ||
ENERGY - 0.3% | |||
Oil, Gas & Consumable Fuels - 0.3% | |||
Enterprise Products Operating LP 4% 10/15/07 | 2,670,000 | 2,613,340 | |
FINANCIALS - 3.3% | |||
Capital Markets - 0.1% | |||
Lehman Brothers Holdings E-Capital Trust I 5.9538% 8/19/65 (d) | 720,000 | 720,373 | |
Commercial Banks - 0.4% | |||
Santander Issuances SA Unipersonal 5.7006% 6/20/16 (a)(d) | 1,500,000 | 1,500,051 | |
Wells Fargo & Co. 5.34% 3/10/08 (d) | 2,300,000 | 2,301,267 | |
3,801,318 | |||
Consumer Finance - 0.7% | |||
MBNA Capital I 8.278% 12/1/26 | 810,000 | 848,375 | |
MBNA Europe Funding PLC 5.3363% 9/7/07 (a)(d) | 2,720,000 | 2,721,474 | |
SLM Corp. 5.6647% 7/26/10 (d) | 2,770,000 | 2,768,147 | |
6,337,996 | |||
Nonconvertible Bonds - continued | |||
Principal Amount | Value | ||
FINANCIALS - continued | |||
Diversified Financial Services - 0.5% | |||
Aspetuck Trust 5.7869% 10/16/06 (d)(g) | $ 2,195,000 | $ 2,196,449 | |
CC Funding Trust I 6.9% 2/16/07 | 1,695,000 | 1,705,309 | |
3,901,758 | |||
Insurance - 0.1% | |||
Oil Insurance Ltd. 5.545% 10/6/06 (a)(d) | 830,000 | 829,799 | |
Real Estate Investment Trusts - 0.5% | |||
iStar Financial, Inc. 5.9638% 3/16/09 (d) | 2,505,000 | 2,521,293 | |
Reckson Operating Partnership LP 6% 6/15/07 | 1,440,000 | 1,435,572 | |
3,956,865 | |||
Thrifts & Mortgage Finance - 1.0% | |||
Countrywide Financial Corp. 5.67% 4/11/07 (d) | 1,575,000 | 1,576,386 | |
Residential Capital Corp. 6.875% 6/29/07 (d) | 1,995,000 | 2,005,061 | |
Washington Mutual Bank: | |||
5.2388% 5/1/09 (d) | 3,000,000 | 3,001,119 | |
5.31% 8/25/08 (d) | 2,220,000 | 2,222,513 | |
8,805,079 | |||
TOTAL FINANCIALS | 28,353,188 | ||
INFORMATION TECHNOLOGY - 0.2% | |||
Communications Equipment - 0.2% | |||
Motorola, Inc. 4.608% 11/16/07 | 1,700,000 | 1,681,341 | |
TELECOMMUNICATION SERVICES - 1.9% | |||
Diversified Telecommunication Services - 1.8% | |||
AT&T, Inc. 5.2625% 5/15/08 (d) | 3,000,000 | 3,001,032 | |
Deutsche Telekom International Finance BV 5.6288% 3/23/09 (d) | 1,725,000 | 1,726,113 | |
Sprint Capital Corp. 4.78% 8/17/06 | 1,000,000 | 999,704 | |
Telecom Italia Capital SA 6.1081% 7/18/11 (d) | 3,000,000 | 3,001,473 | |
Telefonica Emisiones SAU 5.61% 6/19/09 (d) | 3,500,000 | 3,502,734 | |
Telefonos de Mexico SA de CV 4.5% 11/19/08 | 1,605,000 | 1,559,076 | |
TELUS Corp. yankee 7.5% 6/1/07 | 2,000,000 | 2,030,302 | |
15,820,434 | |||
Wireless Telecommunication Services - 0.1% | |||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 700,000 | 699,847 | |
TOTAL TELECOMMUNICATION SERVICES | 16,520,281 | ||
Nonconvertible Bonds - continued | |||
Principal Amount | Value | ||
UTILITIES - 1.2% | |||
Electric Utilities - 0.3% | |||
Pepco Holdings, Inc. 5.5% 8/15/07 | $ 2,710,000 | $ 2,706,794 | |
Independent Power Producers & Energy Traders - 0.3% | |||
Constellation Energy Group, Inc. 6.35% 4/1/07 | 910,000 | 913,714 | |
Duke Capital LLC 4.331% 11/16/06 | 1,590,000 | 1,583,018 | |
2,496,732 | |||
Multi-Utilities - 0.6% | |||
Dominion Resources, Inc. 5.79% 9/28/07 (d) | 2,300,000 | 2,301,663 | |
NiSource, Inc. 3.628% 11/1/06 | 1,055,000 | 1,049,284 | |
Sempra Energy 4.75% 5/15/09 | 2,000,000 | 1,956,382 | |
5,307,329 | |||
TOTAL UTILITIES | 10,510,855 | ||
TOTAL NONCONVERTIBLE BONDS (Cost $74,244,078) | 74,074,787 | ||
U.S. Government and Government Agency Obligations - 6.1% | |||
U.S. Government Agency Obligations - 6.0% | |||
Fannie Mae 0% 4/27/07 | 46,000,000 | 44,228,254 | |
Freddie Mac 0% 9/29/06 | 7,300,000 | 7,237,432 | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 51,465,686 | ||
U.S. Treasury Obligations - 0.1% | |||
U.S. Treasury Bills, yield at date of purchase 5.03% 10/19/06 (c) | 750,000 | 741,870 | |
TOTAL U.S. GOVERNMENT AND (Cost $52,261,448) | 52,207,556 | ||
U.S. Government Agency - Mortgage Securities - 1.1% | |||
Fannie Mae - 1.1% | |||
4.3% 10/1/34 (d) | 55,298 | 54,784 | |
4.307% 3/1/33 (d) | 138,726 | 137,167 | |
4.307% 10/1/33 (d) | 49,655 | 48,901 | |
4.323% 6/1/33 (d) | 61,166 | 60,476 | |
4.513% 10/1/35 (d) | 90,948 | 89,781 | |
U.S. Government Agency - Mortgage Securities - continued | |||
Principal Amount | Value | ||
Fannie Mae - continued | |||
4.553% 1/1/35 (d) | $ 223,468 | $ 221,694 | |
4.555% 9/1/34 (d) | 416,778 | 416,253 | |
4.593% 8/1/34 (d) | 138,275 | 137,752 | |
4.643% 1/1/33 (d) | 76,143 | 75,604 | |
4.658% 3/1/35 (d) | 53,780 | 53,374 | |
4.684% 9/1/34 (d) | 47,118 | 47,402 | |
4.708% 10/1/32 (d) | 24,827 | 24,737 | |
4.73% 2/1/33 (d) | 20,633 | 20,511 | |
4.732% 10/1/32 (d) | 31,928 | 32,271 | |
4.746% 1/1/35 (d) | 13,324 | 13,240 | |
4.811% 8/1/34 (d) | 118,558 | 118,217 | |
4.815% 5/1/33 (d) | 10,553 | 10,502 | |
4.988% 11/1/32 (d) | 86,703 | 86,872 | |
4.989% 12/1/32 (d) | 11,219 | 11,217 | |
5.016% 2/1/35 (d) | 46,737 | 46,556 | |
5.023% 7/1/34 (d) | 62,560 | 62,083 | |
5.063% 11/1/34 (d) | 25,481 | 25,593 | |
5.184% 8/1/33 (d) | 162,136 | 161,670 | |
5.294% 7/1/35 (d) | 67,769 | 67,718 | |
5.5% 11/1/16 to 2/1/19 | 4,010,734 | 3,976,024 | |
6.5% 7/1/16 to 3/1/35 | 2,261,507 | 2,296,635 | |
7% 8/1/17 to 5/1/32 | 1,215,544 | 1,243,832 | |
TOTAL FANNIE MAE | 9,540,866 | ||
Freddie Mac - 0.0% | |||
4.783% 10/1/32 (d) | 24,552 | 24,611 | |
4.86% 3/1/33 (d) | 62,962 | 62,507 | |
5.639% 4/1/32 (d) | 30,337 | 30,737 | |
TOTAL FREDDIE MAC | 117,855 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $9,903,646) | 9,658,721 | ||
Asset-Backed Securities - 29.3% | |||
Accredited Mortgage Loan Trust: | |||
Series 2004-2 Class A2, 5.685% 7/25/34 (d) | 386,570 | 387,853 | |
Series 2004-3 Class 2A4, 5.735% 10/25/34 (d) | 520,512 | 521,192 | |
Series 2004-4 Class A2D, 5.735% 1/25/35 (d) | 237,655 | 238,456 | |
Series 2005-1 Class M1, 5.855% 4/25/35 (d) | 1,545,000 | 1,552,561 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
ACE Securities Corp.: | |||
Series 2002-HE2 Class M1, 6.66% 8/25/32 (d) | $ 151,473 | $ 151,586 | |
Series 2003-HE1: | |||
Class M1, 6.035% 11/25/33 (d) | 113,099 | 113,568 | |
Class M2, 7.085% 11/25/33 (d) | 75,000 | 75,845 | |
Series 2003-HS1: | |||
Class M1, 6.135% 6/25/33 (d) | 50,000 | 50,301 | |
Class M2, 7.135% 6/25/33 (d) | 50,000 | 50,560 | |
Series 2003-NC1 Class M1, 6.165% 7/25/33 (d) | 100,000 | 100,370 | |
Series 2004-HE1: | |||
Class M1, 5.885% 2/25/34 (d) | 150,000 | 150,345 | |
Class M2, 6.485% 2/25/34 (d) | 175,000 | 176,377 | |
Series 2005-HE2: | |||
Class M2, 5.835% 4/25/35 (d) | 250,000 | 251,096 | |
Class M3, 5.865% 4/25/35 (d) | 145,000 | 145,974 | |
Class M4, 6.025% 4/25/35 (d) | 185,000 | 186,221 | |
Series 2005-HE3: | |||
Class A2A, 5.485% 5/25/35 (d) | 232,106 | 232,124 | |
Class A2B, 5.595% 5/25/35 (d) | 630,000 | 630,503 | |
Series 2005-SD1 Class A1, 5.785% 11/25/50 (d) | 173,919 | 174,169 | |
Series 2006-HE2: | |||
Class A2C, 5.545% 5/25/36 (d) | 995,000 | 995,930 | |
Class M1, 5.685% 5/25/36 (d) | 915,000 | 916,529 | |
Class M2, 5.705% 5/25/36 (d) | 305,000 | 305,238 | |
Class M3, 5.725% 5/25/36 (d) | 240,000 | 240,277 | |
Class M4, 5.785% 5/25/36 (d) | 200,000 | 200,305 | |
Class M5, 5.825% 5/25/36 (d) | 295,000 | 295,557 | |
Aesop Funding II LLC Series 2005-1A Class A2, 5.4381% 4/20/09 (a)(d) | 1,200,000 | 1,200,161 | |
American Express Credit Account Master Trust: | |||
Series 2004-1 Class B, 5.6188% 9/15/11 (d) | 410,000 | 411,573 | |
Series 2004-5 Class B, 5.6188% 4/16/12 (d) | 2,150,000 | 2,150,496 | |
Series 2004-C Class C, 5.8688% 2/15/12 (a)(d) | 591,770 | 593,267 | |
Series 2005-1 Class A, 5.3988% 10/15/12 (d) | 2,185,000 | 2,186,113 | |
Series 2005-6 Class C, 5.6188% 3/15/11 (a)(d) | 1,275,000 | 1,276,734 | |
AmeriCredit Automobile Receivables Trust: | |||
Series 2003-AM Class A4B, 5.8038% 11/6/09 (d) | 329,492 | 329,886 | |
Series 2003-BX Class A4B, 5.8038% 1/6/10 (d) | 84,194 | 84,304 | |
Series 2004-1 Class A3, 3.22% 7/6/08 | 72,682 | 72,582 | |
Series 2005-1 Class C, 4.73% 7/6/10 | 2,500,000 | 2,463,979 | |
Series 2006-RM Class A1, 5.37% 10/6/09 | 2,000,000 | 1,998,267 | |
Ameriquest Mortgage Securities, Inc.: | |||
Series 2003-1 Class M1, 6.285% 2/25/33 (d) | 474,619 | 475,824 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Ameriquest Mortgage Securities, Inc.: - continued | |||
Series 2003-11 Class M1, 6.075% 1/25/34 (d) | $ 1,930,000 | $ 1,947,423 | |
Series 2003-3 Class M1, 6.185% 3/25/33 (d) | 21,641 | 21,713 | |
Series 2003-AR1 Class M1, 6.535% 1/25/33 (d) | 370,506 | 371,746 | |
Series 2004-R11 Class M1, 6.045% 11/25/34 (d) | 560,000 | 564,212 | |
Series 2004-R2: | |||
Class M1, 5.815% 4/25/34 (d) | 85,000 | 84,998 | |
Class M2, 5.865% 4/25/34 (d) | 75,000 | 74,999 | |
Series 2004-R8 Class M9, 8.135% 9/25/34 (d) | 1,525,000 | 1,536,893 | |
Series 2004-R9: | |||
Class A3, 5.705% 10/25/34 (d) | 38,332 | 38,337 | |
Class M2, 6.035% 10/25/34 (d) | 720,000 | 725,567 | |
Class M4, 6.555% 10/25/34 (d) | 925,000 | 937,697 | |
Series 2005-R1: | |||
Class M1, 5.835% 3/25/35 (d) | 770,000 | 771,978 | |
Class M2, 5.865% 3/25/35 (d) | 260,000 | 261,056 | |
Series 2005-R2 Class M1, 5.835% 4/25/35 (d) | 1,700,000 | 1,706,851 | |
Amortizing Residential Collateral Trust: | |||
Series 2002-BC1 Class M2, 6.485% 1/25/32 (d) | 35,456 | 35,701 | |
Series 2002-BC6 Class M1, 6.135% 8/25/32 (d) | 100,000 | 100,454 | |
ARG Funding Corp.: | |||
Series 2005-1A Class A2, 5.4781% 4/20/09 (a)(d) | 1,500,000 | 1,502,188 | |
Series 2005-2A Class A2, 5.4881% 5/20/09 (a)(d) | 800,000 | 799,989 | |
Argent Securities, Inc.: | |||
Series 2003-W3 Class M2, 7.185% 9/25/33 (d) | 800,000 | 809,499 | |
Series 2004-W5 Class M1, 5.985% 4/25/34 (d) | 1,420,000 | 1,421,663 | |
Series 2004-W7: | |||
Class M1, 5.935% 5/25/34 (d) | 305,000 | 307,122 | |
Class M2, 5.985% 5/25/34 (d) | 250,000 | 251,791 | |
Series 2006-W1 Class M10, 7.885% 3/25/36 (d) | 995,000 | 916,994 | |
Series 2006-W4: | |||
Class A2C, 5.545% 5/25/36 (d) | 1,200,000 | 1,200,575 | |
Class M2, 5.705% 5/25/36 (d) | 1,265,000 | 1,264,466 | |
Class M3, 5.725% 5/25/36 (d) | 1,010,000 | 1,009,579 | |
Arran Funding Ltd. Series 2005-A Class C, 5.1875% 12/15/10 (d) | 3,235,000 | 3,234,030 | |
Asset Backed Funding Certificates Series 2004-HE1 Class M2, 6.535% 1/25/34 (d) | 230,000 | 233,902 | |
Asset Backed Securities Corp. Home Equity Loan Trust: | |||
Series 2003-HE2 Class M1, 6.2688% 4/15/33 (d) | 1,165,025 | 1,166,976 | |
Series 2003-HE6 Class M1, 6.035% 11/25/33 (d) | 215,000 | 216,507 | |
Series 2003-HE7 Class A3, 5.7288% 12/15/33 (d) | 45,714 | 45,858 | |
Series 2004-HE6 Class A2, 5.745% 6/25/34 (d) | 825,475 | 827,448 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Asset Backed Securities Corp. Home Equity Loan Trust: - continued | |||
Series 2005-HE1 Class M1, 5.885% 3/25/35 (d) | $ 540,000 | $ 543,203 | |
Series 2005-HE2: | |||
Class M1, 5.835% 3/25/35 (d) | 1,105,000 | 1,111,225 | |
Class M2, 5.885% 3/25/35 (d) | 275,000 | 277,143 | |
Series 2005-HE3 Class A4, 5.585% 4/25/35 (d) | 1,234,989 | 1,235,468 | |
Bank One Issuance Trust: | |||
Series 2002-B1 Class B1, 5.7488% 12/15/09 (d) | 465,000 | 465,681 | |
Series 2002-C1 Class C1, 6.3288% 12/15/09 (d) | 675,000 | 678,457 | |
Series 2003-C4 Class C4, 6.3988% 2/15/11 (d) | 2,010,000 | 2,039,325 | |
Series 2004-C1 Class C1, 5.8688% 11/15/11 (d) | 25,000 | 25,172 | |
Bayview Financial Acquisition Trust Series 2004-C Class A1, 5.82% 5/28/44 (d) | 581,257 | 582,260 | |
Bayview Financial Asset Trust Series 2003-F Class A, 5.9% 9/28/43 (d) | 150,114 | 150,187 | |
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.85% 2/28/44 (d) | 270,073 | 270,606 | |
Bayview Financial Securities Co. LLC Series 2006-A Class 2A1, 5.52% 2/28/41 (d) | 1,758,247 | 1,758,686 | |
Bear Stearns Asset Backed Securities I: | |||
Series 2004-BO1: | |||
Class M2, 6.135% 9/25/34 (d) | 390,000 | 394,804 | |
Class M3, 6.435% 9/25/34 (d) | 265,000 | 268,223 | |
Class M4, 6.585% 9/25/34 (d) | 225,000 | 228,983 | |
Class M5, 6.785% 9/25/34 (d) | 210,000 | 213,924 | |
Series 2004-HE9 Class M2, 6.585% 11/25/34 (d) | 490,000 | 497,767 | |
Series 2005-HE2: | |||
Class M1, 5.885% 2/25/35 (d) | 905,000 | 909,666 | |
Class M2, 6.135% 2/25/35 (d) | 330,000 | 332,901 | |
Capital Auto Receivables Asset Trust: | |||
Series 2003-1 Class B, 5.8388% 6/15/10 (a)(d) | 51,292 | 51,332 | |
Series 2005-1 Class B, 5.7438% 6/15/10 (d) | 850,000 | 854,020 | |
Capital One Auto Finance Trust: | |||
Series 2003-A Class A4B, 5.6488% 1/15/10 (d) | 307,508 | 307,815 | |
Series 2004-B Class A4, 5.4788% 8/15/11 (d) | 1,700,000 | 1,700,399 | |
Series 2006-B Class A2, 5.53% 4/15/09 | 1,805,000 | 1,805,451 | |
Capital One Master Trust: | |||
Series 2001-1 Class B, 5.8788% 12/15/10 (d) | 500,000 | 502,162 | |
Series 2001-6 Class C, 6.7% 6/15/11 (a) | 2,200,000 | 2,247,524 | |
Series 2001-8A Class B, 5.9188% 8/17/09 (d) | 405,000 | 405,278 | |
Capital One Multi-Asset Execution Trust: | |||
Series 2003-B6 Class B6, 5.8988% 9/15/11 (d) | 1,125,000 | 1,133,824 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Capital One Multi-Asset Execution Trust: - continued | |||
Series 2004-B1 Class B1, 5.8088% 11/15/11 (d) | $ 1,180,000 | $ 1,186,016 | |
Series 2004-C1 Class C1, 3.4% 11/16/09 | 2,480,000 | 2,453,886 | |
Capital Trust Ltd. Series 2004-1: | |||
Class A2, 5.8281% 7/20/39 (a)(d) | 265,000 | 265,404 | |
Class B, 6.1281% 7/20/39 (a)(d) | 140,000 | 141,095 | |
Class C, 6.4781% 7/20/39 (a)(d) | 180,000 | 181,251 | |
Carrington Mortgage Loan Trust Series 2006-FRE1: | |||
Class M7, 6.335% 7/25/36 (d) | 445,000 | 444,989 | |
Class M9, 7.285% 7/25/36 (d) | 285,000 | 284,992 | |
Cayman ABSC NIMS Trust Series 2004-HE2 Class A1, 6.75% 4/25/34 (a) | 20,691 | 20,639 | |
CDC Mortgage Capital Trust: | |||
Series 2003-HE3 Class M1, 6.085% 11/25/33 (d) | 91,792 | 92,635 | |
Series 2004-HE2 Class M2, 6.585% 7/26/34 (d) | 175,000 | 176,159 | |
Cendant Timeshare Receivables Funding LLC Series 2005 1A Class 2A2, 5.5581% 5/20/17 (a)(d) | 824,603 | 823,465 | |
Chase Credit Card Owner Trust: | |||
Series 2001-6 Class B, 5.8488% 3/16/09 (d) | 200,000 | 200,185 | |
Series 2003-6 Class C, 6.1688% 2/15/11 (d) | 2,210,000 | 2,237,447 | |
Series 2004-1 Class B, 5.5688% 5/15/09 (d) | 295,000 | 294,996 | |
Chase Issuance Trust: | |||
Series 2004-C3 Class C3, 5.8388% 6/15/12 (d) | 1,645,000 | 1,654,241 | |
Series 2006-C3 Class C3, 5.5988% 6/15/11 (d) | 1,975,000 | 1,975,000 | |
CIT Equipment Collateral Trust Series 2005-VT1 Class C, 4.18% 11/20/12 | 668,782 | 659,902 | |
Citibank Credit Card Issuance Trust: | |||
Series 2001-B2 Class B2, 5.77% 12/10/08 (d) | 615,000 | 615,385 | |
Series 2002-B1 Class B1, 5.79% 6/25/09 (d) | 655,000 | 656,170 | |
Series 2002-C1 Class C1, 6.15% 2/9/09 (d) | 900,000 | 903,467 | |
Series 2003-C1 Class C1, 6.5888% 4/7/10 (d) | 1,685,000 | 1,710,608 | |
College Loan Corp. Trust I Series 2006-1 Class A7B, 5.11% 4/25/46 (a)(d) | 3,195,000 | 3,195,000 | |
Countrywide Home Loans, Inc.: | |||
Series 2002-6 Class AV1, 5.815% 5/25/33 (d) | 37,045 | 37,094 | |
Series 2003-BC1 Class M2, 7.385% 9/25/32 (d) | 672,497 | 675,205 | |
Series 2003-SD3 Class A1, 5.805% 12/25/32 (a)(d) | 16,368 | 16,431 | |
Series 2004-2 Class M1, 5.885% 5/25/34 (d) | 375,000 | 376,454 | |
Series 2004-3: | |||
Class 3A4, 5.635% 8/25/34 (d) | 2,820,359 | 2,823,923 | |
Class M1, 5.885% 6/25/34 (d) | 100,000 | 100,491 | |
Series 2004-4 Class M2, 5.915% 6/25/34 (d) | 315,000 | 316,646 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Countrywide Home Loans, Inc.: - continued | |||
Series 2005-1: | |||
Class 1AV2, 5.585% 7/25/35 (d) | $ 1,220,000 | $ 1,220,514 | |
Class MV1, 5.785% 7/25/35 (d) | 435,000 | 436,453 | |
Class MV2, 5.825% 7/25/35 (d) | 525,000 | 527,176 | |
Series 2005-AB1 Class A2, 5.595% 8/25/35 (d) | 2,480,000 | 2,483,407 | |
Series 2005-IM1 Class A1, 5.515% 11/25/35 (d) | 386,492 | 386,501 | |
CPS Auto Receivables Trust Series 2006-B Class A2, 5.71% 6/15/16 (a) | 4,000,000 | 4,006,875 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 2003-8 Class A2, 5.775% 4/25/34 (d) | 31,426 | 31,509 | |
Series 2004-FRE1: | |||
Class B1, 7.185% 4/25/34 (d) | 605,000 | 604,991 | |
Class M3, 6.035% 4/25/34 (d) | 41,121 | 41,120 | |
Discover Card Master Trust I: | |||
Series 2003-4 Class B1, 5.6988% 5/16/11 (d) | 550,000 | 552,842 | |
Series 2005-1 Class B, 5.5188% 9/16/10 (d) | 1,580,000 | 1,581,148 | |
Series 2005-3 Class B, 5.5588% 5/15/11 (d) | 2,000,000 | 2,001,659 | |
Series 2006-1 Class B1, 5.5188% 8/16/11 (d) | 1,845,000 | 1,845,425 | |
Series 2006-2 Class B1, 5.5138% 1/17/12 (d) | 2,000,000 | 2,000,000 | |
Fannie Mae guaranteed REMIC pass thru certificates | |||
Class AB1, 5.6867% 5/28/35 (d) | 285,897 | 285,852 | |
Class AB3, 5.8394% 5/28/35 (d) | 119,329 | 119,347 | |
Class AB8, 5.7933% 5/28/35 (d) | 28,648 | 28,644 | |
Fieldstone Mortgage Investment Corp.: | |||
Series 2004-3 Class M5, 6.835% 8/25/34 (d) | 1,500,000 | 1,519,970 | |
Series 2005-2 Class 2A1, 5.505% 12/25/35 (d) | 1,239,438 | 1,239,517 | |
Series 2006-2: | |||
Class 2A2, 5.555% 7/25/36 (d) | 880,000 | 880,000 | |
Class M1, 5.695% 7/25/36 (d) | 1,765,000 | 1,765,000 | |
First Franklin Mortgage Loan Asset Backed Certificates | 169,170 | 169,186 | |
First Franklin Mortgage Loan Trust Series 2004-FF2: | |||
Class M3, 5.935% 3/25/34 (d) | 25,000 | 25,062 | |
Class M4, 6.285% 3/25/34 (d) | 25,000 | 25,140 | |
First Investors Auto Owner Trust Series 2006-A Class A3, 4.93% 2/15/11 (a) | 830,000 | 822,364 | |
Ford Credit Auto Owner Trust Series 2003-B Class B2, 5.7988% 10/15/07 (d) | 650,000 | 650,022 | |
Ford Credit Floorplan Master Owner Trust: | |||
Series 2005-1: | |||
Class A, 5.5188% 5/15/10 (d) | 1,375,000 | 1,374,980 | |
Class B, 5.8088% 5/15/10 (d) | 1,110,000 | 1,111,511 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Ford Credit Floorplan Master Owner Trust: - continued | |||
Series 2006-3: | |||
Class A, 5.5488% 6/15/11 (d) | $ 990,000 | $ 990,309 | |
Class B, 5.8188% 6/15/11 (d) | 1,405,000 | 1,405,439 | |
Fremont Home Loan Trust: | |||
Series 2003-B Class M6, 9.885% 12/25/33 (d) | 312,930 | 313,807 | |
Series 2004-A Class M2, 6.535% 1/25/34 (d) | 341,042 | 342,913 | |
Series 2004-B Class M1, 5.965% 5/25/34 (d) | 205,000 | 206,133 | |
Series 2004-C: | |||
Class 2A2, 5.935% 8/25/34 (d) | 1,000,000 | 1,004,941 | |
Class M1, 6.035% 8/25/34 (d) | 540,000 | 545,900 | |
Class M3, 6.535% 8/25/34 (d) | 1,000,000 | 1,016,224 | |
Series 2004-D Class 3A2, 5.665% 11/25/34 (d) | 167,575 | 167,953 | |
Series 2005-2 Class 2A1, 5.495% 6/25/35 (d) | 271,993 | 271,992 | |
Series 2005-A: | |||
Class 2A2, 5.625% 2/25/35 (d) | 916,019 | 916,704 | |
Class M1, 5.815% 1/25/35 (d) | 225,000 | 226,489 | |
Class M2, 5.845% 1/25/35 (d) | 325,000 | 326,689 | |
Class M3, 5.875% 1/25/35 (d) | 175,000 | 176,229 | |
Class M4, 6.065% 1/25/35 (d) | 125,000 | 126,275 | |
Series 2006-A: | |||
Class M3, 5.765% 5/25/36 (d) | 455,000 | 454,990 | |
Class M4, 5.785% 5/25/36 (d) | 685,000 | 684,984 | |
Class M5, 5.885% 5/25/36 (d) | 365,000 | 365,964 | |
GE Business Loan Trust Series 2003-1 Class A, 5.7988% 4/15/31 (a)(d) | 213,666 | 214,664 | |
GE Capital Credit Card Master Note Trust Series 2005-2 | 925,000 | 925,624 | |
Gracechurch Card Funding PLC: | |||
Series 11 Class C, 5.6488% 11/15/10 (d) | 2,490,000 | 2,490,000 | |
Series 5: | |||
Class B, 5.5988% 8/15/08 (d) | 80,000 | 80,004 | |
Class C, 6.2988% 8/15/08 (d) | 295,000 | 295,063 | |
Series 6 Class B, 5.5588% 2/17/09 (d) | 75,000 | 74,987 | |
Series 8 Class C, 5.6988% 6/15/10 (d) | 2,650,000 | 2,650,000 | |
Series 9: | |||
Class B, 5.5188% 9/15/10 (d) | 485,000 | 485,000 | |
Class C, 5.6788% 9/15/10 (d) | 1,800,000 | 1,802,178 | |
GSAMP Trust: | |||
Series 2002-NC1 Class A2, 5.705% 7/25/32 (d) | 2,606 | 2,639 | |
Series 2003-FM1 Class M1, 6.1981% 3/20/33 (d) | 636,784 | 637,176 | |
Series 2004-AHL Class A2D, 5.745% 8/25/34 (d) | 978,654 | 982,633 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
GSAMP Trust: - continued | |||
Series 2004-FM1: | |||
Class M1, 6.035% 11/25/33 (d) | $ 168,544 | $ 168,541 | |
Class M2, 6.785% 11/25/33 (d) | 135,000 | 136,597 | |
Series 2004-FM2 Class M1, 5.885% 1/25/34 (d) | 249,683 | 249,679 | |
Series 2004-HE1: | |||
Class M1, 5.935% 5/25/34 (d) | 320,000 | 319,993 | |
Class M2, 6.535% 5/25/34 (d) | 150,000 | 151,872 | |
Series 2005-6: | |||
Class A2, 5.595% 6/25/35 (d) | 1,800,000 | 1,798,675 | |
Class M3, 6.035% 6/25/35 (d) | 1,555,000 | 1,552,686 | |
Series 2005-9 Class 2A1, 5.505% 8/25/35 (d) | 1,126,702 | 1,126,141 | |
Series 2005-HE2 Class M, 5.815% 3/25/35 (d) | 1,220,000 | 1,225,568 | |
Series 2005-MTR1 Class A1, 5.525% 10/25/35 (d) | 1,543,591 | 1,543,591 | |
Series 2005-NC1 Class M1, 5.835% 2/25/35 (d) | 1,205,000 | 1,211,318 | |
Series 2006-NC2 Class M4, 5.735% 6/25/36 (d) | 1,541,000 | 1,542,196 | |
Guggenheim Structured Real Estate Funding Ltd. Series 2005-1 Class C, 6.465% 5/25/30 (a)(d) | 2,880,000 | 2,880,000 | |
Harwood Street Funding I LLC Series 2004-1A Class CTFS, 7.3781% 9/20/09 (a)(d) | 1,700,000 | 1,702,387 | |
Home Equity Asset Trust: | |||
Series 2002-3 Class A5, 5.825% 2/25/33 (d) | 14 | 14 | |
Series 2002-5 Class M1, 6.585% 5/25/33 (d) | 165,729 | 165,842 | |
Series 2003-1 Class M1, 6.385% 6/25/33 (d) | 524,845 | 525,267 | |
Series 2003-2 Class M1, 6.265% 8/25/33 (d) | 66,323 | 66,458 | |
Series 2003-3 Class M1, 6.245% 8/25/33 (d) | 320,568 | 321,515 | |
Series 2003-4 Class M1, 6.185% 10/25/33 (d) | 96,601 | 96,904 | |
Series 2003-5: | |||
Class A2, 5.735% 12/25/33 (d) | 24,569 | 24,634 | |
Class M1, 6.085% 12/25/33 (d) | 160,000 | 161,089 | |
Class M2, 7.115% 12/25/33 (d) | 70,000 | 71,188 | |
Series 2003-7: | |||
Class A2, 5.765% 3/25/34 (d) | 109,722 | 109,773 | |
Class M1, 6.035% 3/25/34 (d) | 795,000 | 797,654 | |
Series 2003-8 Class M1, 6.105% 4/25/34 (d) | 260,000 | 262,574 | |
Series 2004-4 Class A2, 5.705% 10/25/34 (d) | 174,129 | 174,417 | |
Series 2004-6 Class A2, 5.735% 12/25/34 (d) | 510,559 | 511,666 | |
Series 2005-1: | |||
Class M1, 5.815% 5/25/35 (d) | 1,270,000 | 1,274,938 | |
Class M2, 5.835% 5/25/35 (d) | 1,410,000 | 1,415,368 | |
Series 2005-2: | |||
Class 2A2, 5.585% 7/25/35 (d) | 1,830,000 | 1,831,223 | |
Class M1, 5.835% 7/25/35 (d) | 890,000 | 893,340 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Household Affinity Credit Card Master Note Trust I | $ 500,000 | $ 499,937 | |
Household Home Equity Loan Trust: | |||
Series 2003-2: | |||
Class A, 5.7081% 9/20/33 (d) | 100,180 | 100,233 | |
Class M, 5.9581% 9/20/33 (d) | 47,513 | 47,546 | |
Series 2004-1 Class M, 5.7869% 9/20/33 (d) | 136,170 | 136,768 | |
Household Mortgage Loan Trust Series 2004-HC1: | |||
Class A, 5.7281% 2/20/34 (d) | 193,833 | 193,968 | |
Class M, 5.8781% 2/20/34 (d) | 117,556 | 117,634 | |
Household Private Label Credit Card Master Note Trust I | 1,000,000 | 1,000,668 | |
HSBC Automotive Trust: | |||
Series 2006-1 Class A2, 5.4% 6/17/09 | 3,410,000 | 3,407,464 | |
Series 2006-2 Class A2, 5.61% 6/17/09 | 1,500,000 | 1,502,051 | |
HSBC Home Equity Loan Trust: | |||
Series 2005-2: | |||
Class M1, 5.8381% 1/20/35 (d) | 268,818 | 269,417 | |
Class M2, 5.8681% 1/20/35 (d) | 200,120 | 200,828 | |
Series 2005-3: | |||
Class A1, 5.5269% 1/20/35 (d) | 601,236 | 601,788 | |
Class M1, 5.6869% 1/20/35 (d) | 353,051 | 353,703 | |
IXIS Real Estate Capital Trust Series 2005-HE1: | |||
Class A1, 5.635% 6/25/35 (d) | 649,165 | 649,604 | |
Class M1, 5.855% 6/25/35 (d) | 550,000 | 551,986 | |
John Deere Owner Trust Series 2006-A Class A2, 5.41% 11/17/08 | 1,805,000 | 1,804,368 | |
Keycorp Student Loan Trust Series 1999-A Class A2, 5.81% 12/27/09 (d) | 225,423 | 226,072 | |
Long Beach Mortgage Loan Trust: | |||
Series 2003-2 Class M1, 6.205% 6/25/33 (d) | 462,597 | 463,452 | |
Series 2003-3 Class M1, 6.135% 7/25/33 (d) | 337,423 | 338,642 | |
Series 2006-6: | |||
Class 2A3, 5.5438% 7/25/36 (d) | 1,435,000 | 1,435,000 | |
Class M4, 5.7538% 7/25/36 (d) | 425,000 | 425,000 | |
Class M5, 5.7838% 7/25/36 (d) | 265,000 | 265,000 | |
Class M6, 5.8438% 7/25/36 (d) | 265,000 | 265,000 | |
MASTR Asset Backed Securities Trust: | |||
Series 2004-FRE1 Class M1, 5.935% 7/25/34 (d) | 485,000 | 485,947 | |
Series 2004-HE1 Class M1, 6.035% 9/25/34 (d) | 685,000 | 690,186 | |
MBNA Credit Card Master Note Trust: | |||
Series 2001-B2 Class B2, 5.7288% 1/15/09 (d) | 1,000,000 | 999,901 | |
Series 2002-B2 Class B2, 5.7488% 10/15/09 (d) | 1,034,000 | 1,036,490 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
MBNA Credit Card Master Note Trust: - continued | |||
Series 2002-B4 Class B4, 5.8688% 3/15/10 (d) | $ 630,000 | $ 633,045 | |
Series 2003-B1 Class B1, 5.8088% 7/15/10 (d) | 1,510,000 | 1,518,348 | |
Series 2003-B2 Class B2, 5.7588% 10/15/10 (d) | 125,000 | 125,667 | |
Series 2003-B3 Class B3, 5.7438% 1/18/11 (d) | 1,550,000 | 1,557,092 | |
Series 2003-B5 Class B5, 5.7388% 2/15/11 (d) | 2,000,000 | 2,011,750 | |
Series 2003-C2 Class C2, 6.9688% 6/15/10 (d) | 2,000,000 | 2,041,099 | |
Series 2005-C3 Class C, 5.6388% 3/15/11 (d) | 2,830,000 | 2,836,502 | |
MBNA Master Credit Card Trust II: | |||
Series 1998-E Class B, 5.8369% 9/15/10 (d) | 200,000 | 200,920 | |
Series 1998-G Class B, 5.7688% 2/17/09 (d) | 500,000 | 500,140 | |
Meritage Mortgage Loan Trust Series 2004-1: | |||
Class M1, 5.885% 7/25/34 (d) | 150,000 | 150,303 | |
Class M2, 5.935% 7/25/34 (d) | 25,000 | 25,058 | |
Class M3, 6.335% 7/25/34 (d) | 50,000 | 50,298 | |
Class M4, 6.485% 7/25/34 (d) | 50,000 | 50,315 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
Series 2004-FM1 Class M2, 6.535% 1/25/35 (d) | 150,000 | 150,785 | |
Series 2004-HE2: | |||
Class A1B, 5.855% 8/25/35 (d) | 284,892 | 286,141 | |
Class A2B, 5.765% 8/25/35 (d) | 759,441 | 761,765 | |
Merrill Lynch Mortgage Ltd. Series 2004-OP1N Class N1, 4.75% 6/25/35 (a) | 4,048 | 4,017 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-HE3 Class M1, 6.485% 12/27/32 (d) | 125,000 | 126,119 | |
Series 2003-NC10 Class M1, 6.065% 10/25/33 (d) | 792,708 | 796,609 | |
Series 2003-NC8 Class M1, 6.085% 9/25/33 (d) | 119,992 | 120,416 | |
Series 2004-HE6 Class A2, 5.725% 8/25/34 (d) | 430,254 | 431,413 | |
Series 2004-NC2 Class M1, 5.935% 12/25/33 (d) | 375,000 | 377,343 | |
Series 2004-NC6 Class A2, 5.725% 7/25/34 (d) | 90,032 | 90,113 | |
Series 2005-1 Class M2, 5.855% 12/25/34 (d) | 570,000 | 573,129 | |
Series 2005-HE1: | |||
Class A3B, 5.605% 12/25/34 (d) | 277,636 | 277,924 | |
Class M1, 5.835% 12/25/34 (d) | 150,000 | 150,975 | |
Class M2, 5.855% 12/25/34 (d) | 385,000 | 387,259 | |
Series 2005-HE2: | |||
Class M1, 5.785% 1/25/35 (d) | 370,000 | 372,361 | |
Class M2, 5.825% 1/25/35 (d) | 265,000 | 266,117 | |
Series 2005-NC1: | |||
Class M1, 5.825% 1/25/35 (d) | 325,000 | 327,217 | |
Class M2, 5.855% 1/25/35 (d) | 325,000 | 325,988 | |
Class M3, 5.895% 1/25/35 (d) | 325,000 | 327,358 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Morgan Stanley ABS Capital I, Inc.: - continued | |||
Series 2006-HE4: | |||
Class M1, 5.665% 6/25/36 (d) | $ 440,000 | $ 440,174 | |
Class M2: | |||
5.685% 6/25/36 (d) | 770,000 | 770,300 | |
5.695% 6/25/36 (d) | 550,000 | 549,987 | |
Class M4, 5.735% 6/25/36 (d) | 1,160,000 | 1,159,973 | |
Series 2006-HE5 Class B1, 6.355% 8/25/36 (d) | 2,415,000 | 2,415,507 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-AM1 Class M1, 6.66% 2/25/32 (d) | 334,289 | 336,741 | |
Series 2001-NC1 Class M2, 6.99% 10/25/31 (d) | 10,752 | 10,762 | |
Series 2001-NC4 Class M1, 6.885% 1/25/32 (d) | 69,227 | 69,294 | |
Series 2002-AM3 Class A3, 5.875% 2/25/33 (d) | 14,114 | 14,148 | |
Series 2002-HE1 Class M1, 5.985% 7/25/32 (d) | 590,000 | 596,834 | |
Series 2002-NC3 Class M1, 6.105% 8/25/32 (d) | 100,000 | 100,124 | |
Series 2002-OP1 Class M1, 6.135% 9/25/32 (d) | 435,350 | 435,640 | |
Navistar Financial Dealer Note Master Trust Series 2005-1 Class A, 5.495% 2/25/13 (d) | 2,050,000 | 2,054,685 | |
New Century Home Equity Loan Trust Series 2005-1: | |||
Class M1, 5.835% 3/25/35 (d) | 595,000 | 597,291 | |
Class M2, 5.865% 3/25/35 (d) | 595,000 | 597,945 | |
Class M3, 5.905% 3/25/35 (d) | 290,000 | 292,165 | |
Nissan Auto Lease Trust: | |||
Series 2003-A Class A3A, 5.5088% 6/15/09 (d) | 45,061 | 45,064 | |
Series 2004-A Class A4A, 5.4388% 6/15/10 (d) | 1,325,000 | 1,325,763 | |
Series 2005-A Class A4, 5.4188% 8/15/11 (d) | 2,210,000 | 2,210,001 | |
NovaStar Home Equity Loan Series 2004-1: | |||
Class M1, 5.835% 6/25/34 (d) | 97,514 | 97,986 | |
Class M4, 6.36% 6/25/34 (d) | 170,000 | 171,374 | |
NovaStar Mortgage Funding Trust Series 2003-3 Class A3, 5.835% 12/25/33 (d) | 57,779 | 57,934 | |
Ocala Funding LLC Series 2006-1A Class A, 6.6669% 3/20/11 (a)(d) | 965,000 | 965,000 | |
Option One Mortgage Loan Trust Series 2003-6 Class M1, 6.035% 11/25/33 (d) | 1,025,000 | 1,033,378 | |
Ownit Mortgage Loan Asset-Backed Certificates Series 2005-3 Class A2A, 5.505% 6/25/36 (d) | 1,066,437 | 1,066,545 | |
Park Place Securities, Inc.: | |||
Series 2004 WWF1 Class M4, 6.485% 1/25/35 (d) | 945,000 | 958,458 | |
Series 2004-WCW1: | |||
Class M1, 6.015% 9/25/34 (d) | 385,000 | 389,714 | |
Class M2, 6.065% 9/25/34 (d) | 160,000 | 161,468 | |
Class M3, 6.635% 9/25/34 (d) | 310,000 | 313,779 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Park Place Securities, Inc.: - continued | |||
Series 2004-WCW1: | |||
Class M4, 6.835% 9/25/34 (d) | $ 435,000 | $ 440,130 | |
Series 2004-WCW2 Class A2, 5.765% 10/25/34 (d) | 267,982 | 268,346 | |
Series 2004-WWF1 Class A5, 5.855% 1/25/35 (d) | 176,386 | 176,772 | |
Series 2005-WCH1: | |||
Class A3B, 5.605% 1/25/35 (d) | 220,853 | 221,079 | |
Class M2, 5.905% 1/25/35 (d) | 1,130,000 | 1,136,212 | |
Class M3, 5.945% 1/25/35 (d) | 425,000 | 428,411 | |
Class M5, 6.265% 1/25/35 (d) | 400,000 | 404,316 | |
Series 2005-WHQ1 Class M7, 6.635% 3/25/35 (d) | 910,000 | 915,268 | |
Providian Master Note Trust: | |||
Series 2005-2 Class C2, 5.8688% 11/15/12 (a)(d) | 2,160,000 | 2,167,042 | |
Series 2006-C1A Class C1, 5.9188% 3/16/15 (a)(d) | 1,575,000 | 1,575,000 | |
Residential Asset Mortgage Products, Inc.: | |||
Series 2004-RS10 Class MII2, 6.635% 10/25/34 (d) | 1,300,000 | 1,326,007 | |
Series 2004-RS6: | |||
Class 2M2, 6.685% 6/25/34 (d) | 250,000 | 249,995 | |
Class 2M3, 6.835% 6/25/34 (d) | 250,000 | 249,995 | |
Series 2005-SP2 Class 1A1, 5.535% 5/25/44 (d) | 837,715 | 837,899 | |
Residential Asset Securities Corp.: | |||
Series 2004-KS10 Class AI2, 5.705% 3/25/29 (d) | 42,163 | 42,260 | |
Series 2005-KS7 Class A1, 5.485% 8/25/35 (d) | 537,341 | 537,392 | |
Salomon Brothers Mortgage Securities VII, Inc. | 1,451 | 1,454 | |
Saxon Asset Securities Trust: | |||
Series 2004-1 Class M1, 5.915% 3/25/35 (d) | 640,000 | 641,014 | |
Series 2004-2 Class MV1, 5.965% 8/25/35 (d) | 415,000 | 416,651 | |
Sharps SP I LLC Net Interest Margin Trust Series 2004-HE3N Class NA, 5.19% 11/25/34 (a) | 282,916 | 281,994 | |
Sierra Timeshare Receivables Fund LLC Series 2006-1A | 4,160,000 | 4,158,569 | |
Specialty Underwriting & Residential Finance: | |||
Series 2003-BC3 Class M1, 6.035% 8/25/34 (d) | 1,000,000 | 1,003,638 | |
Series 2003-BC4 Class M1, 5.985% 11/25/34 (d) | 260,000 | 261,499 | |
Structured Asset Investment Loan Trust: | |||
Series 2003-BC9 Class M1, 6.085% 8/25/33 (d) | 1,135,000 | 1,137,921 | |
Series 2004-8 Class M5, 6.535% 9/25/34 (d) | 290,000 | 294,067 | |
Series 2005-1 Class M4, 6.145% 2/25/35 (a)(d) | 485,000 | 490,687 | |
Structured Asset Securities Corp. Series 2004-GEL1 Class A, 5.745% 2/25/34 (d) | 39,085 | 39,084 | |
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 5.8188% 3/15/11 (a)(d) | 675,000 | 675,000 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Superior Wholesale Inventory Financing Trust XII | $ 980,000 | $ 981,880 | |
Terwin Mortgage Trust: | |||
Series 2003-4HE Class A1, 5.815% 9/25/34 (d) | 56,585 | 56,853 | |
Series 2003-6HE Class A1, 5.855% 11/25/33 (d) | 41,734 | 41,899 | |
Series 2005-14HE Class AF1, 5.525% 8/25/36 (d) | 618,961 | 619,009 | |
Series 2006-9HGA Class A1, 5.451% 10/25/37 (a)(b)(d) | 1,500,000 | 1,499,400 | |
Triad Auto Receivables Owner Trust Series 2006-B Class A2, 5.36% 11/12/09 | 2,585,000 | 2,582,497 | |
Turquoise Card Backed Securities PLC Series 2006-1A Class C, 5.5536% 5/16/11 (a)(d) | 2,165,000 | 2,165,000 | |
UPFC Auto Receivables Trust Series 2006-A Class A2, 5.44% 6/15/09 | 685,000 | 684,371 | |
Washington Mutual Asset Holdings Corp. Series 2006-5 | 2,159,436 | 2,150,764 | |
WFS Financial Owner Trust: | |||
Series 2004-3 Class D, 4.07% 2/17/12 | 303,038 | 299,080 | |
Series 2004-4 Class D, 3.58% 5/17/12 | 276,891 | 271,413 | |
Series 2005-1 Class D, 4.09% 8/15/12 | 290,262 | 285,247 | |
Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (a)(d) | 2,180,000 | 2,180,000 | |
TOTAL ASSET-BACKED SECURITIES (Cost $252,505,307) | 252,873,611 | ||
Collateralized Mortgage Obligations - 15.7% | |||
Private Sponsor - 11.3% | |||
Adjustable Rate Mortgage Trust floater: | |||
Series 2004-2 Class 7A3, 5.785% 2/25/35 (d) | 685,423 | 687,801 | |
Series 2004-4 Class 5A2, 5.785% 3/25/35 (d) | 206,688 | 207,031 | |
Series 2005-1 Class 5A2, 5.715% 5/25/35 (d) | 396,381 | 395,302 | |
Series 2005-10 Class 5A2, 5.705% 1/25/36 (d) | 1,422,145 | 1,423,870 | |
Series 2005-2: | |||
Class 6A2, 5.665% 6/25/35 (d) | 168,083 | 168,346 | |
Class 6M2, 5.865% 6/25/35 (d) | 1,375,000 | 1,383,106 | |
Series 2005-3 Class 8A2, 5.625% 7/25/35 (d) | 1,371,650 | 1,374,279 | |
Series 2005-5 Class 6A2, 5.615% 9/25/35 (d) | 1,109,441 | 1,109,911 | |
Series 2005-8 Class 7A2, 5.665% 11/25/35 (d) | 700,240 | 702,174 | |
American Home Mortgage Assets Trust floater Series 2006-1 Class 2A1, 5.575% 5/25/46 (d) | 1,451,520 | 1,450,977 | |
Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1058% 8/25/35 (d) | 1,951,660 | 1,937,851 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Bear Stearns Alt-A Trust floater: | |||
Series 2005-1 Class A1, 5.665% 1/25/35 (d) | $ 1,619,538 | $ 1,622,178 | |
Series 2005-2 Class 1A1, 5.635% 3/25/35 (d) | 1,130,774 | 1,130,938 | |
Citigroup Mortgage Loan Trust Series 2006-NC1: | |||
Class M4, 5.74% 8/25/36 (d) | 1,205,000 | 1,205,000 | |
Class M5, 5.77% 8/25/36 (d) | 860,000 | 860,000 | |
CS First Boston Mortgage Securities Corp. floater: | |||
Series 2004-AR2 Class 6A1, 5.785% 3/25/34 (d) | 109,804 | 109,958 | |
Series 2004-AR3 Class 6A2, 5.755% 4/25/34 (d) | 54,382 | 54,424 | |
Series 2004-AR5 Class 11A2, 5.755% 6/25/34 (d) | 101,539 | 101,616 | |
Series 2004-AR6 Class 9A2, 5.755% 10/25/34 (d) | 134,619 | 134,860 | |
Series 2004-AR7 Class 6A2, 5.765% 8/25/34 (d) | 236,872 | 237,461 | |
Series 2004-AR8 Class 8A2, 5.765% 9/25/34 (d) | 193,067 | 194,007 | |
CWALT, Inc. floater Series 2005-56 Class 3A1, 5.675% 11/25/35 (d) | 754,178 | 756,673 | |
First Horizon Mortgage pass thru Trust floater Series 2004-FL1 Class 2A1, 5.8719% 12/25/34 (d) | 172,408 | 172,641 | |
Gracechurch Mortgage Funding PLC floater Series 1A: | |||
Class A2B, 5.0981% 10/11/41 (a)(d) | 3,695,000 | 3,695,813 | |
Class CB, 5.3081% 10/11/41 (a)(d) | 260,000 | 260,000 | |
Class DB, 5.4981% 10/11/41 (a)(d) | 1,060,000 | 1,060,000 | |
Granite Master Issuer PLC floater: | |||
Series 2005-1: | |||
Class A3, 5.4938% 12/21/24 (d) | 700,000 | 700,799 | |
Class B1, 5.5438% 12/20/54 (d) | 950,000 | 949,959 | |
Class M1, 5.6438% 12/20/54 (d) | 700,000 | 699,972 | |
Series 2005-2 Class C1, 5.6894% 12/20/54 (d) | 1,200,000 | 1,199,880 | |
Series 2005-4: | |||
Class C1, 5.6194% 12/20/54 (d) | 925,000 | 925,000 | |
Class M2, 5.4694% 12/20/54 (d) | 1,830,000 | 1,830,072 | |
Granite Mortgages PLC floater: | |||
Series 2004-2: | |||
Class 1A2, 5.4838% 6/20/28 (d) | 67,641 | 67,636 | |
Class 1B, 5.5838% 6/20/44 (d) | 13,518 | 13,526 | |
Class 1C, 6.1138% 6/20/44 (d) | 49,372 | 49,422 | |
Class 1M, 5.6938% 6/20/44 (d) | 295,784 | 296,119 | |
Series 2004-3: | |||
Class 1B, 5.5738% 9/20/44 (d) | 95,901 | 95,912 | |
Class 1C, 6.0038% 9/20/44 (d) | 443,542 | 443,923 | |
Class 1M, 5.6838% 9/20/44 (d) | 47,950 | 47,961 | |
GSAMP Trust floater Series 2004-11 Class 2A1, 5.715% 12/20/34 (d) | 1,005,428 | 1,007,118 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Holmes Financing No. 10 PLC floater Series 10A: | |||
Class 1C, 5.7382% 7/15/40 (a)(d) | $ 415,000 | $ 415,000 | |
Class 2A, 5.4982% 7/15/40 (a)(d) | 1,040,000 | 1,040,000 | |
Class 2C, 5.8182% 7/15/40 (a)(d) | 975,000 | 975,000 | |
Holmes Financing No. 8 PLC floater Series 2: | |||
Class A, 5.5869% 4/15/11 (d) | 1,400,000 | 1,401,218 | |
Class B, 5.6769% 7/15/40 (d) | 190,000 | 190,059 | |
Class C, 6.2269% 7/15/40 (d) | 775,000 | 776,211 | |
Homestar Mortgage Acceptance Corp. floater Series 2004-5 Class A1, 5.835% 10/25/34 (d) | 752,610 | 755,514 | |
Impac CMB Trust floater: | |||
Series 2004-11 Class 2A2, 5.755% 3/25/35 (d) | 594,453 | 595,963 | |
Series 2004-6 Class 1A2, 5.775% 10/25/34 (d) | 189,309 | 189,747 | |
Series 2005-1: | |||
Class M1, 5.845% 4/25/35 (d) | 273,170 | 273,709 | |
Class M2, 5.885% 4/25/35 (d) | 483,079 | 483,966 | |
Class M3, 5.915% 4/25/35 (d) | 117,894 | 118,322 | |
Class M4, 6.135% 4/25/35 (d) | 71,887 | 72,155 | |
Class M5, 6.155% 4/25/35 (d) | 71,887 | 72,182 | |
Class M6, 6.205% 4/25/35 (d) | 112,143 | 112,457 | |
Series 2005-2 Class 1A2, 5.695% 4/25/35 (d) | 1,148,589 | 1,151,820 | |
Series 2005-4 Class 1B1, 6.685% 5/25/35 (d) | 492,479 | 493,094 | |
Series 2005-7: | |||
Class M1, 5.865% 11/25/35 (d) | 206,828 | 206,976 | |
Class M2, 5.905% 11/25/35 (d) | 155,121 | 155,554 | |
Class M3, 6.005% 11/25/35 (d) | 775,605 | 777,767 | |
Class M4, 6.045% 11/25/35 (d) | 370,567 | 371,673 | |
Lehman Structured Securities Corp. floater Series 2005-1 | 1,258,584 | 1,260,551 | |
Lehman XS Trust floater Series 2006-GP1 Class A1, 5.475% 5/25/46 (d) | 2,431,376 | 2,431,376 | |
Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.236% 8/25/17 (d) | 539,680 | 545,226 | |
MASTR Adjustable Rate Mortgages Trust floater: | |||
Series 2004-11: | |||
Class 1A4, 5.875% 11/25/34 (d) | 114,714 | 115,301 | |
Class 2A1, 5.765% 11/25/34 (d) | 370,401 | 372,032 | |
Class 2A2, 5.825% 11/25/34 (d) | 81,544 | 81,706 | |
Series 2005-1 Class 1A1, 5.655% 3/25/35 (d) | 519,432 | 520,545 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Merrill Lynch Mortgage Investors, Inc.: | |||
floater: | |||
Series 2003-A: | |||
Class 2A1, 5.775% 3/25/28 (d) | $ 161,005 | $ 161,929 | |
Class 2A2, 5.3738% 3/25/28 (d) | 57,502 | 57,645 | |
Series 2003-B Class A1, 5.725% 4/25/28 (d) | 155,025 | 155,703 | |
Series 2003-D Class A, 5.695% 8/25/28 (d) | 705,789 | 707,053 | |
Series 2003-E Class A2, 5.2938% 10/25/28 (d) | 288,006 | 288,063 | |
Series 2003-F Class A2, 5.42% 10/25/28 (d) | 298,406 | 298,568 | |
Series 2004-A Class A2, 4.34% 4/25/29 (d) | 388,677 | 388,123 | |
Series 2004-B Class A2, 5.5875% 6/25/29 (d) | 397,820 | 397,697 | |
Series 2004-C Class A2, 5.01% 7/25/29 (d) | 503,723 | 503,011 | |
Series 2004-D Class A2, 5.3238% 9/25/29 (d) | 537,729 | 537,741 | |
Series 2004-E Class A2D, 5.6294% 11/25/29 (d) | 565,980 | 567,948 | |
Series 2004-G Class A2, 5.8719% 11/25/29 (d) | 248,639 | 248,849 | |
Series 2005-A Class A2, 5.2138% 2/25/30 (d) | 700,737 | 700,907 | |
Series 2005-B Class A2, 5.5475% 7/25/30 (d) | 755,944 | 756,086 | |
Series 2003-G Class XA1, 1% 1/25/29 (f) | 1,628,696 | 12,662 | |
MortgageIT Trust floater Series 2004-2: | |||
Class A1, 5.755% 12/25/34 (d) | 436,503 | 436,187 | |
Class A2, 5.835% 12/25/34 (d) | 589,604 | 595,024 | |
Opteum Mortgage Acceptance Corp. floater: | |||
Series 2005-3 Class APT, 5.675% 7/25/35 (d) | 1,952,122 | 1,954,258 | |
Series 2005-5 Class 1A1B, 5.585% 12/25/35 (d) | 920,000 | 920,000 | |
Permanent Financing No. 3 PLC floater Series 2 Class C, 6.35% 6/10/42 (d) | 1,205,000 | 1,208,247 | |
Permanent Financing No. 4 PLC floater Series 2 Class C, 6.02% 6/10/42 (d) | 1,145,000 | 1,149,501 | |
Permanent Financing No. 5 PLC floater: | |||
Series 2: | |||
Class A, 5.41% 6/10/11 (d) | 5,000,000 | 5,003,143 | |
Class C, 5.95% 6/10/42 (d) | 390,000 | 391,341 | |
Series 3 Class C, 6.12% 6/10/42 (d) | 1,030,000 | 1,040,300 | |
Permanent Financing No. 6 PLC floater Series 6 Class 2C, 5.75% 6/10/42 (d) | 1,600,000 | 1,602,125 | |
Permanent Financing No. 7 PLC floater Series 7 Class 2C, 5.63% 6/10/42 (d) | 1,140,000 | 1,141,158 | |
Permanent Financing No. 8 PLC floater: | |||
Series 3C, 5.82% 6/10/42 (d) | 910,000 | 910,419 | |
Series 8 Class 2C, 5.7% 6/10/42 (d) | 1,435,000 | 1,435,222 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Residential Asset Mortgage Products, Inc.: | |||
sequential pay: | |||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | $ 206,596 | $ 207,313 | |
Series 2004-SL2 Class A1, 6.5% 10/25/16 | 80,982 | 81,668 | |
Series 2005-AR5 Class 1A1, 4.8362% 9/19/35 (d) | 552,013 | 546,706 | |
Residential Finance LP/Residential Finance Development Corp. floater Series 2003-A: | |||
Class B4, 7.145% 3/10/35 (a)(d) | 94,445 | 95,395 | |
Class B5, 7.695% 3/10/35 (a)(d) | 94,445 | 95,703 | |
Residential Funding Securities Corp.: | |||
Series 2003-RP1 Class A1, 5.885% 11/25/34 (d) | 22,946 | 22,967 | |
Series 2003-RP2 Class A1, 5.8438% 6/25/33 (a)(d) | 122,085 | 122,619 | |
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (a)(f) | 4,780,733 | 16,554 | |
Sequoia Mortgage Trust floater: | |||
Series 2003-5 Class A2, 5.27% 9/20/33 (d) | 272,790 | 272,773 | |
Series 2003-7 Class A2, 5.6419% 1/20/34 (d) | 128,584 | 128,582 | |
Series 2004-1 Class A, 5.8825% 2/20/34 (d) | 189,103 | 189,228 | |
Series 2004-10 Class A4, 5.56% 11/20/34 (d) | 590,168 | 590,639 | |
Series 2004-12 Class 1A2, 5.82% 1/20/35 (d) | 910,595 | 912,892 | |
Series 2004-4 Class A, 5.48% 5/20/34 (d) | 695,180 | 695,009 | |
Series 2004-5 Class A3, 5.5769% 6/20/34 (d) | 259,241 | 259,325 | |
Series 2004-6: | |||
Class A3A, 5.8275% 6/20/35 (d) | 291,509 | 291,851 | |
Class A3B, 5.1069% 7/20/34 (d) | 583,019 | 583,144 | |
Series 2004-7: | |||
Class A3A, 5.265% 8/20/34 (d) | 340,782 | 341,461 | |
Class A3B, 5.49% 7/20/34 (d) | 661,713 | 664,435 | |
Series 2004-8 Class A2, 5.31% 9/20/34 (d) | 1,022,266 | 1,022,727 | |
Series 2005-1 Class A2, 5.8325% 2/20/35 (d) | 492,855 | 493,754 | |
Series 2005-2 Class A2, 5.19% 3/20/35 (d) | 884,660 | 883,635 | |
Structured Asset Securities Corp. floater: | |||
Series 2004-NP1 Class A, 5.785% 9/25/33 (a)(d) | 120,048 | 120,142 | |
Series 2005-AR1 Class B1, 7.385% 9/25/35 (a)(d) | 1,155,000 | 990,413 | |
Thornburg Mortgage Securities Trust floater: | |||
Series 2004-3 Class A, 5.755% 9/25/34 (d) | 1,974,785 | 1,981,992 | |
Series 2005-3 Class A4, 5.655% 10/25/35 (d) | 2,152,569 | 2,148,993 | |
WaMu Mortgage pass thru certificates: | |||
floater: | |||
Series 2005-AR11 Class A1C1, 5.585% 8/25/45 (d) | 895,747 | 895,897 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
WaMu Mortgage pass thru certificates: - continued | |||
floater: | |||
Series 2005-AR13 Class A1C1, 5.575% 10/25/45 (d) | $ 1,333,812 | $ 1,333,947 | |
Series 2005-AR17 Class A1C1, 5.575% 12/25/45 (d) | 1,011,410 | 1,011,601 | |
Series 2005-AR19 Class A1C1, 5.575% 12/25/45 (d) | 1,410,284 | 1,410,946 | |
sequential pay Series 2002-S6 Class A25, 6% 10/25/32 | 123,203 | 122,678 | |
Washington Mutual Mortgage Securities Corp. sequential pay Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 56,799 | 58,231 | |
Wells Fargo Mortgage Backed Securities Trust: | |||
Series 2004-M Class A3, 4.6748% 8/25/34 (d) | 1,368,256 | 1,358,478 | |
Series 2005-AR10 Class 2A2, 4.1096% 6/25/35 (d) | 4,531,302 | 4,435,326 | |
Series 2005-AR12 Class 2A1, 4.3193% 7/25/35 (d) | 2,954,017 | 2,897,960 | |
TOTAL PRIVATE SPONSOR | 97,572,534 | ||
U.S. Government Agency - 4.4% | |||
Fannie Mae: | |||
floater Series 2002-89 Class F, 5.685% 1/25/33 (d) | 102,476 | 102,609 | |
planned amortization class: | |||
Series 1993-207 Class G, 6.15% 4/25/23 | 422,076 | 422,956 | |
Series 2003-24 CLass PB, 4.5% 12/25/12 | 1,847,539 | 1,829,445 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
floater: | |||
Series 2001-38 Class QF, 6.365% 8/25/31 (d) | 933,207 | 959,669 | |
Series 2002-11 Class QF, 5.885% 3/25/32 (d) | 140,519 | 142,239 | |
Series 2002-36 Class FT, 5.885% 6/25/32 (d) | 139,612 | 140,811 | |
Series 2002-49 Class FB, 5.9688% 11/18/31 (d) | 1,410,446 | 1,422,989 | |
Series 2002-60 Class FV, 6.385% 4/25/32 (d) | 304,586 | 314,877 | |
Series 2002-64 Class FE, 5.7188% 10/18/32 (d) | 71,884 | 71,822 | |
Series 2002-68 Class FH, 5.8688% 10/18/32 (d) | 1,181,150 | 1,198,536 | |
Series 2002-74 Class FV, 5.835% 11/25/32 (d) | 92,253 | 92,957 | |
Series 2002-75 Class FA, 6.385% 11/25/32 (d) | 623,941 | 645,328 | |
Series 2003-11: | |||
Class DF, 5.835% 2/25/33 (d) | 73,850 | 74,399 | |
Class EF, 5.835% 2/25/33 (d) | 39,740 | 39,862 | |
Series 2003-122 Class FL, 5.735% 7/25/29 (d) | 512,689 | 515,628 | |
Series 2003-15 Class WF, 5.735% 8/25/17 (d) | 611,239 | 613,830 | |
Series 2004-33 Class FW, 5.785% 8/25/25 (d) | 882,161 | 885,294 | |
Series 2004-54 Class FE, 6.535% 2/25/33 (d) | 508,219 | 511,951 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
U.S. Government Agency - continued | |||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | |||
planned amortization class: | |||
Series 2002-11 Class QB, 5.5% 3/25/15 | $ 213,301 | $ 212,536 | |
Series 2002-28 Class PJ, 6.5% 3/25/31 | 50,460 | 50,270 | |
Series 2002-52 Class PA, 6% 4/25/31 | 9,977 | 9,948 | |
Series 2005-72 Class FG, 5.635% 5/25/35 (d) | 6,595,031 | 6,582,477 | |
Series 2002-50 Class LE, 7% 12/25/29 | 43,082 | 43,211 | |
Series 2004-31 Class IA, 4.5% 6/25/10 (f) | 226,157 | 3,005 | |
Freddie Mac planned amortization class Series 2162 Class PH, 6% 6/15/29 | 1,376,634 | 1,380,978 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
floater: | |||
Series 2406: | |||
Class FP, 6.3488% 1/15/32 (d) | 1,164,721 | 1,196,188 | |
Class PF, 6.3488% 12/15/31 (d) | 1,135,000 | 1,168,134 | |
Series 2410 Class PF, 6.3488% 2/15/32 (d) | 2,340,465 | 2,411,797 | |
Series 2526 Class FC, 5.7688% 11/15/32 (d) | 20,227 | 20,344 | |
Series 2538 Class FB, 5.7688% 12/15/32 (d) | 170,656 | 171,395 | |
Series 2551 Class FH, 5.8188% 1/15/33 (d) | 65,833 | 66,062 | |
Series 2553 Class FB, 5.8688% 3/15/29 (d) | 2,813,108 | 2,832,002 | |
Series 2577 Class FW, 5.8688% 1/15/30 (d) | 1,861,274 | 1,875,770 | |
Series 2861 Class JF, 5.6688% 4/15/17 (d) | 810,184 | 811,482 | |
Series 2994 Class FB, 5.5188% 6/15/20 (d) | 698,199 | 696,348 | |
Series 3066 Class HF, 0% 1/15/34 (d) | 78,930 | 81,672 | |
planned amortization class: | |||
Series 2389 Class DA, 6.2688% 11/15/30 (d) | 1,773,892 | 1,788,914 | |
Series 2395 Class PE, 6% 2/15/30 | 114,483 | 114,339 | |
Series 2543 CLass PM, 5.5% 8/15/18 | 524,597 | 523,401 | |
Series 2614 Class IC, 4.5% 12/15/10 (f) | 848,785 | 12,230 | |
Series 2640 Class GR, 3% 3/15/10 | 150,344 | 149,993 | |
Series 2650 Class FV, 5.7688% 12/15/32 (d) | 1,684,141 | 1,693,004 | |
Series 2676: | |||
Class KN, 3% 12/15/13 | 1,033,721 | 1,018,577 | |
Class QA, 3% 8/15/16 | 207,425 | 206,810 | |
Series 2683 Class UH, 3% 3/15/19 | 1,303,749 | 1,292,960 | |
Series 2748 Class IB, 4.5% 3/15/10 (f) | 417,752 | 3,458 | |
Series 2776 Class UJ, 4.5% 5/15/20 (f) | 338,136 | 8,928 | |
Series 2828 Class JA, 4.5% 1/15/10 | 780,360 | 776,069 | |
Series 1803 Class A, 6% 12/15/08 | 253,438 | 253,641 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
U.S. Government Agency - continued | |||
Ginnie Mae guaranteed REMIC pass thru securities: | |||
floater Series 2001-21 Class FB, 5.7688% 1/16/27 (d) | $ 105,339 | $ 105,961 | |
planned amortization class Series 2002-5 Class PD, 6.5% 5/16/31 | 199,449 | 200,616 | |
TOTAL U.S. GOVERNMENT AGENCY | 37,747,722 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $135,473,039) | 135,320,256 | ||
Commercial Mortgage Securities - 6.8% | |||
Banc of America Large Loan, Inc.: | |||
floater: | |||
Series 2003-BBA2: | |||
Class A3, 5.6888% 11/15/15 (a)(d) | 203,257 | 203,360 | |
Class C, 5.8388% 11/15/15 (a)(d) | 70,000 | 70,146 | |
Class D, 5.9188% 11/15/15 (a)(d) | 110,000 | 110,257 | |
Class F, 6.2688% 11/15/15 (a)(d) | 80,000 | 80,190 | |
Class H, 6.7688% 11/15/15 (a)(d) | 70,000 | 70,192 | |
Class J, 7.3188% 11/15/15 (a)(d) | 70,000 | 70,195 | |
Class K, 7.9688% 11/15/15 (a)(d) | 65,000 | 64,910 | |
Series 2005-BBA6: | |||
Class B, 5.5788% 1/15/19 (a)(d) | 390,000 | 390,154 | |
Class C, 5.6188% 1/15/19 (a)(d) | 400,000 | 400,322 | |
Class D, 5.6688% 1/15/19 (a)(d) | 390,000 | 390,274 | |
Class E, 5.7088% 1/15/19 (a)(d) | 245,000 | 245,234 | |
Class F, 5.7588% 1/15/19 (a)(d) | 165,000 | 165,116 | |
Class G, 5.7888% 1/15/19 (a)(d) | 125,000 | 125,100 | |
Series 2005-BOCA: | |||
Class H, 6.3188% 12/15/16 (a)(d) | 290,000 | 290,105 | |
Class J, 6.4688% 12/15/16 (a)(d) | 140,000 | 140,050 | |
Class K, 6.7188% 12/15/16 (a)(d) | 250,000 | 250,090 | |
Series 2005-ESHA: | |||
Class F, 6.1088% 7/14/20 (a)(d) | 860,000 | 863,676 | |
Class G, 6.2388% 7/14/20 (a)(d) | 585,000 | 587,497 | |
Class H, 6.4588% 7/14/20 (a)(d) | 720,000 | 722,797 | |
Series 2005-MIB1: | |||
Class B, 5.6288% 3/15/22 (a)(d) | 475,000 | 475,307 | |
Class C, 5.6788% 3/15/22 (a)(d) | 200,000 | 200,128 | |
Class D, 5.7288% 3/15/22 (a)(d) | 205,000 | 205,135 | |
Class E, 5.7688% 3/15/22 (a)(d) | 390,000 | 390,257 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Banc of America Large Loan, Inc.: - continued | |||
floater: - continued | |||
Series 2005-MIB1: | |||
Class F, 5.8388% 3/15/22 (a)(d) | $ 200,000 | $ 200,132 | |
Class G, 5.8988% 3/15/22 (a)(d) | 130,000 | 130,086 | |
Series 2006-LAQ: | |||
Class H, 6.025% 2/9/21 (a)(d) | 440,000 | 441,689 | |
Class J, 6.115% 2/9/21 (a)(d) | 320,000 | 321,226 | |
Class K, 6.345% 2/9/21 (a)(d) | 880,000 | 882,794 | |
Series 2005-ESHA Class X1, 0.9161% 7/14/20 (a)(d)(f) | 44,830,000 | 372,331 | |
Series 2006-ESH: | |||
Class A, 6.2288% 7/14/11 (a)(d) | 938,219 | 936,476 | |
Class B, 6.3288% 7/14/11 (a)(d) | 467,860 | 466,559 | |
Class C, 6.4788% 7/14/11 (a)(d) | 936,970 | 933,678 | |
Class D, 7.1088% 7/14/11 (a)(d) | 544,559 | 542,970 | |
Bayview Commercial Asset Trust floater: | |||
Series 2003-1 Class A, 5.965% 8/25/33 (a)(d) | 219,351 | 221,955 | |
Series 2003-2 Class A, 5.965% 12/25/33 (a)(d) | 648,758 | 650,785 | |
Series 2004-1: | |||
Class A, 5.745% 4/25/34 (a)(d) | 383,570 | 384,529 | |
Class B, 7.285% 4/25/34 (a)(d) | 63,928 | 64,568 | |
Series 2004-2: | |||
Class A, 5.815% 8/25/34 (a)(d) | 476,940 | 478,729 | |
Class M1, 5.965% 8/25/34 (a)(d) | 152,770 | 153,534 | |
Series 2004-3: | |||
Class A1, 5.755% 1/25/35 (a)(d) | 688,434 | 690,585 | |
Class A2, 5.805% 1/25/35 (a)(d) | 80,992 | 81,144 | |
Class M1, 5.885% 1/25/35 (a)(d) | 121,488 | 122,172 | |
Class M2, 6.385% 1/25/35 (a)(d) | 80,992 | 81,979 | |
Series 2005-2A: | |||
Class M1, 5.815% 8/25/35 (a)(d) | 171,124 | 171,461 | |
Class M2, 5.865% 8/25/35 (a)(d) | 286,749 | 287,596 | |
Class M3, 5.885% 8/25/35 (a)(d) | 157,249 | 157,713 | |
Class M4, 5.995% 8/25/35 (a)(d) | 143,375 | 143,796 | |
Series 2005-3A: | |||
Class A1, 5.705% 11/25/35 (a)(d) | 782,184 | 784,916 | |
Class M1, 5.825% 11/25/35 (a)(d) | 111,741 | 112,017 | |
Class M2, 5.875% 11/25/35 (a)(d) | 153,643 | 154,176 | |
Class M3, 5.895% 11/25/35 (a)(d) | 139,676 | 140,159 | |
Class M4, 5.985% 11/25/35 (a)(d) | 172,267 | 172,690 | |
Series 2005-4A: | |||
Class A2, 5.775% 1/25/36 (a)(d) | 1,057,859 | 1,059,182 | |
Class B1, 6.785% 1/25/36 (a)(d) | 96,169 | 97,191 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Bayview Commercial Asset Trust floater: - continued | |||
Series 2005-4A: | |||
Class M1, 5.835% 1/25/36 (a)(d) | $ 384,676 | $ 385,758 | |
Class M2, 5.855% 1/25/36 (a)(d) | 96,169 | 96,439 | |
Class M3, 5.885% 1/25/36 (a)(d) | 192,338 | 192,759 | |
Class M4, 5.995% 1/25/36 (a)(d) | 96,169 | 96,590 | |
Class M5, 6.035% 1/25/36 (a)(d) | 96,169 | 96,650 | |
Class M6, 6.085% 1/25/36 (a)(d) | 96,169 | 96,470 | |
Series 2006-2A: | |||
Class A2, 5.665% 7/25/36 (a)(d) | 292,928 | 292,882 | |
Class B1, 6.255% 7/25/36 (a)(d) | 107,407 | 107,390 | |
Class B3, 8.085% 7/25/36 (a)(d) | 175,757 | 175,729 | |
Class M1, 5.695% 7/25/36 (a)(d) | 307,575 | 307,527 | |
Class M2, 5.715% 7/25/36 (a)(d) | 219,696 | 219,662 | |
Class M3, 5.735% 7/25/36 (a)(d) | 170,875 | 170,848 | |
Class M4, 5.805% 7/25/36 (a)(d) | 117,171 | 117,153 | |
Class M5, 5.855% 7/25/36 (a)(d) | 141,582 | 141,560 | |
Class M6, 5.925% 7/25/36 (a)(d) | 224,578 | 224,543 | |
Bear Stearns Commercial Mortgage Securities, Inc. floater Series 2004-BBA3 Class E, 6.0688% 6/15/17 (a)(d) | 960,000 | 960,435 | |
COMM floater Series 2002-FL7: | |||
Class F, 6.6688% 11/15/14 (a)(d) | 1,000,000 | 1,000,781 | |
Class H, 7.6188% 11/15/14 (a)(d) | 150,000 | 150,071 | |
Commercial Mortgage pass thru certificates floater: | |||
Series 2004-HTL1: | |||
Class B, 5.8188% 7/15/16 (a)(d) | 8,103 | 8,108 | |
Class D, 5.9188% 7/15/16 (a)(d) | 17,733 | 17,745 | |
Class E, 6.1188% 7/15/16 (a)(d) | 12,482 | 12,495 | |
Class F, 6.1688% 7/15/16 (a)(d) | 29,623 | 29,659 | |
Class H, 6.6688% 7/15/16 (a)(d) | 87,041 | 87,268 | |
Class J, 6.8188% 7/15/16 (a)(d) | 32,745 | 32,888 | |
Class K, 7.7188% 7/15/16 (a)(d) | 565,375 | 568,832 | |
Series 2005-F10A: | |||
Class B, 5.5988% 4/15/17 (a)(d) | 1,005,000 | 1,005,121 | |
Class C, 5.6388% 4/15/17 (a)(d) | 425,000 | 425,019 | |
Class D, 5.6788% 4/15/17 (a)(d) | 345,000 | 345,143 | |
Class E, 5.7388% 4/15/17 (a)(d) | 260,000 | 260,068 | |
Class F, 5.7788% 4/15/17 (a)(d) | 145,000 | 145,015 | |
Class G, 5.9188% 4/15/17 (a)(d) | 145,000 | 145,016 | |
Class H, 5.9888% 4/15/17 (a)(d) | 145,000 | 145,042 | |
Class I, 6.2188% 4/15/17 (a)(d) | 50,000 | 50,016 | |
Class MOA3, 5.6688% 3/15/20 (a)(d) | 650,000 | 650,069 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Commercial Mortgage pass thru certificates floater: - continued | |||
Series 2005-FL11: | |||
Class B, 5.6188% 11/15/17 (a)(d) | $ 354,841 | $ 354,856 | |
Class C, 5.6688% 11/15/17 (a)(d) | 709,681 | 709,511 | |
Class D, 5.7088% 11/15/17 (a)(d) | 123,011 | 123,121 | |
Class E, 5.7588% 11/15/17 (a)(d) | 189,248 | 189,278 | |
Class F, 5.8188% 11/15/17 (a)(d) | 170,324 | 170,350 | |
Class G, 5.8688% 11/15/17 (a)(d) | 269,679 | 269,660 | |
Series 2006-CN2A Class AJFL, 5.5944% 2/5/19 (a)(d) | 1,135,000 | 1,139,103 | |
CS First Boston Mortgage Securities Corp. floater: | |||
Series 2004-FL1 Class B, 5.8188% 5/15/14 (a)(d) | 306,618 | 306,697 | |
Series 2004-TF2A Class E, 5.7888% 11/15/19 (a)(d) | 640,000 | 640,260 | |
Series 2004-TFL1: | |||
Class E, 5.9188% 2/15/14 (a)(d) | 200,000 | 200,094 | |
Class F, 5.9688% 2/15/14 (a)(d) | 175,000 | 175,119 | |
Class G, 6.2188% 2/15/14 (a)(d) | 125,000 | 125,052 | |
Class H, 6.4688% 2/15/14 (a)(d) | 100,000 | 100,055 | |
Class J, 6.7688% 2/15/14 (a)(d) | 50,000 | 50,064 | |
Series 2005-CN2A Class A1J, 5.6988% | 2,165,000 | 2,166,055 | |
Series 2005-TF2A Class F, 5.8688% | 230,000 | 230,093 | |
Series 2005-TF3A Class A2, 5.6488% 1 | 2,775,000 | 2,778,489 | |
Series 2005-TFLA: | |||
Class C, 5.6088% 2/15/20 (a)(d) | 800,000 | 800,431 | |
Class E, 5.6988% 2/15/20 (a)(d) | 560,000 | 560,533 | |
Class F, 5.7488% 2/15/20 (a)(d) | 250,000 | 250,184 | |
Class G, 5.8888% 2/15/20 (a)(d) | 70,000 | 70,045 | |
Class H, 6.1188% 2/15/20 (a)(d) | 100,000 | 100,074 | |
CSMC Commercial Mortgage Trust floater | |||
Class D, 5.6488% 4/15/21 (a)(d) | 300,000 | 300,490 | |
Class E, 5.6988% 4/15/21 (a)(d) | 300,000 | 300,366 | |
Class G, 5.7888% 4/15/21 (a)(d) | 300,000 | 300,267 | |
Class H, 6.0988% 4/15/21 (a)(d) | 300,000 | 300,290 | |
Class J, 6.1688% 4/15/21 (a)(d) | 200,000 | 200,226 | |
Class K, 6.5688% 4/15/21 (a)(d) | 1,005,000 | 1,005,804 | |
Freddie Mac Multi-class participation certificates | 1,436,331 | 1,480,619 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Greenwich Capital Commercial Funding Corp. floater | |||
Class H-AON: | |||
6.3344% 10/5/20 (a)(d) | $ 180,000 | $ 180,023 | |
6.5844% 10/5/20 (a)(d) | 220,000 | 220,028 | |
Class M-AON, 6.8344% 10/5/20 (a)(d) | 215,000 | 215,027 | |
Class N-AON, 7.1844% 10/5/20 (a)(d) | 550,000 | 550,069 | |
GS Mortgage Securities Corp. II: | |||
floater: | |||
Series 2002-FL5A Class B, 5.6888% 6/16/14 (a)(d) | 2,075,000 | 2,074,847 | |
Series 2005-FL7A Class A1, 5.4944% 11/6/19 (a)(d) | 29,397 | 29,397 | |
Series 2006-FL8: | |||
Class C, 5.61% 6/6/20 (a)(d) | 145,000 | 145,000 | |
Class D, 5.65% 6/6/20 (a)(d) | 405,000 | 405,000 | |
Class E, 5.74% 6/6/20 (a)(d) | 800,000 | 800,000 | |
Class F, 5.81% 6/6/20 (a)(d) | 575,000 | 575,000 | |
Guggenheim Structure Real Estate Funding Ltd. Series 2006-3: | |||
Class B, 5.8% 9/25/46 (a)(d) | 450,000 | 450,000 | |
Class C, 5.95% 9/25/46 (a)(d) | 1,150,000 | 1,150,000 | |
Hilton Hotel Pool Trust floater Series 2000-HLTA Class A2, 5.7463% 10/3/15 (a)(d) | 3,000,000 | 3,022,563 | |
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2003-LLFA Class K1, 7.9088% 12/16/14 (a)(d) | 435,000 | 434,559 | |
Merrill Lynch Mortgage Trust Series 2005-GGP1 Class X, 0.1416% 11/15/10 (a)(d)(f) | 417,400,000 | 361,761 | |
Morgan Stanley Capital I, Inc.: | |||
floater Series 2005-XLF: | |||
Class B, 5.5788% 8/15/19 (a)(d) | 935,000 | 934,635 | |
Class C, 5.6088% 8/15/19 (a)(d) | 75,000 | 74,914 | |
Class D, 5.6288% 8/15/19 (a)(d) | 270,000 | 269,692 | |
Class E, 5.6488% 8/15/19 (a)(d) | 245,000 | 244,904 | |
Class F, 5.6888% 8/15/19 (a)(d) | 170,000 | 169,934 | |
Class G, 5.7388% 8/15/19 (a)(d) | 120,000 | 119,987 | |
Class H, 5.7588% 8/15/19 (a)(d) | 100,000 | 99,961 | |
Class J, 5.8288% 8/15/19 (a)(d) | 75,000 | 74,964 | |
Series 2006-XLF: | |||
Class C, 6.6% 7/15/19 (a)(d) | 570,000 | 570,000 | |
Class D, 5.65% 7/15/19 (a)(d) | 415,000 | 415,000 | |
Class E, 5.69% 7/15/19 (a)(d) | 345,000 | 345,000 | |
Class F, 5.72% 7/15/19 (a)(d) | 535,000 | 535,000 | |
Class G, 5.72% 7/15/19 (a)(d) | 255,000 | 255,000 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
STRIPS III Ltd./STRIPS III Corp. floater Series 2004-1A Class A, 5.88% 3/24/18 (a)(d) | $ 396,989 | $ 397,733 | |
Wachovia Bank Commercial Mortgage Trust floater | |||
Class A2, 5.6188% 10/15/17 (a)(d) | 990,000 | 990,290 | |
Class B, 5.6688% 10/15/17 (a)(d) | 200,000 | 200,038 | |
Class D, 5.7988% 10/15/17 (a)(d) | 400,000 | 400,277 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $58,663,250) | 58,817,850 | ||
Certificates of Deposit - 2.8% | |||
BNP Paribas SA yankee 5.045% 2/21/07 | 4,000,000 | 3,987,651 | |
Deutsche Bank AG yankee 5.045% 2/21/07 | 4,000,000 | 3,987,651 | |
HBOS Treasury Services PLC yankee 5.04% 2/21/07 | 4,000,000 | 3,987,768 | |
Rabobank Nederland Coop. Central yankee 5.01% | 4,000,000 | 3,987,150 | |
Royal Bank of Scotland PLC yankee 5.04% 2/21/07 | 4,000,000 | 3,987,544 | |
Societe Generale euro 5.05% 2/21/07 | 4,000,000 | 3,987,826 | |
TOTAL CERTIFICATES OF DEPOSIT (Cost $23,999,269) | 23,925,590 | ||
Commercial Paper - 0.2% | |||
Rockies Express Pipeline LLC 5.7422% 9/20/06 | 2,000,000 | 1,984,603 | |
Fixed-Income Funds - 27.6% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 2,390,073 | 237,764,502 | |
Cash Equivalents - 2.8% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at 5.3%, dated 7/31/06 due 8/1/06 | $ 23,842,508 | $ 23,839,000 | |
TOTAL INVESTMENT PORTFOLIO - 101.0% (Cost $870,404,138) | 870,466,476 | ||
NET OTHER ASSETS - (1.0)% | (8,973,233) | ||
NET ASSETS - 100% | $ 861,493,243 |
Futures Contracts | |||||
Expiration Date | Underlying | Unrealized Appreciation/ | |||
Purchased | |||||
Eurodollar Contracts | |||||
103 Eurodollar 90 Day Index Contracts | Sept. 2006 | $ 101,588,900 | $ (321,000) | ||
103 Eurodollar 90 Day Index Contracts | Dec. 2006 | 101,596,625 | (251,475) | ||
103 Eurodollar 90 Day Index Contracts | March 2007 | 101,619,800 | (158,887) | ||
103 Eurodollar 90 Day Index Contracts | June 2007 | 101,648,125 | 9,638 | ||
103 Eurodollar 90 Day Index Contracts | Sept. 2007 | 101,666,150 | 70,542 | ||
TOTAL EURODOLLAR CONTRACTS | $ (651,182) | ||||
Sold | |||||
Eurodollar Contracts | |||||
5 Eurodollar 90 Day Index Contracts | Dec. 2007 | 4,935,500 | 8,955 | ||
5 Eurodollar 90 Day Index Contracts | March 2008 | 4,935,500 | 8,780 | ||
4 Eurodollar 90 Day Index Contracts | June 2008 | 3,948,200 | 7,859 | ||
3 Eurodollar 90 Day Index Contracts | Sept. 2008 | 2,960,963 | 5,926 | ||
2 Eurodollar 90 Day Index Contracts | Dec. 2008 | 1,973,775 | 3,367 | ||
1 Eurodollar 90 Day Index Contracts | March 2009 | 986,825 | 1,696 | ||
TOTAL EURODOLLAR CONTRACTS | 36,583 | ||||
$ (614,599) | |||||
Swap Agreements | |||||
Expiration Date | Notional Amount | Value | |||
Credit Default Swaps | |||||
Receive monthly notional amount multiplied by 3.3% and pay to Morgan Stanley, Inc. upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R11 Class M9, 8.885% 11/25/34 | Dec. 2034 | $ 275,000 | $ 4,749 | ||
Receive from Citibank, upon default event of DaimlerChrysler NA Holding Corp., par value of the notional amount of DaimlerChrysler NA Holding Corp. 6.5% 11/15/13, and pay quarterly notional amount multiplied by .8% | June 2007 | 1,000,000 | (6,580) | ||
Receive monthly notional amount multiplied by 1.9% and pay Morgan Stanley, Inc., upon default event of Morgan Stanley ABS Capital, par value of the notional amount of Morgan Stanley ABS Capital I Series 2006-HE3 Class B3, 7.2225% 4/25/36 | May 2036 | 500,000 | (2,967) | ||
Receive monthly notional amount multiplied by 2.39% and pay UBS upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.73% 2/25/34 | March 2034 | 1,055,000 | 2,496 | ||
Receive monthly notional amount multiplied by 2.4% and pay Deutsche Bank upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.2288% 1/25/34 | Feb. 2034 | 305,732 | 405 | ||
Receive monthly notional amount multiplied by 2.7% and pay Morgan Stanley, Inc. upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M9, 6.41% 5/25/35 | June 2035 | 845,000 | (2,738) | ||
Receive monthly notional amount multiplied by 2.79% and pay Merrill Lynch, Inc. upon default event of New Century Home Equity Loan Trust, par value of the notional amount of New Century Home Equity Loan Trust Series 2004-4 Class M9, 7.0788% 2/25/35 | March 2035 | 610,000 | 5,491 | ||
Receive quarterly notional amount multiplied by .20% and pay Merrill Lynch, Inc. upon default event of American Transmission Co. LLC, par value of the notional amount of American Transmission Co. LLC 7.125% 3/15/11 | May 2007 | 1,315,000 | 1,447 | ||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Credit Default Swaps - continued | |||||
Receive quarterly notional amount multiplied by .26% and pay Morgan Stanley, Inc. upon default event of Amerada Hess Corp., par value of the notional amount of Amerada Hess Corp. 6.65% 8/15/11 | March 2007 | $ 1,650,000 | $ 2,525 | ||
Receive quarterly notional amount multiplied by .28% and pay Morgan Stanley, Inc. upon default event of Amerada Hess Corp., par value of the notional amount of Amerada Hess 6.65% 8/15/11 | March 2007 | 2,000,000 | 3,280 | ||
Receive quarterly notional amount multiplied by .285% and pay Deutsche Bank upon default event of ConocoPhillips, par value of the notional amount of ConocoPhillips 4.75% 10/15/12 | Sept. 2011 | 2,200,000 | (3,036) | ||
Receive quarterly notional amount multiplied by .30% and pay Deutsche Bank upon default event of Entergy Corp., par value of the notional amount of Entergy Corp. 7.75% 12/15/09 | March 2008 | 1,390,000 | 1,904 | ||
Receive quarterly notional amount multiplied by .30% and pay Goldman Sachs upon default event of Entergy Corp., par value of the notional amount of Entergy Corp. 7.75% 12/15/09 | March 2008 | 1,015,000 | 1,391 | ||
Receive quarterly notional amount multiplied by .48% and pay Goldman Sachs upon default event of TXU Corp., par value of the notional amount of TXU Energy Co. LLC 7% 3/15/13 | Sept. 2008 | 1,840,000 | 8,869 | ||
Receive quarterly notional amount multiplied by .78% and pay Goldman Sachs upon default event of TXU Corp., par value of the notional amount of TXU Energy Co. LLC 7% 3/15/13 | Dec. 2008 | 1,750,000 | 20,265 | ||
Receive semi-annually notional amount multiplied by .42% and pay Credit Suisse First Boston upon default event of Russian Federation, par value of the notional amount of Russian Federation 5% 3/31/30 | June 2007 | 1,900,000 | 2,261 | ||
TOTAL CREDIT DEFAULT SWAPS | 19,650,732 | 39,762 | |||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Total Return Swaps | |||||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Oct. 2006 | $ 5,655,000 | $ 2,164 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Citibank | Nov. 2006 | 6,800,000 | 3,243 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Jan. 2007 | 4,900,000 | 2,048 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor plus 20 basis points and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Jan. 2007 | 3,000,000 | 705 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor plus 10 basis points and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Nov. 2006 | 8,900,000 | 4,147 | ||
TOTAL TOTAL RETURN SWAPS | 29,255,000 | 12,307 | |||
$ 48,905,732 | $ 52,069 |
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 $114,788,836 or 13.3% 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 $346,206. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited list of holdings for each fixed-income central fund, as of the investing fund's report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central fund's financial statements, which are not covered by the investing fund's Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $2,196,449 or 0.3% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Aspetuck Trust 5.7869% 10/16/06 | 12/14/05 | $ 2,195,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Ultra-Short Central Fund | $ 13,482,875 |
Additional information regarding the fund's fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows: |
Fund | Value, beginning of period | Purchases | Sales | Value,end of period | % ownership, |
Fidelity Ultra-Short Central Fund | $ 288,274,676 | $ - | $ 50,500,019 | $ 237,764,502 | 3.1% |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 85.1% |
United Kingdom | 8.4% |
France | 1.8% |
Cayman Islands | 1.1% |
Others (individually less than 1%) | 3.6% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $1,917,431 all of which will expire on July 31, 2014. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $23,839,000) - Unaffiliated issuers (cost $632,873,000) | $ 632,701,974 | |
Affiliated Central Funds (cost $237,531,138) | 237,764,502 | |
Total Investments (cost $870,404,138) | $ 870,466,476 | |
Cash | 916 | |
Receivable for swap agreements | 7,371 | |
Receivable for fund shares sold | 1,306,558 | |
Interest receivable | 3,522,720 | |
Receivable for daily variation on futures contracts | 10,087 | |
Swap agreements, at value | 52,069 | |
Other receivables | 155 | |
Total assets | 875,366,352 | |
Liabilities | ||
Payable for investments purchased | $ 10,689,698 | |
Delayed delivery | 1,499,415 | |
Payable for fund shares redeemed | 940,414 | |
Distributions payable | 407,013 | |
Accrued management fee | 238,511 | |
Distribution fees payable | 1,088 | |
Other affiliated payables | 96,970 | |
Total liabilities | 13,873,109 | |
Net Assets | $ 861,493,243 | |
Net Assets consist of: | ||
Paid in capital | $ 863,673,830 | |
Undistributed net investment income | 106,939 | |
Accumulated undistributed net realized gain (loss) on investments | (1,787,334) | |
Net unrealized appreciation (depreciation) on investments | (500,192) | |
Net Assets | $ 861,493,243 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 10.02 | |
Maximum offering price per share (100/98.50 of $10.02) | $ 10.17 | |
Class T: | $ 10.02 | |
Maximum offering price per share (100/98.50 of $10.02) | $ 10.17 | |
Ultra-Short Bond: | $ 10.02 | |
Institutional Class: | $ 10.02 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Interest | $ 28,826,439 | |
Income from affiliated Central Funds | 13,482,875 | |
Total income | 42,309,314 | |
Expenses | ||
Management fee | $ 2,887,734 | |
Transfer agent fees | 905,122 | |
Distribution fees | 10,051 | |
Fund wide operations fee | 254,545 | |
Independent trustees' compensation | 3,655 | |
Miscellaneous | 1,858 | |
Total expenses before reductions | 4,062,965 | |
Expense reductions | (5,737) | 4,057,228 |
Net investment income | 38,252,086 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | (134,456) | |
Affiliated Central Funds | (68,282) | |
Futures contracts | (1,229,016) | |
Swap agreements | 325,332 | |
Total net realized gain (loss) | (1,106,422) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 82,562 | |
Futures contracts | 9,496 | |
Swap agreements | (15,516) | |
Total change in net unrealized appreciation (depreciation) | 76,542 | |
Net gain (loss) | (1,029,880) | |
Net increase (decrease) in net assets resulting from operations | $ 37,222,206 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income | $ 38,252,086 | $ 18,477,979 |
Net realized gain (loss) | (1,106,422) | (526,929) |
Change in net unrealized appreciation (depreciation) | 76,542 | (889,284) |
Net increase (decrease) in net assets resulting | 37,222,206 | 17,061,766 |
Distributions to shareholders from net investment income | (38,283,502) | (18,371,771) |
Distributions to shareholders from net realized gain | - | (213,972) |
Total distributions | (38,283,502) | (18,585,743) |
Share transactions - net increase (decrease) | (51,227,531) | 334,021,363 |
Redemption fees | 28,307 | 34,215 |
Total increase (decrease) in net assets | (52,260,520) | 332,531,601 |
Net Assets | ||
Beginning of period | 913,753,763 | 581,222,162 |
End of period (including undistributed net investment income of $106,939 and undistributed net investment income of $26,805, respectively) | $ 861,493,243 | $ 913,753,763 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 H |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income E | .400 | .223 | .013 |
Net realized and unrealized gain (loss) | (.009) | (.026) | .011 |
Total from investment operations | .391 | .197 | .024 |
Distributions from net investment income | (.401) | (.214) | (.014) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.401) | (.217) | (.014) |
Redemption fees added to paid in capital E, J | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C, D | 3.97% | 1.98% | .24% |
Ratios to Average Net Assets F, I | |||
Expenses before reductions | .70% | .78% | .85% A |
Expenses net of fee waivers, if any | .70% | .70% | .70% A |
Expenses net of all reductions | .70% | .70% | .70% A |
Net investment income | 4.00% | 2.23% | 1.11% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 4,553 | $ 2,557 | $ 316 |
Portfolio turnover rate G | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J 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
Years ended July 31, | 2006 | 2005 | 2004 H |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income E | .404 | .222 | .013 |
Net realized and unrealized gain (loss) | (.011) | (.025) | .010 |
Total from investment operations | .393 | .197 | .023 |
Distributions from net investment income | (.403) | (.214) | (.013) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.403) | (.217) | (.013) |
Redemption fees added to paid in capital E, J | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C, D | 4.00% | 1.98% | .23% |
Ratios to Average Net Assets F, I | |||
Expenses before reductions | .68% | .77% | .86% A |
Expenses net of fee waivers, if any | .68% | .70% | .70% A |
Expenses net of all reductions | .68% | .70% | .70% A |
Net investment income | 4.03% | 2.23% | 1.11% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 4,624 | $ 4,044 | $ 356 |
Portfolio turnover rate G | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Ultra-Short Bond
Years ended July 31, | 2006 | 2005 | 2004 | 2003 G |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.02 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income D | .427 | .241 | .122 | .137 |
Net realized and unrealized gain (loss) | (.011) | (.026) | .029 | .052 |
Total from investment operations | .416 | .215 | .151 | .189 |
Distributions from net investment income | (.426) | (.232) | (.122) | (.173) |
Distributions from net realized gain | - | (.003) | - | - |
Total distributions | (.426) | (.235) | (.122) | (.173) |
Redemption fees added to paid in capital D | - I | - I | .001 | .004 |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 | $ 10.02 |
Total Return B, C | 4.23% | 2.16% | 1.52% | 1.94% |
Ratios to Average Net Assets E, H | ||||
Expenses before reductions | .45% | .58% | .62% | .70% A |
Expenses net of fee waivers, if any | .45% | .53% | .55% | .55% A |
Expenses net of all reductions | .45% | .53% | .55% | .55% A |
Net investment income | 4.26% | 2.41% | 1.21% | 1.50% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 850,329 | $ 906,644 | $ 580,174 | $ 225,203 |
Portfolio turnover rate F | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G For the period August 29, 2002 (commencement of operations) to July 31, 2003.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 G |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income D | .420 | .240 | .015 |
Net realized and unrealized gain (loss) | (.008) | (.026) | .010 |
Total from investment operations | .412 | .214 | .025 |
Distributions from net investment income | (.422) | (.231) | (.015) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.422) | (.234) | (.015) |
Redemption fees added to paid in capital D, I | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C | 4.19% | 2.15% | .25% |
Ratios to Average Net Assets E, H | |||
Expenses before reductions | .49% | .58% | .67% A |
Expenses net of fee waivers, if any | .49% | .55% | .55% A |
Expenses net of all reductions | .49% | .55% | .55% A |
Net investment income | 4.22% | 2.38% | 1.26% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 1,987 | $ 509 | $ 376 |
Portfolio turnover rate F | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I 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, 2006
1. Significant Accounting Policies.
Fidelity Ultra-Short Bond Fund (the Fund) is a non-diversified 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, Ultra-Short Bond (the original class), 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 Fund may invest in Fidelity Ultra-Short Central Fund (Ultra-Short Central Fund) referred to as the Central Fund, which is an open-end investment company available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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, which are also consistently followed by the Central Fund:
Security Valuation. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open-end mutual funds, including the Central Fund, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
Annual Report
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions, including the Fund's investment activity in the Central Fund, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income and distributions from the Central Fund are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing 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. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures transactions, swap agreements, market discount, financing transactions, capital loss carryforwards and losses deferred due to excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,312,725 | |
Unrealized depreciation | (1,126,965) | |
Net unrealized appreciation (depreciation) | 185,760 | |
Undistributed ordinary income | 324,954 | |
Capital loss carryforward | (1,917,431) | |
Cost for federal income tax purposes | $ 870,280,716 |
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 38,283,502 | $ 18,371,770 |
Long-term Capital Gains | - | 213,973 |
Total | $ 38,283,502 | $ 18,585,743 |
Short-Term Trading (Redemption) Fees. Shares 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 FMR, are retained by the Fund and accounted for as an addition to paid in capital.
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
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
Annual Report
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
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 and to fluctuations in interest rates. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. 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.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Total return swaps are agreements to exchange the return generated by one instrument or index 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, a fund will receive a payment from the counterparty. To the extent it is less, a 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 either it or its counterparty act as guarantors. By acting as the guarantor of a swap, a fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Periodic payments and premiums received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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 a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."
Mortgage Dollar Rolls. 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
Annual Report
2. Operating Policies - continued
Mortgage Dollar Rolls - continued
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, a 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 $296,940,910 and $234,644,796, 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 .20% of the Fund's average net assets and a group fee rate that averaged ..12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.
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% | $ 4,724 | $ 432 |
Class T | 0% | .15% | 5,327 | 2,729 |
$ 10,051 | $ 3,161 |
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
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 range from .75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 2,219 |
Class T | 674 |
$ 2,893 |
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 Ultra-Short Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Ultra-Short Bond shares. FIIOC receives 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. FSC receives an asset-based fee of .10% of Ultra-Short Bond's average net assets. 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 | $ 6,362 | .20 |
Class T | 6,322 | .18 |
Ultra-Short Bond | 891,306 | .10 |
Institutional Class | 1,132 | .14 |
$ 905,122 |
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Ultra-Short Central Fund, managed by Fidelity Investments Money Management, Inc. (FIMM), which seeks to obtain a high level of current income consistent with preservation of capital by investing in U.S. dollar denominated money market and investment-grade debt securities.
The Fund's Schedule of Investments lists the Central Fund as an investment of the Fund but does not include the underlying holdings of the Central Fund. Based on its investment objectives, the Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the Central Fund and the Fund.
A complete unaudited list of holdings for the Central Fund, as of the Fund's report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the Fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the Central Fund financial statements, which are not covered by this Fund's Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
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, which amounts to $1,858 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $2,662. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Ultra-Short Bond | $ 3,075 |
Annual Report
Notes to Financial Statements - continued
7. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
8. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | ||
2006 | 2005 | |
From net investment income | ||
Class A | $ 126,997 | $ 41,869 |
Class T | 141,086 | 50,050 |
Ultra-Short Bond | 37,977,353 | 18,257,386 |
Institutional Class | 38,066 | 22,466 |
Total | $ 38,283,502 | $ 18,371,771 |
From net realized gain | ||
Class A | $ - | $ 407 |
Class T | - | 503 |
Ultra-Short Bond | - | 212,634 |
Institutional Class | - | 428 |
Total | $ - | $ 213,972 |
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2006 | 2005 | 2006 | 2005 | |
Class A | ||||
Shares sold | 574,958 | 314,954 | $ 5,763,274 | $ 3,163,548 |
Reinvestment of distributions | 10,043 | 3,804 | 100,637 | 38,189 |
Shares redeemed | (385,505) | (95,385) | (3,863,258) | (957,951) |
Net increase (decrease) | 199,496 | 223,373 | $ 2,000,653 | $ 2,243,786 |
Class T | ||||
Shares sold | 357,260 | 597,602 | $ 3,579,216 | $ 6,002,298 |
Reinvestment of distributions | 13,205 | 4,137 | 132,333 | 41,523 |
Shares redeemed | (312,176) | (234,046) | (3,129,874) | (2,350,424) |
Net increase (decrease) | 58,289 | 367,693 | $ 581,675 | $ 3,693,397 |
Annual Report
9. Share Transactions - continued
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2006 | 2005 | 2006 | 2005 | |
Ultra-Short Bond | ||||
Shares sold | 39,226,057 | 63,063,839 | $ 393,000,678 | $ 633,315,534 |
Reinvestment of distributions | 3,400,651 | 1,643,763 | 34,072,273 | 16,499,718 |
Shares redeemed | (48,147,604) | (32,055,308) | (482,361,462) | (321,868,107) |
Net increase (decrease) | (5,520,896) | 32,652,294 | $ (55,288,511) | $ 327,947,145 |
Institutional Class | ||||
Shares sold | 190,577 | 296,985 | $ 1,908,425 | $ 2,986,442 |
Reinvestment of distributions | 756 | 2,113 | 7,577 | 21,221 |
Shares redeemed | (43,621) | (285,834) | (437,350) | (2,870,628) |
Net increase (decrease) | 147,712 | 13,264 | $ 1,478,652 | $ 137,035 |
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, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the years in the period then ended, 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 2006
Annual Report
Trustees and Officers
The Trustees , Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 345 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate. Mr. Gamper oversees 292 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board 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.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Ultra-Short Bond (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003-present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). 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.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 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). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
Robert M. Gates (63) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). 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-present), and Brinker International (restaurant management, 2003-present). 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). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
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-present). 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 (62) | |
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. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
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 Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) 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 (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman Emeritus 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), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). 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. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Member and Executive Officers:
Correspondence intended for Mr. Keyes 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 | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Income Fund. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2006 Vice President of Ultra-Short Bond. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
David L. Murphy (58) | |
Year of Election or Appointment: 2005 Vice President of Ultra-Short Bond. Mr. Murphy also serves as Vice President of Fidelity's Money Market Funds (2002-present), certain Asset Allocation Funds (2003-present), Fixed-Income Funds (2005-present), and Balanced Funds (2005-present). He serves as Senior Vice President (2000-present) and Head (2004-present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of Fidelity Investments Money Management, Inc. (2003-present) and an Executive Vice President of FMR (2005-present). Previously, Mr. Murphy served as Money Market Group Leader (2002-2004), Bond Group Leader (2000-2002), and Vice President of Fidelity's Taxable Bond Funds (2000-2002) and Fidelity's Municipal Bond Funds (2001-2002). | |
Thomas J. Silvia (45) | |
Year of Election or Appointment: 2005 Vice President of Ultra-Short Bond. Mr. Silvia also serves as Vice President of Fidelity's Fixed-Income Funds (2005-present), certain Balanced Funds (2005-present), certain Asset Allocation Funds (2005-present), and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed-Income Division (2005-present). Previously, Mr. Silvia served as Director of Fidelity's Taxable Bond portfolio managers (2002-2004) and a portfolio manager in the Bond Group (1997-2004). | |
Andrew Dudley (41) | |
Year of Election or Appointment: 2002 Vice President of Ultra-Short Bond. Mr. Dudley also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Dudley worked as a portfolio manager. | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 2002 Secretary of Ultra-Short Bond. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary ofFidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of Ultra-Short Bond. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of Ultra-Short Bond. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) 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. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Ultra-Short Bond. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Ultra-Short Bond. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
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-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Ultra-Short Bond. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
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). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Ultra-Short Bond. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). 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). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Ultra-Short Bond. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
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. | |
Peter L. Lydecker (52) | |
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 (51) | |
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. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Ultra-Short Bond. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Ultra-Short Bond. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The fund designates $21,139,410 of distributions paid during the period January 1, 2006 to July 31, 2006 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on January 18, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 8,252,035,677.61 | 97.347 |
Withheld | 224,894,685.16 | 2.653 |
TOTAL | 8,476,930,362.77 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 8,252,680,829.70 | 97.355 |
Withheld | 224,249,533.07 | 2.645 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert M. Gates | ||
Affirmative | 8,239,007,314.92 | 97.193 |
Withheld | 237,923,047.85 | 2.807 |
TOTAL | 8,476,930,362.77 | 100.000 |
George H. Heilmeier | ||
Affirmative | 8,242,547,667.10 | 97.235 |
Withheld | 234,382,695.67 | 2.765 |
TOTAL | 8,476,930,362.77 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 8,207,133,817.28 | 96.817 |
Withheld | 269,796,545.49 | 3.183 |
TOTAL | 8,476,930,362.77 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 8,205,030,635.55 | 96.792 |
Withheld | 271,899,727.22 | 3.208 |
TOTAL | 8,476,930,362.77 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 8,239,700,661.39 | 97.201 |
Withheld | 237,229,701.38 | 2.799 |
TOTAL | 8,476,930,362.77 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 8,246,135,458.96 | 97.277 |
Withheld | 230,794,903.81 | 2.723 |
TOTAL | 8,476,930,362.77 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 8,247,874,320.21 | 97.298 |
Withheld | 229,056,042.56 | 2.702 |
TOTAL | 8,476,930,362.77 | 100.000 |
William O. McCoy | ||
Affirmative | 8,229,632,189.68 | 97.083 |
Withheld | 247,298,173.09 | 2.917 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 8,241,271,395.49 | 97.220 |
Withheld | 235,658,967.28 | 2.780 |
TOTAL | 8,476,930,362.77 | 100.000 |
Cornelia M. Small | ||
Affirmative | 8,249,991,018.59 | 97.323 |
Withheld | 226,939,344.18 | 2.677 |
TOTAL | 8,476,930,362.77 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 8,236,371,332.54 | 97.162 |
Withheld | 240,559,030.23 | 2.838 |
TOTAL | 8,476,930,362.77 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 8,244,328,417.87 | 97.256 |
Withheld | 232,601,944.90 | 2.744 |
TOTAL | 8,476,930,362.77 | 100.000 |
A Denotes trust-wide proposal and voting results. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Ultra-Short Bond Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Fixed-Income Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its June 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in June 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. Because the fund had been in existence less than five calendar years, the following charts considered by the Board show, over the one- and three-year periods ended December 31, 2005, as applicable, the cumulative total returns of Class T and Fidelity Ultra-Short Bond (retail class), the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class T and Fidelity Ultra-Short Bond (retail class) represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Fidelity Ultra-Short Bond Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Fidelity Ultra-Short Bond (retail class) was in the first quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for the one-year period, although the three-year cumulative total return of Fidelity Ultra-Short Bond (retail class) compared favorably to its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month (or shorter) periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 14% means that 86% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Ultra-Short Bond Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Annual Report
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that it had approved changes (effective June 1, 2005) in the contractual arrangements for the fund that (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Ultra-Short Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Ultra-Short Bond (retail class) to 45 basis points. These contractual arrangements may not be increased without Board approval. The fund's Advisor classes continue to be subject to different class-level expenses (transfer agent fees and 12b-1 fees).
The Board noted that the total expenses of each class ranked below its competitive median for 2005. The Board considered that each class's total expenses reflect the contractual arrangements for 2005, as if the contractual arrangements were in effect for the entire year.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board noted that because the contractual arrangements that went into effect June 1, 2005 set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses. The Board realized, however, that the 35 basis point fee rate was below the lowest management fee rate available under the contractual arrangements that existed prior to June 1, 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including (Advisor classes only) reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases. The Board also noted that the reduction in the fund's individual fund fee rate by 10 basis points delivers significant economies to fund shareholders. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) funds and accounts managed by Fidelity other than the Fidelity funds, including fee arrangements; (iii) the total expenses of certain funds and classes relative to competitors; (iv) fund performance trends; and (v) Fidelity's fee structures.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
1-800-544-5555
Press
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
By PC
Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.
(computer_graphic)
Fidelity's Web Site
www.fidelity.com
* When you call the quotes line, please remember that a fund's yield and return will vary and, except for money market funds, share price will also vary. This means that you may have a gain or loss when you sell your shares. There is no assurance that money market funds will be able to maintain a stable $1 share price; an investment in a money market fund is not insured or guaranteed by the U.S. government. Total returns are historical and include changes in share price, reinvestment of dividends and capital gains, and the effects of any sales charges.
Annual Report
To Write Fidelity
We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.
(letter_graphic)
Making Changes
To Your Account
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(letter_graphic)
For Non-Retirement
Accounts
Buying shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
Selling shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
General Correspondence
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(letter_graphic)
For Retirement
Accounts
Buying shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
Selling shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
General Correspondence
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
Annual Report
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
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
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
ULB-UANN-0906
1.789713.103
(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 - Class A and Class T
Annual Report
July 31, 2006
Class A and Class T
are classes of
Fidelity® Ultra-Short Bond Fund
(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 | ||
Board Approval of Investment Advisory Contracts and Management Fees |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit 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.
Annual Report
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) 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, 2006 | Past 1 | Life of | |
Class A (incl. 1.50% sales charge) B | 2.41% | 1.99% | |
Class T (incl. 1.50% sales charge) C | 2.44% | 2.00% |
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
Performance - continued
$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 changed, and also shows how the Lehman Brothers® 6 Month Swap Index performed 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
The domestic investment-grade bond market struggled during the 12-month period ending July 31, 2006, finishing with a 1.46% return as measured by the Lehman Brothers® Aggregate Bond Index. The negative momentum was typically a result of rising levels of core inflation, Federal Reserve Board interest rate hikes aimed to keep inflation at bay, and a yield curve that was sometimes inverted, meaning short-term yields exceeded long-term yields - a phenomenon that's often a precursor of a recession. In all, the Fed bumped up rates eight times during the period, hoisting the federal funds target rate to 5.25%, its highest level in five years. On the plus side, bonds scored well in the final quarter of the period, advancing 1.46%, which was identical to the debt market's return for the entire one-year period. Investors turned to high-quality debt in the last three months for a number of reasons: Equity performance stumbled; gross domestic product growth in the second quarter of 2006 gave strong evidence of a slowing economy; and the Fed supported that notion by announcing there was a good possibility of a pause in its rate hike campaign.
During the past year, the fund's Class A and Class T shares gained 3.97% and 4.00%, respectively (excluding sales charges), while the Lehman Brothers 6 Month Swap Index returned 4.22%. Boosting the fund's performance relative to the index was yield-curve positioning, with a large position in the Fidelity® Ultra-Short Central Fund - a diversified internal pool of short-term assets designed to outperform cash-like instruments with similar risk characteristics - and an overweighting in bonds with maturities in the one-to-two year range. Also to the fund's benefit was advantageous sector positioning, led by a heavy emphasis on non-government bonds, including structured products such as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities. These structured securities, which I held directly and also indirectly through our investment in the Fidelity Ultra-Short Central Fund, significantly outpaced the index. Modestly detracting from returns were out-of-index exposures to corporate and mortgage pass-through securities, both of which slightly lagged the index during the period.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including 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, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,022.30 | $ 3.51 |
HypotheticalA | $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Class T | |||
Actual | $ 1,000.00 | $ 1,022.50 | $ 3.46 |
HypotheticalA | $ 1,000.00 | $ 1,021.37 | $ 3.46 |
Ultra-Short Bond | |||
Actual | $ 1,000.00 | $ 1,023.70 | $ 2.26 |
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,023.50 | $ 2.41 |
HypotheticalA | $ 1,000.00 | $ 1,022.41 | $ 2.41 |
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 181/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central fund in which the fund invests are not included in the fund's annualized expense ratio.
Annualized | |
Class A | .70% |
Class T | .69% |
Ultra-Short Bond | .45% |
Institutional Class | .48% |
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2006 | As of January 31, 2006 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 25.9% | ![]() | AAA 26.8% | ||||
![]() | AA 11.5% | ![]() | AA 11.0% | ||||
![]() | A 13.0% | ![]() | A 11.2% | ||||
![]() | BBB 16.9% | ![]() | BBB 14.5% | ||||
![]() | BB and Below 0.6% | ![]() | BB and Below 0.5% | ||||
![]() | Not Rated 4.8% | ![]() | Not Rated 1.4% | ||||
![]() | 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, 2006 | ||
6 months ago | ||
Years | 1.9 | 1.7 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2006 | ||
6 months ago | ||
Years | 0.5 | 0.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006* | As of January 31, 2006** | ||||||
![]() | Corporate Bonds 10.6% | ![]() | Corporate Bonds 8.7% | ||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 23.1% | ![]() | CMOs and Other Mortgage Related Securities 22.8% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 14.9% | ** Foreign investments | 11.0% | ||||
* Futures and Swaps | 18.0% | ** Futures and Swaps | 18.3% |
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
For an unaudited list of holdings for each fixed-income central fund, visit fidelity.com and/or advisor.fidelity.com, as applicable. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Nonconvertible Bonds - 8.6% | |||
Principal Amount | Value | ||
CONSUMER DISCRETIONARY - 1.7% | |||
Auto Components - 0.5% | |||
DaimlerChrysler NA Holding Corp.: | |||
5.74% 3/13/09 (d) | $ 1,800,000 | $ 1,801,874 | |
5.78% 9/10/07 (d) | 1,230,000 | 1,233,707 | |
Johnson Controls, Inc. 5.5988% 1/17/08 (d) | 1,515,000 | 1,517,862 | |
4,553,443 | |||
Media - 1.2% | |||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 900,000 | 902,359 | |
Cox Communications, Inc.: | |||
(Reg. S) 5.8694% 12/14/07 (d) | 2,330,000 | 2,341,387 | |
7.75% 8/15/06 | 360,000 | 360,184 | |
Liberty Media Corp. 6.8294% 9/17/06 (d) | 3,033,000 | 3,036,852 | |
Univision Communications, Inc. 2.875% 10/15/06 | 1,210,000 | 1,201,709 | |
Viacom, Inc. 5.6906% 6/16/09 (a)(d) | 2,000,000 | 1,999,848 | |
9,842,339 | |||
TOTAL CONSUMER DISCRETIONARY | 14,395,782 | ||
ENERGY - 0.3% | |||
Oil, Gas & Consumable Fuels - 0.3% | |||
Enterprise Products Operating LP 4% 10/15/07 | 2,670,000 | 2,613,340 | |
FINANCIALS - 3.3% | |||
Capital Markets - 0.1% | |||
Lehman Brothers Holdings E-Capital Trust I 5.9538% 8/19/65 (d) | 720,000 | 720,373 | |
Commercial Banks - 0.4% | |||
Santander Issuances SA Unipersonal 5.7006% 6/20/16 (a)(d) | 1,500,000 | 1,500,051 | |
Wells Fargo & Co. 5.34% 3/10/08 (d) | 2,300,000 | 2,301,267 | |
3,801,318 | |||
Consumer Finance - 0.7% | |||
MBNA Capital I 8.278% 12/1/26 | 810,000 | 848,375 | |
MBNA Europe Funding PLC 5.3363% 9/7/07 (a)(d) | 2,720,000 | 2,721,474 | |
SLM Corp. 5.6647% 7/26/10 (d) | 2,770,000 | 2,768,147 | |
6,337,996 | |||
Nonconvertible Bonds - continued | |||
Principal Amount | Value | ||
FINANCIALS - continued | |||
Diversified Financial Services - 0.5% | |||
Aspetuck Trust 5.7869% 10/16/06 (d)(g) | $ 2,195,000 | $ 2,196,449 | |
CC Funding Trust I 6.9% 2/16/07 | 1,695,000 | 1,705,309 | |
3,901,758 | |||
Insurance - 0.1% | |||
Oil Insurance Ltd. 5.545% 10/6/06 (a)(d) | 830,000 | 829,799 | |
Real Estate Investment Trusts - 0.5% | |||
iStar Financial, Inc. 5.9638% 3/16/09 (d) | 2,505,000 | 2,521,293 | |
Reckson Operating Partnership LP 6% 6/15/07 | 1,440,000 | 1,435,572 | |
3,956,865 | |||
Thrifts & Mortgage Finance - 1.0% | |||
Countrywide Financial Corp. 5.67% 4/11/07 (d) | 1,575,000 | 1,576,386 | |
Residential Capital Corp. 6.875% 6/29/07 (d) | 1,995,000 | 2,005,061 | |
Washington Mutual Bank: | |||
5.2388% 5/1/09 (d) | 3,000,000 | 3,001,119 | |
5.31% 8/25/08 (d) | 2,220,000 | 2,222,513 | |
8,805,079 | |||
TOTAL FINANCIALS | 28,353,188 | ||
INFORMATION TECHNOLOGY - 0.2% | |||
Communications Equipment - 0.2% | |||
Motorola, Inc. 4.608% 11/16/07 | 1,700,000 | 1,681,341 | |
TELECOMMUNICATION SERVICES - 1.9% | |||
Diversified Telecommunication Services - 1.8% | |||
AT&T, Inc. 5.2625% 5/15/08 (d) | 3,000,000 | 3,001,032 | |
Deutsche Telekom International Finance BV 5.6288% 3/23/09 (d) | 1,725,000 | 1,726,113 | |
Sprint Capital Corp. 4.78% 8/17/06 | 1,000,000 | 999,704 | |
Telecom Italia Capital SA 6.1081% 7/18/11 (d) | 3,000,000 | 3,001,473 | |
Telefonica Emisiones SAU 5.61% 6/19/09 (d) | 3,500,000 | 3,502,734 | |
Telefonos de Mexico SA de CV 4.5% 11/19/08 | 1,605,000 | 1,559,076 | |
TELUS Corp. yankee 7.5% 6/1/07 | 2,000,000 | 2,030,302 | |
15,820,434 | |||
Wireless Telecommunication Services - 0.1% | |||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 700,000 | 699,847 | |
TOTAL TELECOMMUNICATION SERVICES | 16,520,281 | ||
Nonconvertible Bonds - continued | |||
Principal Amount | Value | ||
UTILITIES - 1.2% | |||
Electric Utilities - 0.3% | |||
Pepco Holdings, Inc. 5.5% 8/15/07 | $ 2,710,000 | $ 2,706,794 | |
Independent Power Producers & Energy Traders - 0.3% | |||
Constellation Energy Group, Inc. 6.35% 4/1/07 | 910,000 | 913,714 | |
Duke Capital LLC 4.331% 11/16/06 | 1,590,000 | 1,583,018 | |
2,496,732 | |||
Multi-Utilities - 0.6% | |||
Dominion Resources, Inc. 5.79% 9/28/07 (d) | 2,300,000 | 2,301,663 | |
NiSource, Inc. 3.628% 11/1/06 | 1,055,000 | 1,049,284 | |
Sempra Energy 4.75% 5/15/09 | 2,000,000 | 1,956,382 | |
5,307,329 | |||
TOTAL UTILITIES | 10,510,855 | ||
TOTAL NONCONVERTIBLE BONDS (Cost $74,244,078) | 74,074,787 | ||
U.S. Government and Government Agency Obligations - 6.1% | |||
U.S. Government Agency Obligations - 6.0% | |||
Fannie Mae 0% 4/27/07 | 46,000,000 | 44,228,254 | |
Freddie Mac 0% 9/29/06 | 7,300,000 | 7,237,432 | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 51,465,686 | ||
U.S. Treasury Obligations - 0.1% | |||
U.S. Treasury Bills, yield at date of purchase 5.03% 10/19/06 (c) | 750,000 | 741,870 | |
TOTAL U.S. GOVERNMENT AND (Cost $52,261,448) | 52,207,556 | ||
U.S. Government Agency - Mortgage Securities - 1.1% | |||
Fannie Mae - 1.1% | |||
4.3% 10/1/34 (d) | 55,298 | 54,784 | |
4.307% 3/1/33 (d) | 138,726 | 137,167 | |
4.307% 10/1/33 (d) | 49,655 | 48,901 | |
4.323% 6/1/33 (d) | 61,166 | 60,476 | |
4.513% 10/1/35 (d) | 90,948 | 89,781 | |
U.S. Government Agency - Mortgage Securities - continued | |||
Principal Amount | Value | ||
Fannie Mae - continued | |||
4.553% 1/1/35 (d) | $ 223,468 | $ 221,694 | |
4.555% 9/1/34 (d) | 416,778 | 416,253 | |
4.593% 8/1/34 (d) | 138,275 | 137,752 | |
4.643% 1/1/33 (d) | 76,143 | 75,604 | |
4.658% 3/1/35 (d) | 53,780 | 53,374 | |
4.684% 9/1/34 (d) | 47,118 | 47,402 | |
4.708% 10/1/32 (d) | 24,827 | 24,737 | |
4.73% 2/1/33 (d) | 20,633 | 20,511 | |
4.732% 10/1/32 (d) | 31,928 | 32,271 | |
4.746% 1/1/35 (d) | 13,324 | 13,240 | |
4.811% 8/1/34 (d) | 118,558 | 118,217 | |
4.815% 5/1/33 (d) | 10,553 | 10,502 | |
4.988% 11/1/32 (d) | 86,703 | 86,872 | |
4.989% 12/1/32 (d) | 11,219 | 11,217 | |
5.016% 2/1/35 (d) | 46,737 | 46,556 | |
5.023% 7/1/34 (d) | 62,560 | 62,083 | |
5.063% 11/1/34 (d) | 25,481 | 25,593 | |
5.184% 8/1/33 (d) | 162,136 | 161,670 | |
5.294% 7/1/35 (d) | 67,769 | 67,718 | |
5.5% 11/1/16 to 2/1/19 | 4,010,734 | 3,976,024 | |
6.5% 7/1/16 to 3/1/35 | 2,261,507 | 2,296,635 | |
7% 8/1/17 to 5/1/32 | 1,215,544 | 1,243,832 | |
TOTAL FANNIE MAE | 9,540,866 | ||
Freddie Mac - 0.0% | |||
4.783% 10/1/32 (d) | 24,552 | 24,611 | |
4.86% 3/1/33 (d) | 62,962 | 62,507 | |
5.639% 4/1/32 (d) | 30,337 | 30,737 | |
TOTAL FREDDIE MAC | 117,855 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $9,903,646) | 9,658,721 | ||
Asset-Backed Securities - 29.3% | |||
Accredited Mortgage Loan Trust: | |||
Series 2004-2 Class A2, 5.685% 7/25/34 (d) | 386,570 | 387,853 | |
Series 2004-3 Class 2A4, 5.735% 10/25/34 (d) | 520,512 | 521,192 | |
Series 2004-4 Class A2D, 5.735% 1/25/35 (d) | 237,655 | 238,456 | |
Series 2005-1 Class M1, 5.855% 4/25/35 (d) | 1,545,000 | 1,552,561 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
ACE Securities Corp.: | |||
Series 2002-HE2 Class M1, 6.66% 8/25/32 (d) | $ 151,473 | $ 151,586 | |
Series 2003-HE1: | |||
Class M1, 6.035% 11/25/33 (d) | 113,099 | 113,568 | |
Class M2, 7.085% 11/25/33 (d) | 75,000 | 75,845 | |
Series 2003-HS1: | |||
Class M1, 6.135% 6/25/33 (d) | 50,000 | 50,301 | |
Class M2, 7.135% 6/25/33 (d) | 50,000 | 50,560 | |
Series 2003-NC1 Class M1, 6.165% 7/25/33 (d) | 100,000 | 100,370 | |
Series 2004-HE1: | |||
Class M1, 5.885% 2/25/34 (d) | 150,000 | 150,345 | |
Class M2, 6.485% 2/25/34 (d) | 175,000 | 176,377 | |
Series 2005-HE2: | |||
Class M2, 5.835% 4/25/35 (d) | 250,000 | 251,096 | |
Class M3, 5.865% 4/25/35 (d) | 145,000 | 145,974 | |
Class M4, 6.025% 4/25/35 (d) | 185,000 | 186,221 | |
Series 2005-HE3: | |||
Class A2A, 5.485% 5/25/35 (d) | 232,106 | 232,124 | |
Class A2B, 5.595% 5/25/35 (d) | 630,000 | 630,503 | |
Series 2005-SD1 Class A1, 5.785% 11/25/50 (d) | 173,919 | 174,169 | |
Series 2006-HE2: | |||
Class A2C, 5.545% 5/25/36 (d) | 995,000 | 995,930 | |
Class M1, 5.685% 5/25/36 (d) | 915,000 | 916,529 | |
Class M2, 5.705% 5/25/36 (d) | 305,000 | 305,238 | |
Class M3, 5.725% 5/25/36 (d) | 240,000 | 240,277 | |
Class M4, 5.785% 5/25/36 (d) | 200,000 | 200,305 | |
Class M5, 5.825% 5/25/36 (d) | 295,000 | 295,557 | |
Aesop Funding II LLC Series 2005-1A Class A2, 5.4381% 4/20/09 (a)(d) | 1,200,000 | 1,200,161 | |
American Express Credit Account Master Trust: | |||
Series 2004-1 Class B, 5.6188% 9/15/11 (d) | 410,000 | 411,573 | |
Series 2004-5 Class B, 5.6188% 4/16/12 (d) | 2,150,000 | 2,150,496 | |
Series 2004-C Class C, 5.8688% 2/15/12 (a)(d) | 591,770 | 593,267 | |
Series 2005-1 Class A, 5.3988% 10/15/12 (d) | 2,185,000 | 2,186,113 | |
Series 2005-6 Class C, 5.6188% 3/15/11 (a)(d) | 1,275,000 | 1,276,734 | |
AmeriCredit Automobile Receivables Trust: | |||
Series 2003-AM Class A4B, 5.8038% 11/6/09 (d) | 329,492 | 329,886 | |
Series 2003-BX Class A4B, 5.8038% 1/6/10 (d) | 84,194 | 84,304 | |
Series 2004-1 Class A3, 3.22% 7/6/08 | 72,682 | 72,582 | |
Series 2005-1 Class C, 4.73% 7/6/10 | 2,500,000 | 2,463,979 | |
Series 2006-RM Class A1, 5.37% 10/6/09 | 2,000,000 | 1,998,267 | |
Ameriquest Mortgage Securities, Inc.: | |||
Series 2003-1 Class M1, 6.285% 2/25/33 (d) | 474,619 | 475,824 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Ameriquest Mortgage Securities, Inc.: - continued | |||
Series 2003-11 Class M1, 6.075% 1/25/34 (d) | $ 1,930,000 | $ 1,947,423 | |
Series 2003-3 Class M1, 6.185% 3/25/33 (d) | 21,641 | 21,713 | |
Series 2003-AR1 Class M1, 6.535% 1/25/33 (d) | 370,506 | 371,746 | |
Series 2004-R11 Class M1, 6.045% 11/25/34 (d) | 560,000 | 564,212 | |
Series 2004-R2: | |||
Class M1, 5.815% 4/25/34 (d) | 85,000 | 84,998 | |
Class M2, 5.865% 4/25/34 (d) | 75,000 | 74,999 | |
Series 2004-R8 Class M9, 8.135% 9/25/34 (d) | 1,525,000 | 1,536,893 | |
Series 2004-R9: | |||
Class A3, 5.705% 10/25/34 (d) | 38,332 | 38,337 | |
Class M2, 6.035% 10/25/34 (d) | 720,000 | 725,567 | |
Class M4, 6.555% 10/25/34 (d) | 925,000 | 937,697 | |
Series 2005-R1: | |||
Class M1, 5.835% 3/25/35 (d) | 770,000 | 771,978 | |
Class M2, 5.865% 3/25/35 (d) | 260,000 | 261,056 | |
Series 2005-R2 Class M1, 5.835% 4/25/35 (d) | 1,700,000 | 1,706,851 | |
Amortizing Residential Collateral Trust: | |||
Series 2002-BC1 Class M2, 6.485% 1/25/32 (d) | 35,456 | 35,701 | |
Series 2002-BC6 Class M1, 6.135% 8/25/32 (d) | 100,000 | 100,454 | |
ARG Funding Corp.: | |||
Series 2005-1A Class A2, 5.4781% 4/20/09 (a)(d) | 1,500,000 | 1,502,188 | |
Series 2005-2A Class A2, 5.4881% 5/20/09 (a)(d) | 800,000 | 799,989 | |
Argent Securities, Inc.: | |||
Series 2003-W3 Class M2, 7.185% 9/25/33 (d) | 800,000 | 809,499 | |
Series 2004-W5 Class M1, 5.985% 4/25/34 (d) | 1,420,000 | 1,421,663 | |
Series 2004-W7: | |||
Class M1, 5.935% 5/25/34 (d) | 305,000 | 307,122 | |
Class M2, 5.985% 5/25/34 (d) | 250,000 | 251,791 | |
Series 2006-W1 Class M10, 7.885% 3/25/36 (d) | 995,000 | 916,994 | |
Series 2006-W4: | |||
Class A2C, 5.545% 5/25/36 (d) | 1,200,000 | 1,200,575 | |
Class M2, 5.705% 5/25/36 (d) | 1,265,000 | 1,264,466 | |
Class M3, 5.725% 5/25/36 (d) | 1,010,000 | 1,009,579 | |
Arran Funding Ltd. Series 2005-A Class C, 5.1875% 12/15/10 (d) | 3,235,000 | 3,234,030 | |
Asset Backed Funding Certificates Series 2004-HE1 Class M2, 6.535% 1/25/34 (d) | 230,000 | 233,902 | |
Asset Backed Securities Corp. Home Equity Loan Trust: | |||
Series 2003-HE2 Class M1, 6.2688% 4/15/33 (d) | 1,165,025 | 1,166,976 | |
Series 2003-HE6 Class M1, 6.035% 11/25/33 (d) | 215,000 | 216,507 | |
Series 2003-HE7 Class A3, 5.7288% 12/15/33 (d) | 45,714 | 45,858 | |
Series 2004-HE6 Class A2, 5.745% 6/25/34 (d) | 825,475 | 827,448 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Asset Backed Securities Corp. Home Equity Loan Trust: - continued | |||
Series 2005-HE1 Class M1, 5.885% 3/25/35 (d) | $ 540,000 | $ 543,203 | |
Series 2005-HE2: | |||
Class M1, 5.835% 3/25/35 (d) | 1,105,000 | 1,111,225 | |
Class M2, 5.885% 3/25/35 (d) | 275,000 | 277,143 | |
Series 2005-HE3 Class A4, 5.585% 4/25/35 (d) | 1,234,989 | 1,235,468 | |
Bank One Issuance Trust: | |||
Series 2002-B1 Class B1, 5.7488% 12/15/09 (d) | 465,000 | 465,681 | |
Series 2002-C1 Class C1, 6.3288% 12/15/09 (d) | 675,000 | 678,457 | |
Series 2003-C4 Class C4, 6.3988% 2/15/11 (d) | 2,010,000 | 2,039,325 | |
Series 2004-C1 Class C1, 5.8688% 11/15/11 (d) | 25,000 | 25,172 | |
Bayview Financial Acquisition Trust Series 2004-C Class A1, 5.82% 5/28/44 (d) | 581,257 | 582,260 | |
Bayview Financial Asset Trust Series 2003-F Class A, 5.9% 9/28/43 (d) | 150,114 | 150,187 | |
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.85% 2/28/44 (d) | 270,073 | 270,606 | |
Bayview Financial Securities Co. LLC Series 2006-A Class 2A1, 5.52% 2/28/41 (d) | 1,758,247 | 1,758,686 | |
Bear Stearns Asset Backed Securities I: | |||
Series 2004-BO1: | |||
Class M2, 6.135% 9/25/34 (d) | 390,000 | 394,804 | |
Class M3, 6.435% 9/25/34 (d) | 265,000 | 268,223 | |
Class M4, 6.585% 9/25/34 (d) | 225,000 | 228,983 | |
Class M5, 6.785% 9/25/34 (d) | 210,000 | 213,924 | |
Series 2004-HE9 Class M2, 6.585% 11/25/34 (d) | 490,000 | 497,767 | |
Series 2005-HE2: | |||
Class M1, 5.885% 2/25/35 (d) | 905,000 | 909,666 | |
Class M2, 6.135% 2/25/35 (d) | 330,000 | 332,901 | |
Capital Auto Receivables Asset Trust: | |||
Series 2003-1 Class B, 5.8388% 6/15/10 (a)(d) | 51,292 | 51,332 | |
Series 2005-1 Class B, 5.7438% 6/15/10 (d) | 850,000 | 854,020 | |
Capital One Auto Finance Trust: | |||
Series 2003-A Class A4B, 5.6488% 1/15/10 (d) | 307,508 | 307,815 | |
Series 2004-B Class A4, 5.4788% 8/15/11 (d) | 1,700,000 | 1,700,399 | |
Series 2006-B Class A2, 5.53% 4/15/09 | 1,805,000 | 1,805,451 | |
Capital One Master Trust: | |||
Series 2001-1 Class B, 5.8788% 12/15/10 (d) | 500,000 | 502,162 | |
Series 2001-6 Class C, 6.7% 6/15/11 (a) | 2,200,000 | 2,247,524 | |
Series 2001-8A Class B, 5.9188% 8/17/09 (d) | 405,000 | 405,278 | |
Capital One Multi-Asset Execution Trust: | |||
Series 2003-B6 Class B6, 5.8988% 9/15/11 (d) | 1,125,000 | 1,133,824 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Capital One Multi-Asset Execution Trust: - continued | |||
Series 2004-B1 Class B1, 5.8088% 11/15/11 (d) | $ 1,180,000 | $ 1,186,016 | |
Series 2004-C1 Class C1, 3.4% 11/16/09 | 2,480,000 | 2,453,886 | |
Capital Trust Ltd. Series 2004-1: | |||
Class A2, 5.8281% 7/20/39 (a)(d) | 265,000 | 265,404 | |
Class B, 6.1281% 7/20/39 (a)(d) | 140,000 | 141,095 | |
Class C, 6.4781% 7/20/39 (a)(d) | 180,000 | 181,251 | |
Carrington Mortgage Loan Trust Series 2006-FRE1: | |||
Class M7, 6.335% 7/25/36 (d) | 445,000 | 444,989 | |
Class M9, 7.285% 7/25/36 (d) | 285,000 | 284,992 | |
Cayman ABSC NIMS Trust Series 2004-HE2 Class A1, 6.75% 4/25/34 (a) | 20,691 | 20,639 | |
CDC Mortgage Capital Trust: | |||
Series 2003-HE3 Class M1, 6.085% 11/25/33 (d) | 91,792 | 92,635 | |
Series 2004-HE2 Class M2, 6.585% 7/26/34 (d) | 175,000 | 176,159 | |
Cendant Timeshare Receivables Funding LLC Series 2005 1A Class 2A2, 5.5581% 5/20/17 (a)(d) | 824,603 | 823,465 | |
Chase Credit Card Owner Trust: | |||
Series 2001-6 Class B, 5.8488% 3/16/09 (d) | 200,000 | 200,185 | |
Series 2003-6 Class C, 6.1688% 2/15/11 (d) | 2,210,000 | 2,237,447 | |
Series 2004-1 Class B, 5.5688% 5/15/09 (d) | 295,000 | 294,996 | |
Chase Issuance Trust: | |||
Series 2004-C3 Class C3, 5.8388% 6/15/12 (d) | 1,645,000 | 1,654,241 | |
Series 2006-C3 Class C3, 5.5988% 6/15/11 (d) | 1,975,000 | 1,975,000 | |
CIT Equipment Collateral Trust Series 2005-VT1 Class C, 4.18% 11/20/12 | 668,782 | 659,902 | |
Citibank Credit Card Issuance Trust: | |||
Series 2001-B2 Class B2, 5.77% 12/10/08 (d) | 615,000 | 615,385 | |
Series 2002-B1 Class B1, 5.79% 6/25/09 (d) | 655,000 | 656,170 | |
Series 2002-C1 Class C1, 6.15% 2/9/09 (d) | 900,000 | 903,467 | |
Series 2003-C1 Class C1, 6.5888% 4/7/10 (d) | 1,685,000 | 1,710,608 | |
College Loan Corp. Trust I Series 2006-1 Class A7B, 5.11% 4/25/46 (a)(d) | 3,195,000 | 3,195,000 | |
Countrywide Home Loans, Inc.: | |||
Series 2002-6 Class AV1, 5.815% 5/25/33 (d) | 37,045 | 37,094 | |
Series 2003-BC1 Class M2, 7.385% 9/25/32 (d) | 672,497 | 675,205 | |
Series 2003-SD3 Class A1, 5.805% 12/25/32 (a)(d) | 16,368 | 16,431 | |
Series 2004-2 Class M1, 5.885% 5/25/34 (d) | 375,000 | 376,454 | |
Series 2004-3: | |||
Class 3A4, 5.635% 8/25/34 (d) | 2,820,359 | 2,823,923 | |
Class M1, 5.885% 6/25/34 (d) | 100,000 | 100,491 | |
Series 2004-4 Class M2, 5.915% 6/25/34 (d) | 315,000 | 316,646 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Countrywide Home Loans, Inc.: - continued | |||
Series 2005-1: | |||
Class 1AV2, 5.585% 7/25/35 (d) | $ 1,220,000 | $ 1,220,514 | |
Class MV1, 5.785% 7/25/35 (d) | 435,000 | 436,453 | |
Class MV2, 5.825% 7/25/35 (d) | 525,000 | 527,176 | |
Series 2005-AB1 Class A2, 5.595% 8/25/35 (d) | 2,480,000 | 2,483,407 | |
Series 2005-IM1 Class A1, 5.515% 11/25/35 (d) | 386,492 | 386,501 | |
CPS Auto Receivables Trust Series 2006-B Class A2, 5.71% 6/15/16 (a) | 4,000,000 | 4,006,875 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 2003-8 Class A2, 5.775% 4/25/34 (d) | 31,426 | 31,509 | |
Series 2004-FRE1: | |||
Class B1, 7.185% 4/25/34 (d) | 605,000 | 604,991 | |
Class M3, 6.035% 4/25/34 (d) | 41,121 | 41,120 | |
Discover Card Master Trust I: | |||
Series 2003-4 Class B1, 5.6988% 5/16/11 (d) | 550,000 | 552,842 | |
Series 2005-1 Class B, 5.5188% 9/16/10 (d) | 1,580,000 | 1,581,148 | |
Series 2005-3 Class B, 5.5588% 5/15/11 (d) | 2,000,000 | 2,001,659 | |
Series 2006-1 Class B1, 5.5188% 8/16/11 (d) | 1,845,000 | 1,845,425 | |
Series 2006-2 Class B1, 5.5138% 1/17/12 (d) | 2,000,000 | 2,000,000 | |
Fannie Mae guaranteed REMIC pass thru certificates | |||
Class AB1, 5.6867% 5/28/35 (d) | 285,897 | 285,852 | |
Class AB3, 5.8394% 5/28/35 (d) | 119,329 | 119,347 | |
Class AB8, 5.7933% 5/28/35 (d) | 28,648 | 28,644 | |
Fieldstone Mortgage Investment Corp.: | |||
Series 2004-3 Class M5, 6.835% 8/25/34 (d) | 1,500,000 | 1,519,970 | |
Series 2005-2 Class 2A1, 5.505% 12/25/35 (d) | 1,239,438 | 1,239,517 | |
Series 2006-2: | |||
Class 2A2, 5.555% 7/25/36 (d) | 880,000 | 880,000 | |
Class M1, 5.695% 7/25/36 (d) | 1,765,000 | 1,765,000 | |
First Franklin Mortgage Loan Asset Backed Certificates | 169,170 | 169,186 | |
First Franklin Mortgage Loan Trust Series 2004-FF2: | |||
Class M3, 5.935% 3/25/34 (d) | 25,000 | 25,062 | |
Class M4, 6.285% 3/25/34 (d) | 25,000 | 25,140 | |
First Investors Auto Owner Trust Series 2006-A Class A3, 4.93% 2/15/11 (a) | 830,000 | 822,364 | |
Ford Credit Auto Owner Trust Series 2003-B Class B2, 5.7988% 10/15/07 (d) | 650,000 | 650,022 | |
Ford Credit Floorplan Master Owner Trust: | |||
Series 2005-1: | |||
Class A, 5.5188% 5/15/10 (d) | 1,375,000 | 1,374,980 | |
Class B, 5.8088% 5/15/10 (d) | 1,110,000 | 1,111,511 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Ford Credit Floorplan Master Owner Trust: - continued | |||
Series 2006-3: | |||
Class A, 5.5488% 6/15/11 (d) | $ 990,000 | $ 990,309 | |
Class B, 5.8188% 6/15/11 (d) | 1,405,000 | 1,405,439 | |
Fremont Home Loan Trust: | |||
Series 2003-B Class M6, 9.885% 12/25/33 (d) | 312,930 | 313,807 | |
Series 2004-A Class M2, 6.535% 1/25/34 (d) | 341,042 | 342,913 | |
Series 2004-B Class M1, 5.965% 5/25/34 (d) | 205,000 | 206,133 | |
Series 2004-C: | |||
Class 2A2, 5.935% 8/25/34 (d) | 1,000,000 | 1,004,941 | |
Class M1, 6.035% 8/25/34 (d) | 540,000 | 545,900 | |
Class M3, 6.535% 8/25/34 (d) | 1,000,000 | 1,016,224 | |
Series 2004-D Class 3A2, 5.665% 11/25/34 (d) | 167,575 | 167,953 | |
Series 2005-2 Class 2A1, 5.495% 6/25/35 (d) | 271,993 | 271,992 | |
Series 2005-A: | |||
Class 2A2, 5.625% 2/25/35 (d) | 916,019 | 916,704 | |
Class M1, 5.815% 1/25/35 (d) | 225,000 | 226,489 | |
Class M2, 5.845% 1/25/35 (d) | 325,000 | 326,689 | |
Class M3, 5.875% 1/25/35 (d) | 175,000 | 176,229 | |
Class M4, 6.065% 1/25/35 (d) | 125,000 | 126,275 | |
Series 2006-A: | |||
Class M3, 5.765% 5/25/36 (d) | 455,000 | 454,990 | |
Class M4, 5.785% 5/25/36 (d) | 685,000 | 684,984 | |
Class M5, 5.885% 5/25/36 (d) | 365,000 | 365,964 | |
GE Business Loan Trust Series 2003-1 Class A, 5.7988% 4/15/31 (a)(d) | 213,666 | 214,664 | |
GE Capital Credit Card Master Note Trust Series 2005-2 | 925,000 | 925,624 | |
Gracechurch Card Funding PLC: | |||
Series 11 Class C, 5.6488% 11/15/10 (d) | 2,490,000 | 2,490,000 | |
Series 5: | |||
Class B, 5.5988% 8/15/08 (d) | 80,000 | 80,004 | |
Class C, 6.2988% 8/15/08 (d) | 295,000 | 295,063 | |
Series 6 Class B, 5.5588% 2/17/09 (d) | 75,000 | 74,987 | |
Series 8 Class C, 5.6988% 6/15/10 (d) | 2,650,000 | 2,650,000 | |
Series 9: | |||
Class B, 5.5188% 9/15/10 (d) | 485,000 | 485,000 | |
Class C, 5.6788% 9/15/10 (d) | 1,800,000 | 1,802,178 | |
GSAMP Trust: | |||
Series 2002-NC1 Class A2, 5.705% 7/25/32 (d) | 2,606 | 2,639 | |
Series 2003-FM1 Class M1, 6.1981% 3/20/33 (d) | 636,784 | 637,176 | |
Series 2004-AHL Class A2D, 5.745% 8/25/34 (d) | 978,654 | 982,633 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
GSAMP Trust: - continued | |||
Series 2004-FM1: | |||
Class M1, 6.035% 11/25/33 (d) | $ 168,544 | $ 168,541 | |
Class M2, 6.785% 11/25/33 (d) | 135,000 | 136,597 | |
Series 2004-FM2 Class M1, 5.885% 1/25/34 (d) | 249,683 | 249,679 | |
Series 2004-HE1: | |||
Class M1, 5.935% 5/25/34 (d) | 320,000 | 319,993 | |
Class M2, 6.535% 5/25/34 (d) | 150,000 | 151,872 | |
Series 2005-6: | |||
Class A2, 5.595% 6/25/35 (d) | 1,800,000 | 1,798,675 | |
Class M3, 6.035% 6/25/35 (d) | 1,555,000 | 1,552,686 | |
Series 2005-9 Class 2A1, 5.505% 8/25/35 (d) | 1,126,702 | 1,126,141 | |
Series 2005-HE2 Class M, 5.815% 3/25/35 (d) | 1,220,000 | 1,225,568 | |
Series 2005-MTR1 Class A1, 5.525% 10/25/35 (d) | 1,543,591 | 1,543,591 | |
Series 2005-NC1 Class M1, 5.835% 2/25/35 (d) | 1,205,000 | 1,211,318 | |
Series 2006-NC2 Class M4, 5.735% 6/25/36 (d) | 1,541,000 | 1,542,196 | |
Guggenheim Structured Real Estate Funding Ltd. Series 2005-1 Class C, 6.465% 5/25/30 (a)(d) | 2,880,000 | 2,880,000 | |
Harwood Street Funding I LLC Series 2004-1A Class CTFS, 7.3781% 9/20/09 (a)(d) | 1,700,000 | 1,702,387 | |
Home Equity Asset Trust: | |||
Series 2002-3 Class A5, 5.825% 2/25/33 (d) | 14 | 14 | |
Series 2002-5 Class M1, 6.585% 5/25/33 (d) | 165,729 | 165,842 | |
Series 2003-1 Class M1, 6.385% 6/25/33 (d) | 524,845 | 525,267 | |
Series 2003-2 Class M1, 6.265% 8/25/33 (d) | 66,323 | 66,458 | |
Series 2003-3 Class M1, 6.245% 8/25/33 (d) | 320,568 | 321,515 | |
Series 2003-4 Class M1, 6.185% 10/25/33 (d) | 96,601 | 96,904 | |
Series 2003-5: | |||
Class A2, 5.735% 12/25/33 (d) | 24,569 | 24,634 | |
Class M1, 6.085% 12/25/33 (d) | 160,000 | 161,089 | |
Class M2, 7.115% 12/25/33 (d) | 70,000 | 71,188 | |
Series 2003-7: | |||
Class A2, 5.765% 3/25/34 (d) | 109,722 | 109,773 | |
Class M1, 6.035% 3/25/34 (d) | 795,000 | 797,654 | |
Series 2003-8 Class M1, 6.105% 4/25/34 (d) | 260,000 | 262,574 | |
Series 2004-4 Class A2, 5.705% 10/25/34 (d) | 174,129 | 174,417 | |
Series 2004-6 Class A2, 5.735% 12/25/34 (d) | 510,559 | 511,666 | |
Series 2005-1: | |||
Class M1, 5.815% 5/25/35 (d) | 1,270,000 | 1,274,938 | |
Class M2, 5.835% 5/25/35 (d) | 1,410,000 | 1,415,368 | |
Series 2005-2: | |||
Class 2A2, 5.585% 7/25/35 (d) | 1,830,000 | 1,831,223 | |
Class M1, 5.835% 7/25/35 (d) | 890,000 | 893,340 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Household Affinity Credit Card Master Note Trust I | $ 500,000 | $ 499,937 | |
Household Home Equity Loan Trust: | |||
Series 2003-2: | |||
Class A, 5.7081% 9/20/33 (d) | 100,180 | 100,233 | |
Class M, 5.9581% 9/20/33 (d) | 47,513 | 47,546 | |
Series 2004-1 Class M, 5.7869% 9/20/33 (d) | 136,170 | 136,768 | |
Household Mortgage Loan Trust Series 2004-HC1: | |||
Class A, 5.7281% 2/20/34 (d) | 193,833 | 193,968 | |
Class M, 5.8781% 2/20/34 (d) | 117,556 | 117,634 | |
Household Private Label Credit Card Master Note Trust I | 1,000,000 | 1,000,668 | |
HSBC Automotive Trust: | |||
Series 2006-1 Class A2, 5.4% 6/17/09 | 3,410,000 | 3,407,464 | |
Series 2006-2 Class A2, 5.61% 6/17/09 | 1,500,000 | 1,502,051 | |
HSBC Home Equity Loan Trust: | |||
Series 2005-2: | |||
Class M1, 5.8381% 1/20/35 (d) | 268,818 | 269,417 | |
Class M2, 5.8681% 1/20/35 (d) | 200,120 | 200,828 | |
Series 2005-3: | |||
Class A1, 5.5269% 1/20/35 (d) | 601,236 | 601,788 | |
Class M1, 5.6869% 1/20/35 (d) | 353,051 | 353,703 | |
IXIS Real Estate Capital Trust Series 2005-HE1: | |||
Class A1, 5.635% 6/25/35 (d) | 649,165 | 649,604 | |
Class M1, 5.855% 6/25/35 (d) | 550,000 | 551,986 | |
John Deere Owner Trust Series 2006-A Class A2, 5.41% 11/17/08 | 1,805,000 | 1,804,368 | |
Keycorp Student Loan Trust Series 1999-A Class A2, 5.81% 12/27/09 (d) | 225,423 | 226,072 | |
Long Beach Mortgage Loan Trust: | |||
Series 2003-2 Class M1, 6.205% 6/25/33 (d) | 462,597 | 463,452 | |
Series 2003-3 Class M1, 6.135% 7/25/33 (d) | 337,423 | 338,642 | |
Series 2006-6: | |||
Class 2A3, 5.5438% 7/25/36 (d) | 1,435,000 | 1,435,000 | |
Class M4, 5.7538% 7/25/36 (d) | 425,000 | 425,000 | |
Class M5, 5.7838% 7/25/36 (d) | 265,000 | 265,000 | |
Class M6, 5.8438% 7/25/36 (d) | 265,000 | 265,000 | |
MASTR Asset Backed Securities Trust: | |||
Series 2004-FRE1 Class M1, 5.935% 7/25/34 (d) | 485,000 | 485,947 | |
Series 2004-HE1 Class M1, 6.035% 9/25/34 (d) | 685,000 | 690,186 | |
MBNA Credit Card Master Note Trust: | |||
Series 2001-B2 Class B2, 5.7288% 1/15/09 (d) | 1,000,000 | 999,901 | |
Series 2002-B2 Class B2, 5.7488% 10/15/09 (d) | 1,034,000 | 1,036,490 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
MBNA Credit Card Master Note Trust: - continued | |||
Series 2002-B4 Class B4, 5.8688% 3/15/10 (d) | $ 630,000 | $ 633,045 | |
Series 2003-B1 Class B1, 5.8088% 7/15/10 (d) | 1,510,000 | 1,518,348 | |
Series 2003-B2 Class B2, 5.7588% 10/15/10 (d) | 125,000 | 125,667 | |
Series 2003-B3 Class B3, 5.7438% 1/18/11 (d) | 1,550,000 | 1,557,092 | |
Series 2003-B5 Class B5, 5.7388% 2/15/11 (d) | 2,000,000 | 2,011,750 | |
Series 2003-C2 Class C2, 6.9688% 6/15/10 (d) | 2,000,000 | 2,041,099 | |
Series 2005-C3 Class C, 5.6388% 3/15/11 (d) | 2,830,000 | 2,836,502 | |
MBNA Master Credit Card Trust II: | |||
Series 1998-E Class B, 5.8369% 9/15/10 (d) | 200,000 | 200,920 | |
Series 1998-G Class B, 5.7688% 2/17/09 (d) | 500,000 | 500,140 | |
Meritage Mortgage Loan Trust Series 2004-1: | |||
Class M1, 5.885% 7/25/34 (d) | 150,000 | 150,303 | |
Class M2, 5.935% 7/25/34 (d) | 25,000 | 25,058 | |
Class M3, 6.335% 7/25/34 (d) | 50,000 | 50,298 | |
Class M4, 6.485% 7/25/34 (d) | 50,000 | 50,315 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
Series 2004-FM1 Class M2, 6.535% 1/25/35 (d) | 150,000 | 150,785 | |
Series 2004-HE2: | |||
Class A1B, 5.855% 8/25/35 (d) | 284,892 | 286,141 | |
Class A2B, 5.765% 8/25/35 (d) | 759,441 | 761,765 | |
Merrill Lynch Mortgage Ltd. Series 2004-OP1N Class N1, 4.75% 6/25/35 (a) | 4,048 | 4,017 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-HE3 Class M1, 6.485% 12/27/32 (d) | 125,000 | 126,119 | |
Series 2003-NC10 Class M1, 6.065% 10/25/33 (d) | 792,708 | 796,609 | |
Series 2003-NC8 Class M1, 6.085% 9/25/33 (d) | 119,992 | 120,416 | |
Series 2004-HE6 Class A2, 5.725% 8/25/34 (d) | 430,254 | 431,413 | |
Series 2004-NC2 Class M1, 5.935% 12/25/33 (d) | 375,000 | 377,343 | |
Series 2004-NC6 Class A2, 5.725% 7/25/34 (d) | 90,032 | 90,113 | |
Series 2005-1 Class M2, 5.855% 12/25/34 (d) | 570,000 | 573,129 | |
Series 2005-HE1: | |||
Class A3B, 5.605% 12/25/34 (d) | 277,636 | 277,924 | |
Class M1, 5.835% 12/25/34 (d) | 150,000 | 150,975 | |
Class M2, 5.855% 12/25/34 (d) | 385,000 | 387,259 | |
Series 2005-HE2: | |||
Class M1, 5.785% 1/25/35 (d) | 370,000 | 372,361 | |
Class M2, 5.825% 1/25/35 (d) | 265,000 | 266,117 | |
Series 2005-NC1: | |||
Class M1, 5.825% 1/25/35 (d) | 325,000 | 327,217 | |
Class M2, 5.855% 1/25/35 (d) | 325,000 | 325,988 | |
Class M3, 5.895% 1/25/35 (d) | 325,000 | 327,358 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Morgan Stanley ABS Capital I, Inc.: - continued | |||
Series 2006-HE4: | |||
Class M1, 5.665% 6/25/36 (d) | $ 440,000 | $ 440,174 | |
Class M2: | |||
5.685% 6/25/36 (d) | 770,000 | 770,300 | |
5.695% 6/25/36 (d) | 550,000 | 549,987 | |
Class M4, 5.735% 6/25/36 (d) | 1,160,000 | 1,159,973 | |
Series 2006-HE5 Class B1, 6.355% 8/25/36 (d) | 2,415,000 | 2,415,507 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-AM1 Class M1, 6.66% 2/25/32 (d) | 334,289 | 336,741 | |
Series 2001-NC1 Class M2, 6.99% 10/25/31 (d) | 10,752 | 10,762 | |
Series 2001-NC4 Class M1, 6.885% 1/25/32 (d) | 69,227 | 69,294 | |
Series 2002-AM3 Class A3, 5.875% 2/25/33 (d) | 14,114 | 14,148 | |
Series 2002-HE1 Class M1, 5.985% 7/25/32 (d) | 590,000 | 596,834 | |
Series 2002-NC3 Class M1, 6.105% 8/25/32 (d) | 100,000 | 100,124 | |
Series 2002-OP1 Class M1, 6.135% 9/25/32 (d) | 435,350 | 435,640 | |
Navistar Financial Dealer Note Master Trust Series 2005-1 Class A, 5.495% 2/25/13 (d) | 2,050,000 | 2,054,685 | |
New Century Home Equity Loan Trust Series 2005-1: | |||
Class M1, 5.835% 3/25/35 (d) | 595,000 | 597,291 | |
Class M2, 5.865% 3/25/35 (d) | 595,000 | 597,945 | |
Class M3, 5.905% 3/25/35 (d) | 290,000 | 292,165 | |
Nissan Auto Lease Trust: | |||
Series 2003-A Class A3A, 5.5088% 6/15/09 (d) | 45,061 | 45,064 | |
Series 2004-A Class A4A, 5.4388% 6/15/10 (d) | 1,325,000 | 1,325,763 | |
Series 2005-A Class A4, 5.4188% 8/15/11 (d) | 2,210,000 | 2,210,001 | |
NovaStar Home Equity Loan Series 2004-1: | |||
Class M1, 5.835% 6/25/34 (d) | 97,514 | 97,986 | |
Class M4, 6.36% 6/25/34 (d) | 170,000 | 171,374 | |
NovaStar Mortgage Funding Trust Series 2003-3 Class A3, 5.835% 12/25/33 (d) | 57,779 | 57,934 | |
Ocala Funding LLC Series 2006-1A Class A, 6.6669% 3/20/11 (a)(d) | 965,000 | 965,000 | |
Option One Mortgage Loan Trust Series 2003-6 Class M1, 6.035% 11/25/33 (d) | 1,025,000 | 1,033,378 | |
Ownit Mortgage Loan Asset-Backed Certificates Series 2005-3 Class A2A, 5.505% 6/25/36 (d) | 1,066,437 | 1,066,545 | |
Park Place Securities, Inc.: | |||
Series 2004 WWF1 Class M4, 6.485% 1/25/35 (d) | 945,000 | 958,458 | |
Series 2004-WCW1: | |||
Class M1, 6.015% 9/25/34 (d) | 385,000 | 389,714 | |
Class M2, 6.065% 9/25/34 (d) | 160,000 | 161,468 | |
Class M3, 6.635% 9/25/34 (d) | 310,000 | 313,779 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Park Place Securities, Inc.: - continued | |||
Series 2004-WCW1: | |||
Class M4, 6.835% 9/25/34 (d) | $ 435,000 | $ 440,130 | |
Series 2004-WCW2 Class A2, 5.765% 10/25/34 (d) | 267,982 | 268,346 | |
Series 2004-WWF1 Class A5, 5.855% 1/25/35 (d) | 176,386 | 176,772 | |
Series 2005-WCH1: | |||
Class A3B, 5.605% 1/25/35 (d) | 220,853 | 221,079 | |
Class M2, 5.905% 1/25/35 (d) | 1,130,000 | 1,136,212 | |
Class M3, 5.945% 1/25/35 (d) | 425,000 | 428,411 | |
Class M5, 6.265% 1/25/35 (d) | 400,000 | 404,316 | |
Series 2005-WHQ1 Class M7, 6.635% 3/25/35 (d) | 910,000 | 915,268 | |
Providian Master Note Trust: | |||
Series 2005-2 Class C2, 5.8688% 11/15/12 (a)(d) | 2,160,000 | 2,167,042 | |
Series 2006-C1A Class C1, 5.9188% 3/16/15 (a)(d) | 1,575,000 | 1,575,000 | |
Residential Asset Mortgage Products, Inc.: | |||
Series 2004-RS10 Class MII2, 6.635% 10/25/34 (d) | 1,300,000 | 1,326,007 | |
Series 2004-RS6: | |||
Class 2M2, 6.685% 6/25/34 (d) | 250,000 | 249,995 | |
Class 2M3, 6.835% 6/25/34 (d) | 250,000 | 249,995 | |
Series 2005-SP2 Class 1A1, 5.535% 5/25/44 (d) | 837,715 | 837,899 | |
Residential Asset Securities Corp.: | |||
Series 2004-KS10 Class AI2, 5.705% 3/25/29 (d) | 42,163 | 42,260 | |
Series 2005-KS7 Class A1, 5.485% 8/25/35 (d) | 537,341 | 537,392 | |
Salomon Brothers Mortgage Securities VII, Inc. | 1,451 | 1,454 | |
Saxon Asset Securities Trust: | |||
Series 2004-1 Class M1, 5.915% 3/25/35 (d) | 640,000 | 641,014 | |
Series 2004-2 Class MV1, 5.965% 8/25/35 (d) | 415,000 | 416,651 | |
Sharps SP I LLC Net Interest Margin Trust Series 2004-HE3N Class NA, 5.19% 11/25/34 (a) | 282,916 | 281,994 | |
Sierra Timeshare Receivables Fund LLC Series 2006-1A | 4,160,000 | 4,158,569 | |
Specialty Underwriting & Residential Finance: | |||
Series 2003-BC3 Class M1, 6.035% 8/25/34 (d) | 1,000,000 | 1,003,638 | |
Series 2003-BC4 Class M1, 5.985% 11/25/34 (d) | 260,000 | 261,499 | |
Structured Asset Investment Loan Trust: | |||
Series 2003-BC9 Class M1, 6.085% 8/25/33 (d) | 1,135,000 | 1,137,921 | |
Series 2004-8 Class M5, 6.535% 9/25/34 (d) | 290,000 | 294,067 | |
Series 2005-1 Class M4, 6.145% 2/25/35 (a)(d) | 485,000 | 490,687 | |
Structured Asset Securities Corp. Series 2004-GEL1 Class A, 5.745% 2/25/34 (d) | 39,085 | 39,084 | |
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 5.8188% 3/15/11 (a)(d) | 675,000 | 675,000 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Superior Wholesale Inventory Financing Trust XII | $ 980,000 | $ 981,880 | |
Terwin Mortgage Trust: | |||
Series 2003-4HE Class A1, 5.815% 9/25/34 (d) | 56,585 | 56,853 | |
Series 2003-6HE Class A1, 5.855% 11/25/33 (d) | 41,734 | 41,899 | |
Series 2005-14HE Class AF1, 5.525% 8/25/36 (d) | 618,961 | 619,009 | |
Series 2006-9HGA Class A1, 5.451% 10/25/37 (a)(b)(d) | 1,500,000 | 1,499,400 | |
Triad Auto Receivables Owner Trust Series 2006-B Class A2, 5.36% 11/12/09 | 2,585,000 | 2,582,497 | |
Turquoise Card Backed Securities PLC Series 2006-1A Class C, 5.5536% 5/16/11 (a)(d) | 2,165,000 | 2,165,000 | |
UPFC Auto Receivables Trust Series 2006-A Class A2, 5.44% 6/15/09 | 685,000 | 684,371 | |
Washington Mutual Asset Holdings Corp. Series 2006-5 | 2,159,436 | 2,150,764 | |
WFS Financial Owner Trust: | |||
Series 2004-3 Class D, 4.07% 2/17/12 | 303,038 | 299,080 | |
Series 2004-4 Class D, 3.58% 5/17/12 | 276,891 | 271,413 | |
Series 2005-1 Class D, 4.09% 8/15/12 | 290,262 | 285,247 | |
Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (a)(d) | 2,180,000 | 2,180,000 | |
TOTAL ASSET-BACKED SECURITIES (Cost $252,505,307) | 252,873,611 | ||
Collateralized Mortgage Obligations - 15.7% | |||
Private Sponsor - 11.3% | |||
Adjustable Rate Mortgage Trust floater: | |||
Series 2004-2 Class 7A3, 5.785% 2/25/35 (d) | 685,423 | 687,801 | |
Series 2004-4 Class 5A2, 5.785% 3/25/35 (d) | 206,688 | 207,031 | |
Series 2005-1 Class 5A2, 5.715% 5/25/35 (d) | 396,381 | 395,302 | |
Series 2005-10 Class 5A2, 5.705% 1/25/36 (d) | 1,422,145 | 1,423,870 | |
Series 2005-2: | |||
Class 6A2, 5.665% 6/25/35 (d) | 168,083 | 168,346 | |
Class 6M2, 5.865% 6/25/35 (d) | 1,375,000 | 1,383,106 | |
Series 2005-3 Class 8A2, 5.625% 7/25/35 (d) | 1,371,650 | 1,374,279 | |
Series 2005-5 Class 6A2, 5.615% 9/25/35 (d) | 1,109,441 | 1,109,911 | |
Series 2005-8 Class 7A2, 5.665% 11/25/35 (d) | 700,240 | 702,174 | |
American Home Mortgage Assets Trust floater Series 2006-1 Class 2A1, 5.575% 5/25/46 (d) | 1,451,520 | 1,450,977 | |
Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1058% 8/25/35 (d) | 1,951,660 | 1,937,851 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Bear Stearns Alt-A Trust floater: | |||
Series 2005-1 Class A1, 5.665% 1/25/35 (d) | $ 1,619,538 | $ 1,622,178 | |
Series 2005-2 Class 1A1, 5.635% 3/25/35 (d) | 1,130,774 | 1,130,938 | |
Citigroup Mortgage Loan Trust Series 2006-NC1: | |||
Class M4, 5.74% 8/25/36 (d) | 1,205,000 | 1,205,000 | |
Class M5, 5.77% 8/25/36 (d) | 860,000 | 860,000 | |
CS First Boston Mortgage Securities Corp. floater: | |||
Series 2004-AR2 Class 6A1, 5.785% 3/25/34 (d) | 109,804 | 109,958 | |
Series 2004-AR3 Class 6A2, 5.755% 4/25/34 (d) | 54,382 | 54,424 | |
Series 2004-AR5 Class 11A2, 5.755% 6/25/34 (d) | 101,539 | 101,616 | |
Series 2004-AR6 Class 9A2, 5.755% 10/25/34 (d) | 134,619 | 134,860 | |
Series 2004-AR7 Class 6A2, 5.765% 8/25/34 (d) | 236,872 | 237,461 | |
Series 2004-AR8 Class 8A2, 5.765% 9/25/34 (d) | 193,067 | 194,007 | |
CWALT, Inc. floater Series 2005-56 Class 3A1, 5.675% 11/25/35 (d) | 754,178 | 756,673 | |
First Horizon Mortgage pass thru Trust floater Series 2004-FL1 Class 2A1, 5.8719% 12/25/34 (d) | 172,408 | 172,641 | |
Gracechurch Mortgage Funding PLC floater Series 1A: | |||
Class A2B, 5.0981% 10/11/41 (a)(d) | 3,695,000 | 3,695,813 | |
Class CB, 5.3081% 10/11/41 (a)(d) | 260,000 | 260,000 | |
Class DB, 5.4981% 10/11/41 (a)(d) | 1,060,000 | 1,060,000 | |
Granite Master Issuer PLC floater: | |||
Series 2005-1: | |||
Class A3, 5.4938% 12/21/24 (d) | 700,000 | 700,799 | |
Class B1, 5.5438% 12/20/54 (d) | 950,000 | 949,959 | |
Class M1, 5.6438% 12/20/54 (d) | 700,000 | 699,972 | |
Series 2005-2 Class C1, 5.6894% 12/20/54 (d) | 1,200,000 | 1,199,880 | |
Series 2005-4: | |||
Class C1, 5.6194% 12/20/54 (d) | 925,000 | 925,000 | |
Class M2, 5.4694% 12/20/54 (d) | 1,830,000 | 1,830,072 | |
Granite Mortgages PLC floater: | |||
Series 2004-2: | |||
Class 1A2, 5.4838% 6/20/28 (d) | 67,641 | 67,636 | |
Class 1B, 5.5838% 6/20/44 (d) | 13,518 | 13,526 | |
Class 1C, 6.1138% 6/20/44 (d) | 49,372 | 49,422 | |
Class 1M, 5.6938% 6/20/44 (d) | 295,784 | 296,119 | |
Series 2004-3: | |||
Class 1B, 5.5738% 9/20/44 (d) | 95,901 | 95,912 | |
Class 1C, 6.0038% 9/20/44 (d) | 443,542 | 443,923 | |
Class 1M, 5.6838% 9/20/44 (d) | 47,950 | 47,961 | |
GSAMP Trust floater Series 2004-11 Class 2A1, 5.715% 12/20/34 (d) | 1,005,428 | 1,007,118 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Holmes Financing No. 10 PLC floater Series 10A: | |||
Class 1C, 5.7382% 7/15/40 (a)(d) | $ 415,000 | $ 415,000 | |
Class 2A, 5.4982% 7/15/40 (a)(d) | 1,040,000 | 1,040,000 | |
Class 2C, 5.8182% 7/15/40 (a)(d) | 975,000 | 975,000 | |
Holmes Financing No. 8 PLC floater Series 2: | |||
Class A, 5.5869% 4/15/11 (d) | 1,400,000 | 1,401,218 | |
Class B, 5.6769% 7/15/40 (d) | 190,000 | 190,059 | |
Class C, 6.2269% 7/15/40 (d) | 775,000 | 776,211 | |
Homestar Mortgage Acceptance Corp. floater Series 2004-5 Class A1, 5.835% 10/25/34 (d) | 752,610 | 755,514 | |
Impac CMB Trust floater: | |||
Series 2004-11 Class 2A2, 5.755% 3/25/35 (d) | 594,453 | 595,963 | |
Series 2004-6 Class 1A2, 5.775% 10/25/34 (d) | 189,309 | 189,747 | |
Series 2005-1: | |||
Class M1, 5.845% 4/25/35 (d) | 273,170 | 273,709 | |
Class M2, 5.885% 4/25/35 (d) | 483,079 | 483,966 | |
Class M3, 5.915% 4/25/35 (d) | 117,894 | 118,322 | |
Class M4, 6.135% 4/25/35 (d) | 71,887 | 72,155 | |
Class M5, 6.155% 4/25/35 (d) | 71,887 | 72,182 | |
Class M6, 6.205% 4/25/35 (d) | 112,143 | 112,457 | |
Series 2005-2 Class 1A2, 5.695% 4/25/35 (d) | 1,148,589 | 1,151,820 | |
Series 2005-4 Class 1B1, 6.685% 5/25/35 (d) | 492,479 | 493,094 | |
Series 2005-7: | |||
Class M1, 5.865% 11/25/35 (d) | 206,828 | 206,976 | |
Class M2, 5.905% 11/25/35 (d) | 155,121 | 155,554 | |
Class M3, 6.005% 11/25/35 (d) | 775,605 | 777,767 | |
Class M4, 6.045% 11/25/35 (d) | 370,567 | 371,673 | |
Lehman Structured Securities Corp. floater Series 2005-1 | 1,258,584 | 1,260,551 | |
Lehman XS Trust floater Series 2006-GP1 Class A1, 5.475% 5/25/46 (d) | 2,431,376 | 2,431,376 | |
Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.236% 8/25/17 (d) | 539,680 | 545,226 | |
MASTR Adjustable Rate Mortgages Trust floater: | |||
Series 2004-11: | |||
Class 1A4, 5.875% 11/25/34 (d) | 114,714 | 115,301 | |
Class 2A1, 5.765% 11/25/34 (d) | 370,401 | 372,032 | |
Class 2A2, 5.825% 11/25/34 (d) | 81,544 | 81,706 | |
Series 2005-1 Class 1A1, 5.655% 3/25/35 (d) | 519,432 | 520,545 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Merrill Lynch Mortgage Investors, Inc.: | |||
floater: | |||
Series 2003-A: | |||
Class 2A1, 5.775% 3/25/28 (d) | $ 161,005 | $ 161,929 | |
Class 2A2, 5.3738% 3/25/28 (d) | 57,502 | 57,645 | |
Series 2003-B Class A1, 5.725% 4/25/28 (d) | 155,025 | 155,703 | |
Series 2003-D Class A, 5.695% 8/25/28 (d) | 705,789 | 707,053 | |
Series 2003-E Class A2, 5.2938% 10/25/28 (d) | 288,006 | 288,063 | |
Series 2003-F Class A2, 5.42% 10/25/28 (d) | 298,406 | 298,568 | |
Series 2004-A Class A2, 4.34% 4/25/29 (d) | 388,677 | 388,123 | |
Series 2004-B Class A2, 5.5875% 6/25/29 (d) | 397,820 | 397,697 | |
Series 2004-C Class A2, 5.01% 7/25/29 (d) | 503,723 | 503,011 | |
Series 2004-D Class A2, 5.3238% 9/25/29 (d) | 537,729 | 537,741 | |
Series 2004-E Class A2D, 5.6294% 11/25/29 (d) | 565,980 | 567,948 | |
Series 2004-G Class A2, 5.8719% 11/25/29 (d) | 248,639 | 248,849 | |
Series 2005-A Class A2, 5.2138% 2/25/30 (d) | 700,737 | 700,907 | |
Series 2005-B Class A2, 5.5475% 7/25/30 (d) | 755,944 | 756,086 | |
Series 2003-G Class XA1, 1% 1/25/29 (f) | 1,628,696 | 12,662 | |
MortgageIT Trust floater Series 2004-2: | |||
Class A1, 5.755% 12/25/34 (d) | 436,503 | 436,187 | |
Class A2, 5.835% 12/25/34 (d) | 589,604 | 595,024 | |
Opteum Mortgage Acceptance Corp. floater: | |||
Series 2005-3 Class APT, 5.675% 7/25/35 (d) | 1,952,122 | 1,954,258 | |
Series 2005-5 Class 1A1B, 5.585% 12/25/35 (d) | 920,000 | 920,000 | |
Permanent Financing No. 3 PLC floater Series 2 Class C, 6.35% 6/10/42 (d) | 1,205,000 | 1,208,247 | |
Permanent Financing No. 4 PLC floater Series 2 Class C, 6.02% 6/10/42 (d) | 1,145,000 | 1,149,501 | |
Permanent Financing No. 5 PLC floater: | |||
Series 2: | |||
Class A, 5.41% 6/10/11 (d) | 5,000,000 | 5,003,143 | |
Class C, 5.95% 6/10/42 (d) | 390,000 | 391,341 | |
Series 3 Class C, 6.12% 6/10/42 (d) | 1,030,000 | 1,040,300 | |
Permanent Financing No. 6 PLC floater Series 6 Class 2C, 5.75% 6/10/42 (d) | 1,600,000 | 1,602,125 | |
Permanent Financing No. 7 PLC floater Series 7 Class 2C, 5.63% 6/10/42 (d) | 1,140,000 | 1,141,158 | |
Permanent Financing No. 8 PLC floater: | |||
Series 3C, 5.82% 6/10/42 (d) | 910,000 | 910,419 | |
Series 8 Class 2C, 5.7% 6/10/42 (d) | 1,435,000 | 1,435,222 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Residential Asset Mortgage Products, Inc.: | |||
sequential pay: | |||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | $ 206,596 | $ 207,313 | |
Series 2004-SL2 Class A1, 6.5% 10/25/16 | 80,982 | 81,668 | |
Series 2005-AR5 Class 1A1, 4.8362% 9/19/35 (d) | 552,013 | 546,706 | |
Residential Finance LP/Residential Finance Development Corp. floater Series 2003-A: | |||
Class B4, 7.145% 3/10/35 (a)(d) | 94,445 | 95,395 | |
Class B5, 7.695% 3/10/35 (a)(d) | 94,445 | 95,703 | |
Residential Funding Securities Corp.: | |||
Series 2003-RP1 Class A1, 5.885% 11/25/34 (d) | 22,946 | 22,967 | |
Series 2003-RP2 Class A1, 5.8438% 6/25/33 (a)(d) | 122,085 | 122,619 | |
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (a)(f) | 4,780,733 | 16,554 | |
Sequoia Mortgage Trust floater: | |||
Series 2003-5 Class A2, 5.27% 9/20/33 (d) | 272,790 | 272,773 | |
Series 2003-7 Class A2, 5.6419% 1/20/34 (d) | 128,584 | 128,582 | |
Series 2004-1 Class A, 5.8825% 2/20/34 (d) | 189,103 | 189,228 | |
Series 2004-10 Class A4, 5.56% 11/20/34 (d) | 590,168 | 590,639 | |
Series 2004-12 Class 1A2, 5.82% 1/20/35 (d) | 910,595 | 912,892 | |
Series 2004-4 Class A, 5.48% 5/20/34 (d) | 695,180 | 695,009 | |
Series 2004-5 Class A3, 5.5769% 6/20/34 (d) | 259,241 | 259,325 | |
Series 2004-6: | |||
Class A3A, 5.8275% 6/20/35 (d) | 291,509 | 291,851 | |
Class A3B, 5.1069% 7/20/34 (d) | 583,019 | 583,144 | |
Series 2004-7: | |||
Class A3A, 5.265% 8/20/34 (d) | 340,782 | 341,461 | |
Class A3B, 5.49% 7/20/34 (d) | 661,713 | 664,435 | |
Series 2004-8 Class A2, 5.31% 9/20/34 (d) | 1,022,266 | 1,022,727 | |
Series 2005-1 Class A2, 5.8325% 2/20/35 (d) | 492,855 | 493,754 | |
Series 2005-2 Class A2, 5.19% 3/20/35 (d) | 884,660 | 883,635 | |
Structured Asset Securities Corp. floater: | |||
Series 2004-NP1 Class A, 5.785% 9/25/33 (a)(d) | 120,048 | 120,142 | |
Series 2005-AR1 Class B1, 7.385% 9/25/35 (a)(d) | 1,155,000 | 990,413 | |
Thornburg Mortgage Securities Trust floater: | |||
Series 2004-3 Class A, 5.755% 9/25/34 (d) | 1,974,785 | 1,981,992 | |
Series 2005-3 Class A4, 5.655% 10/25/35 (d) | 2,152,569 | 2,148,993 | |
WaMu Mortgage pass thru certificates: | |||
floater: | |||
Series 2005-AR11 Class A1C1, 5.585% 8/25/45 (d) | 895,747 | 895,897 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
WaMu Mortgage pass thru certificates: - continued | |||
floater: | |||
Series 2005-AR13 Class A1C1, 5.575% 10/25/45 (d) | $ 1,333,812 | $ 1,333,947 | |
Series 2005-AR17 Class A1C1, 5.575% 12/25/45 (d) | 1,011,410 | 1,011,601 | |
Series 2005-AR19 Class A1C1, 5.575% 12/25/45 (d) | 1,410,284 | 1,410,946 | |
sequential pay Series 2002-S6 Class A25, 6% 10/25/32 | 123,203 | 122,678 | |
Washington Mutual Mortgage Securities Corp. sequential pay Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 56,799 | 58,231 | |
Wells Fargo Mortgage Backed Securities Trust: | |||
Series 2004-M Class A3, 4.6748% 8/25/34 (d) | 1,368,256 | 1,358,478 | |
Series 2005-AR10 Class 2A2, 4.1096% 6/25/35 (d) | 4,531,302 | 4,435,326 | |
Series 2005-AR12 Class 2A1, 4.3193% 7/25/35 (d) | 2,954,017 | 2,897,960 | |
TOTAL PRIVATE SPONSOR | 97,572,534 | ||
U.S. Government Agency - 4.4% | |||
Fannie Mae: | |||
floater Series 2002-89 Class F, 5.685% 1/25/33 (d) | 102,476 | 102,609 | |
planned amortization class: | |||
Series 1993-207 Class G, 6.15% 4/25/23 | 422,076 | 422,956 | |
Series 2003-24 CLass PB, 4.5% 12/25/12 | 1,847,539 | 1,829,445 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
floater: | |||
Series 2001-38 Class QF, 6.365% 8/25/31 (d) | 933,207 | 959,669 | |
Series 2002-11 Class QF, 5.885% 3/25/32 (d) | 140,519 | 142,239 | |
Series 2002-36 Class FT, 5.885% 6/25/32 (d) | 139,612 | 140,811 | |
Series 2002-49 Class FB, 5.9688% 11/18/31 (d) | 1,410,446 | 1,422,989 | |
Series 2002-60 Class FV, 6.385% 4/25/32 (d) | 304,586 | 314,877 | |
Series 2002-64 Class FE, 5.7188% 10/18/32 (d) | 71,884 | 71,822 | |
Series 2002-68 Class FH, 5.8688% 10/18/32 (d) | 1,181,150 | 1,198,536 | |
Series 2002-74 Class FV, 5.835% 11/25/32 (d) | 92,253 | 92,957 | |
Series 2002-75 Class FA, 6.385% 11/25/32 (d) | 623,941 | 645,328 | |
Series 2003-11: | |||
Class DF, 5.835% 2/25/33 (d) | 73,850 | 74,399 | |
Class EF, 5.835% 2/25/33 (d) | 39,740 | 39,862 | |
Series 2003-122 Class FL, 5.735% 7/25/29 (d) | 512,689 | 515,628 | |
Series 2003-15 Class WF, 5.735% 8/25/17 (d) | 611,239 | 613,830 | |
Series 2004-33 Class FW, 5.785% 8/25/25 (d) | 882,161 | 885,294 | |
Series 2004-54 Class FE, 6.535% 2/25/33 (d) | 508,219 | 511,951 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
U.S. Government Agency - continued | |||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | |||
planned amortization class: | |||
Series 2002-11 Class QB, 5.5% 3/25/15 | $ 213,301 | $ 212,536 | |
Series 2002-28 Class PJ, 6.5% 3/25/31 | 50,460 | 50,270 | |
Series 2002-52 Class PA, 6% 4/25/31 | 9,977 | 9,948 | |
Series 2005-72 Class FG, 5.635% 5/25/35 (d) | 6,595,031 | 6,582,477 | |
Series 2002-50 Class LE, 7% 12/25/29 | 43,082 | 43,211 | |
Series 2004-31 Class IA, 4.5% 6/25/10 (f) | 226,157 | 3,005 | |
Freddie Mac planned amortization class Series 2162 Class PH, 6% 6/15/29 | 1,376,634 | 1,380,978 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
floater: | |||
Series 2406: | |||
Class FP, 6.3488% 1/15/32 (d) | 1,164,721 | 1,196,188 | |
Class PF, 6.3488% 12/15/31 (d) | 1,135,000 | 1,168,134 | |
Series 2410 Class PF, 6.3488% 2/15/32 (d) | 2,340,465 | 2,411,797 | |
Series 2526 Class FC, 5.7688% 11/15/32 (d) | 20,227 | 20,344 | |
Series 2538 Class FB, 5.7688% 12/15/32 (d) | 170,656 | 171,395 | |
Series 2551 Class FH, 5.8188% 1/15/33 (d) | 65,833 | 66,062 | |
Series 2553 Class FB, 5.8688% 3/15/29 (d) | 2,813,108 | 2,832,002 | |
Series 2577 Class FW, 5.8688% 1/15/30 (d) | 1,861,274 | 1,875,770 | |
Series 2861 Class JF, 5.6688% 4/15/17 (d) | 810,184 | 811,482 | |
Series 2994 Class FB, 5.5188% 6/15/20 (d) | 698,199 | 696,348 | |
Series 3066 Class HF, 0% 1/15/34 (d) | 78,930 | 81,672 | |
planned amortization class: | |||
Series 2389 Class DA, 6.2688% 11/15/30 (d) | 1,773,892 | 1,788,914 | |
Series 2395 Class PE, 6% 2/15/30 | 114,483 | 114,339 | |
Series 2543 CLass PM, 5.5% 8/15/18 | 524,597 | 523,401 | |
Series 2614 Class IC, 4.5% 12/15/10 (f) | 848,785 | 12,230 | |
Series 2640 Class GR, 3% 3/15/10 | 150,344 | 149,993 | |
Series 2650 Class FV, 5.7688% 12/15/32 (d) | 1,684,141 | 1,693,004 | |
Series 2676: | |||
Class KN, 3% 12/15/13 | 1,033,721 | 1,018,577 | |
Class QA, 3% 8/15/16 | 207,425 | 206,810 | |
Series 2683 Class UH, 3% 3/15/19 | 1,303,749 | 1,292,960 | |
Series 2748 Class IB, 4.5% 3/15/10 (f) | 417,752 | 3,458 | |
Series 2776 Class UJ, 4.5% 5/15/20 (f) | 338,136 | 8,928 | |
Series 2828 Class JA, 4.5% 1/15/10 | 780,360 | 776,069 | |
Series 1803 Class A, 6% 12/15/08 | 253,438 | 253,641 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
U.S. Government Agency - continued | |||
Ginnie Mae guaranteed REMIC pass thru securities: | |||
floater Series 2001-21 Class FB, 5.7688% 1/16/27 (d) | $ 105,339 | $ 105,961 | |
planned amortization class Series 2002-5 Class PD, 6.5% 5/16/31 | 199,449 | 200,616 | |
TOTAL U.S. GOVERNMENT AGENCY | 37,747,722 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $135,473,039) | 135,320,256 | ||
Commercial Mortgage Securities - 6.8% | |||
Banc of America Large Loan, Inc.: | |||
floater: | |||
Series 2003-BBA2: | |||
Class A3, 5.6888% 11/15/15 (a)(d) | 203,257 | 203,360 | |
Class C, 5.8388% 11/15/15 (a)(d) | 70,000 | 70,146 | |
Class D, 5.9188% 11/15/15 (a)(d) | 110,000 | 110,257 | |
Class F, 6.2688% 11/15/15 (a)(d) | 80,000 | 80,190 | |
Class H, 6.7688% 11/15/15 (a)(d) | 70,000 | 70,192 | |
Class J, 7.3188% 11/15/15 (a)(d) | 70,000 | 70,195 | |
Class K, 7.9688% 11/15/15 (a)(d) | 65,000 | 64,910 | |
Series 2005-BBA6: | |||
Class B, 5.5788% 1/15/19 (a)(d) | 390,000 | 390,154 | |
Class C, 5.6188% 1/15/19 (a)(d) | 400,000 | 400,322 | |
Class D, 5.6688% 1/15/19 (a)(d) | 390,000 | 390,274 | |
Class E, 5.7088% 1/15/19 (a)(d) | 245,000 | 245,234 | |
Class F, 5.7588% 1/15/19 (a)(d) | 165,000 | 165,116 | |
Class G, 5.7888% 1/15/19 (a)(d) | 125,000 | 125,100 | |
Series 2005-BOCA: | |||
Class H, 6.3188% 12/15/16 (a)(d) | 290,000 | 290,105 | |
Class J, 6.4688% 12/15/16 (a)(d) | 140,000 | 140,050 | |
Class K, 6.7188% 12/15/16 (a)(d) | 250,000 | 250,090 | |
Series 2005-ESHA: | |||
Class F, 6.1088% 7/14/20 (a)(d) | 860,000 | 863,676 | |
Class G, 6.2388% 7/14/20 (a)(d) | 585,000 | 587,497 | |
Class H, 6.4588% 7/14/20 (a)(d) | 720,000 | 722,797 | |
Series 2005-MIB1: | |||
Class B, 5.6288% 3/15/22 (a)(d) | 475,000 | 475,307 | |
Class C, 5.6788% 3/15/22 (a)(d) | 200,000 | 200,128 | |
Class D, 5.7288% 3/15/22 (a)(d) | 205,000 | 205,135 | |
Class E, 5.7688% 3/15/22 (a)(d) | 390,000 | 390,257 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Banc of America Large Loan, Inc.: - continued | |||
floater: - continued | |||
Series 2005-MIB1: | |||
Class F, 5.8388% 3/15/22 (a)(d) | $ 200,000 | $ 200,132 | |
Class G, 5.8988% 3/15/22 (a)(d) | 130,000 | 130,086 | |
Series 2006-LAQ: | |||
Class H, 6.025% 2/9/21 (a)(d) | 440,000 | 441,689 | |
Class J, 6.115% 2/9/21 (a)(d) | 320,000 | 321,226 | |
Class K, 6.345% 2/9/21 (a)(d) | 880,000 | 882,794 | |
Series 2005-ESHA Class X1, 0.9161% 7/14/20 (a)(d)(f) | 44,830,000 | 372,331 | |
Series 2006-ESH: | |||
Class A, 6.2288% 7/14/11 (a)(d) | 938,219 | 936,476 | |
Class B, 6.3288% 7/14/11 (a)(d) | 467,860 | 466,559 | |
Class C, 6.4788% 7/14/11 (a)(d) | 936,970 | 933,678 | |
Class D, 7.1088% 7/14/11 (a)(d) | 544,559 | 542,970 | |
Bayview Commercial Asset Trust floater: | |||
Series 2003-1 Class A, 5.965% 8/25/33 (a)(d) | 219,351 | 221,955 | |
Series 2003-2 Class A, 5.965% 12/25/33 (a)(d) | 648,758 | 650,785 | |
Series 2004-1: | |||
Class A, 5.745% 4/25/34 (a)(d) | 383,570 | 384,529 | |
Class B, 7.285% 4/25/34 (a)(d) | 63,928 | 64,568 | |
Series 2004-2: | |||
Class A, 5.815% 8/25/34 (a)(d) | 476,940 | 478,729 | |
Class M1, 5.965% 8/25/34 (a)(d) | 152,770 | 153,534 | |
Series 2004-3: | |||
Class A1, 5.755% 1/25/35 (a)(d) | 688,434 | 690,585 | |
Class A2, 5.805% 1/25/35 (a)(d) | 80,992 | 81,144 | |
Class M1, 5.885% 1/25/35 (a)(d) | 121,488 | 122,172 | |
Class M2, 6.385% 1/25/35 (a)(d) | 80,992 | 81,979 | |
Series 2005-2A: | |||
Class M1, 5.815% 8/25/35 (a)(d) | 171,124 | 171,461 | |
Class M2, 5.865% 8/25/35 (a)(d) | 286,749 | 287,596 | |
Class M3, 5.885% 8/25/35 (a)(d) | 157,249 | 157,713 | |
Class M4, 5.995% 8/25/35 (a)(d) | 143,375 | 143,796 | |
Series 2005-3A: | |||
Class A1, 5.705% 11/25/35 (a)(d) | 782,184 | 784,916 | |
Class M1, 5.825% 11/25/35 (a)(d) | 111,741 | 112,017 | |
Class M2, 5.875% 11/25/35 (a)(d) | 153,643 | 154,176 | |
Class M3, 5.895% 11/25/35 (a)(d) | 139,676 | 140,159 | |
Class M4, 5.985% 11/25/35 (a)(d) | 172,267 | 172,690 | |
Series 2005-4A: | |||
Class A2, 5.775% 1/25/36 (a)(d) | 1,057,859 | 1,059,182 | |
Class B1, 6.785% 1/25/36 (a)(d) | 96,169 | 97,191 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Bayview Commercial Asset Trust floater: - continued | |||
Series 2005-4A: | |||
Class M1, 5.835% 1/25/36 (a)(d) | $ 384,676 | $ 385,758 | |
Class M2, 5.855% 1/25/36 (a)(d) | 96,169 | 96,439 | |
Class M3, 5.885% 1/25/36 (a)(d) | 192,338 | 192,759 | |
Class M4, 5.995% 1/25/36 (a)(d) | 96,169 | 96,590 | |
Class M5, 6.035% 1/25/36 (a)(d) | 96,169 | 96,650 | |
Class M6, 6.085% 1/25/36 (a)(d) | 96,169 | 96,470 | |
Series 2006-2A: | |||
Class A2, 5.665% 7/25/36 (a)(d) | 292,928 | 292,882 | |
Class B1, 6.255% 7/25/36 (a)(d) | 107,407 | 107,390 | |
Class B3, 8.085% 7/25/36 (a)(d) | 175,757 | 175,729 | |
Class M1, 5.695% 7/25/36 (a)(d) | 307,575 | 307,527 | |
Class M2, 5.715% 7/25/36 (a)(d) | 219,696 | 219,662 | |
Class M3, 5.735% 7/25/36 (a)(d) | 170,875 | 170,848 | |
Class M4, 5.805% 7/25/36 (a)(d) | 117,171 | 117,153 | |
Class M5, 5.855% 7/25/36 (a)(d) | 141,582 | 141,560 | |
Class M6, 5.925% 7/25/36 (a)(d) | 224,578 | 224,543 | |
Bear Stearns Commercial Mortgage Securities, Inc. floater Series 2004-BBA3 Class E, 6.0688% 6/15/17 (a)(d) | 960,000 | 960,435 | |
COMM floater Series 2002-FL7: | |||
Class F, 6.6688% 11/15/14 (a)(d) | 1,000,000 | 1,000,781 | |
Class H, 7.6188% 11/15/14 (a)(d) | 150,000 | 150,071 | |
Commercial Mortgage pass thru certificates floater: | |||
Series 2004-HTL1: | |||
Class B, 5.8188% 7/15/16 (a)(d) | 8,103 | 8,108 | |
Class D, 5.9188% 7/15/16 (a)(d) | 17,733 | 17,745 | |
Class E, 6.1188% 7/15/16 (a)(d) | 12,482 | 12,495 | |
Class F, 6.1688% 7/15/16 (a)(d) | 29,623 | 29,659 | |
Class H, 6.6688% 7/15/16 (a)(d) | 87,041 | 87,268 | |
Class J, 6.8188% 7/15/16 (a)(d) | 32,745 | 32,888 | |
Class K, 7.7188% 7/15/16 (a)(d) | 565,375 | 568,832 | |
Series 2005-F10A: | |||
Class B, 5.5988% 4/15/17 (a)(d) | 1,005,000 | 1,005,121 | |
Class C, 5.6388% 4/15/17 (a)(d) | 425,000 | 425,019 | |
Class D, 5.6788% 4/15/17 (a)(d) | 345,000 | 345,143 | |
Class E, 5.7388% 4/15/17 (a)(d) | 260,000 | 260,068 | |
Class F, 5.7788% 4/15/17 (a)(d) | 145,000 | 145,015 | |
Class G, 5.9188% 4/15/17 (a)(d) | 145,000 | 145,016 | |
Class H, 5.9888% 4/15/17 (a)(d) | 145,000 | 145,042 | |
Class I, 6.2188% 4/15/17 (a)(d) | 50,000 | 50,016 | |
Class MOA3, 5.6688% 3/15/20 (a)(d) | 650,000 | 650,069 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Commercial Mortgage pass thru certificates floater: - continued | |||
Series 2005-FL11: | |||
Class B, 5.6188% 11/15/17 (a)(d) | $ 354,841 | $ 354,856 | |
Class C, 5.6688% 11/15/17 (a)(d) | 709,681 | 709,511 | |
Class D, 5.7088% 11/15/17 (a)(d) | 123,011 | 123,121 | |
Class E, 5.7588% 11/15/17 (a)(d) | 189,248 | 189,278 | |
Class F, 5.8188% 11/15/17 (a)(d) | 170,324 | 170,350 | |
Class G, 5.8688% 11/15/17 (a)(d) | 269,679 | 269,660 | |
Series 2006-CN2A Class AJFL, 5.5944% 2/5/19 (a)(d) | 1,135,000 | 1,139,103 | |
CS First Boston Mortgage Securities Corp. floater: | |||
Series 2004-FL1 Class B, 5.8188% 5/15/14 (a)(d) | 306,618 | 306,697 | |
Series 2004-TF2A Class E, 5.7888% 11/15/19 (a)(d) | 640,000 | 640,260 | |
Series 2004-TFL1: | |||
Class E, 5.9188% 2/15/14 (a)(d) | 200,000 | 200,094 | |
Class F, 5.9688% 2/15/14 (a)(d) | 175,000 | 175,119 | |
Class G, 6.2188% 2/15/14 (a)(d) | 125,000 | 125,052 | |
Class H, 6.4688% 2/15/14 (a)(d) | 100,000 | 100,055 | |
Class J, 6.7688% 2/15/14 (a)(d) | 50,000 | 50,064 | |
Series 2005-CN2A Class A1J, 5.6988% | 2,165,000 | 2,166,055 | |
Series 2005-TF2A Class F, 5.8688% | 230,000 | 230,093 | |
Series 2005-TF3A Class A2, 5.6488% 1 | 2,775,000 | 2,778,489 | |
Series 2005-TFLA: | |||
Class C, 5.6088% 2/15/20 (a)(d) | 800,000 | 800,431 | |
Class E, 5.6988% 2/15/20 (a)(d) | 560,000 | 560,533 | |
Class F, 5.7488% 2/15/20 (a)(d) | 250,000 | 250,184 | |
Class G, 5.8888% 2/15/20 (a)(d) | 70,000 | 70,045 | |
Class H, 6.1188% 2/15/20 (a)(d) | 100,000 | 100,074 | |
CSMC Commercial Mortgage Trust floater | |||
Class D, 5.6488% 4/15/21 (a)(d) | 300,000 | 300,490 | |
Class E, 5.6988% 4/15/21 (a)(d) | 300,000 | 300,366 | |
Class G, 5.7888% 4/15/21 (a)(d) | 300,000 | 300,267 | |
Class H, 6.0988% 4/15/21 (a)(d) | 300,000 | 300,290 | |
Class J, 6.1688% 4/15/21 (a)(d) | 200,000 | 200,226 | |
Class K, 6.5688% 4/15/21 (a)(d) | 1,005,000 | 1,005,804 | |
Freddie Mac Multi-class participation certificates | 1,436,331 | 1,480,619 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Greenwich Capital Commercial Funding Corp. floater | |||
Class H-AON: | |||
6.3344% 10/5/20 (a)(d) | $ 180,000 | $ 180,023 | |
6.5844% 10/5/20 (a)(d) | 220,000 | 220,028 | |
Class M-AON, 6.8344% 10/5/20 (a)(d) | 215,000 | 215,027 | |
Class N-AON, 7.1844% 10/5/20 (a)(d) | 550,000 | 550,069 | |
GS Mortgage Securities Corp. II: | |||
floater: | |||
Series 2002-FL5A Class B, 5.6888% 6/16/14 (a)(d) | 2,075,000 | 2,074,847 | |
Series 2005-FL7A Class A1, 5.4944% 11/6/19 (a)(d) | 29,397 | 29,397 | |
Series 2006-FL8: | |||
Class C, 5.61% 6/6/20 (a)(d) | 145,000 | 145,000 | |
Class D, 5.65% 6/6/20 (a)(d) | 405,000 | 405,000 | |
Class E, 5.74% 6/6/20 (a)(d) | 800,000 | 800,000 | |
Class F, 5.81% 6/6/20 (a)(d) | 575,000 | 575,000 | |
Guggenheim Structure Real Estate Funding Ltd. Series 2006-3: | |||
Class B, 5.8% 9/25/46 (a)(d) | 450,000 | 450,000 | |
Class C, 5.95% 9/25/46 (a)(d) | 1,150,000 | 1,150,000 | |
Hilton Hotel Pool Trust floater Series 2000-HLTA Class A2, 5.7463% 10/3/15 (a)(d) | 3,000,000 | 3,022,563 | |
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2003-LLFA Class K1, 7.9088% 12/16/14 (a)(d) | 435,000 | 434,559 | |
Merrill Lynch Mortgage Trust Series 2005-GGP1 Class X, 0.1416% 11/15/10 (a)(d)(f) | 417,400,000 | 361,761 | |
Morgan Stanley Capital I, Inc.: | |||
floater Series 2005-XLF: | |||
Class B, 5.5788% 8/15/19 (a)(d) | 935,000 | 934,635 | |
Class C, 5.6088% 8/15/19 (a)(d) | 75,000 | 74,914 | |
Class D, 5.6288% 8/15/19 (a)(d) | 270,000 | 269,692 | |
Class E, 5.6488% 8/15/19 (a)(d) | 245,000 | 244,904 | |
Class F, 5.6888% 8/15/19 (a)(d) | 170,000 | 169,934 | |
Class G, 5.7388% 8/15/19 (a)(d) | 120,000 | 119,987 | |
Class H, 5.7588% 8/15/19 (a)(d) | 100,000 | 99,961 | |
Class J, 5.8288% 8/15/19 (a)(d) | 75,000 | 74,964 | |
Series 2006-XLF: | |||
Class C, 6.6% 7/15/19 (a)(d) | 570,000 | 570,000 | |
Class D, 5.65% 7/15/19 (a)(d) | 415,000 | 415,000 | |
Class E, 5.69% 7/15/19 (a)(d) | 345,000 | 345,000 | |
Class F, 5.72% 7/15/19 (a)(d) | 535,000 | 535,000 | |
Class G, 5.72% 7/15/19 (a)(d) | 255,000 | 255,000 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
STRIPS III Ltd./STRIPS III Corp. floater Series 2004-1A Class A, 5.88% 3/24/18 (a)(d) | $ 396,989 | $ 397,733 | |
Wachovia Bank Commercial Mortgage Trust floater | |||
Class A2, 5.6188% 10/15/17 (a)(d) | 990,000 | 990,290 | |
Class B, 5.6688% 10/15/17 (a)(d) | 200,000 | 200,038 | |
Class D, 5.7988% 10/15/17 (a)(d) | 400,000 | 400,277 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $58,663,250) | 58,817,850 | ||
Certificates of Deposit - 2.8% | |||
BNP Paribas SA yankee 5.045% 2/21/07 | 4,000,000 | 3,987,651 | |
Deutsche Bank AG yankee 5.045% 2/21/07 | 4,000,000 | 3,987,651 | |
HBOS Treasury Services PLC yankee 5.04% 2/21/07 | 4,000,000 | 3,987,768 | |
Rabobank Nederland Coop. Central yankee 5.01% | 4,000,000 | 3,987,150 | |
Royal Bank of Scotland PLC yankee 5.04% 2/21/07 | 4,000,000 | 3,987,544 | |
Societe Generale euro 5.05% 2/21/07 | 4,000,000 | 3,987,826 | |
TOTAL CERTIFICATES OF DEPOSIT (Cost $23,999,269) | 23,925,590 | ||
Commercial Paper - 0.2% | |||
Rockies Express Pipeline LLC 5.7422% 9/20/06 | 2,000,000 | 1,984,603 | |
Fixed-Income Funds - 27.6% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 2,390,073 | 237,764,502 | |
Cash Equivalents - 2.8% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at 5.3%, dated 7/31/06 due 8/1/06 | $ 23,842,508 | $ 23,839,000 | |
TOTAL INVESTMENT PORTFOLIO - 101.0% (Cost $870,404,138) | 870,466,476 | ||
NET OTHER ASSETS - (1.0)% | (8,973,233) | ||
NET ASSETS - 100% | $ 861,493,243 |
Futures Contracts | |||||
Expiration Date | Underlying | Unrealized Appreciation/ | |||
Purchased | |||||
Eurodollar Contracts | |||||
103 Eurodollar 90 Day Index Contracts | Sept. 2006 | $ 101,588,900 | $ (321,000) | ||
103 Eurodollar 90 Day Index Contracts | Dec. 2006 | 101,596,625 | (251,475) | ||
103 Eurodollar 90 Day Index Contracts | March 2007 | 101,619,800 | (158,887) | ||
103 Eurodollar 90 Day Index Contracts | June 2007 | 101,648,125 | 9,638 | ||
103 Eurodollar 90 Day Index Contracts | Sept. 2007 | 101,666,150 | 70,542 | ||
TOTAL EURODOLLAR CONTRACTS | $ (651,182) | ||||
Sold | |||||
Eurodollar Contracts | |||||
5 Eurodollar 90 Day Index Contracts | Dec. 2007 | 4,935,500 | 8,955 | ||
5 Eurodollar 90 Day Index Contracts | March 2008 | 4,935,500 | 8,780 | ||
4 Eurodollar 90 Day Index Contracts | June 2008 | 3,948,200 | 7,859 | ||
3 Eurodollar 90 Day Index Contracts | Sept. 2008 | 2,960,963 | 5,926 | ||
2 Eurodollar 90 Day Index Contracts | Dec. 2008 | 1,973,775 | 3,367 | ||
1 Eurodollar 90 Day Index Contracts | March 2009 | 986,825 | 1,696 | ||
TOTAL EURODOLLAR CONTRACTS | 36,583 | ||||
$ (614,599) | |||||
Swap Agreements | |||||
Expiration Date | Notional Amount | Value | |||
Credit Default Swaps | |||||
Receive monthly notional amount multiplied by 3.3% and pay to Morgan Stanley, Inc. upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R11 Class M9, 8.885% 11/25/34 | Dec. 2034 | $ 275,000 | $ 4,749 | ||
Receive from Citibank, upon default event of DaimlerChrysler NA Holding Corp., par value of the notional amount of DaimlerChrysler NA Holding Corp. 6.5% 11/15/13, and pay quarterly notional amount multiplied by .8% | June 2007 | 1,000,000 | (6,580) | ||
Receive monthly notional amount multiplied by 1.9% and pay Morgan Stanley, Inc., upon default event of Morgan Stanley ABS Capital, par value of the notional amount of Morgan Stanley ABS Capital I Series 2006-HE3 Class B3, 7.2225% 4/25/36 | May 2036 | 500,000 | (2,967) | ||
Receive monthly notional amount multiplied by 2.39% and pay UBS upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.73% 2/25/34 | March 2034 | 1,055,000 | 2,496 | ||
Receive monthly notional amount multiplied by 2.4% and pay Deutsche Bank upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.2288% 1/25/34 | Feb. 2034 | 305,732 | 405 | ||
Receive monthly notional amount multiplied by 2.7% and pay Morgan Stanley, Inc. upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M9, 6.41% 5/25/35 | June 2035 | 845,000 | (2,738) | ||
Receive monthly notional amount multiplied by 2.79% and pay Merrill Lynch, Inc. upon default event of New Century Home Equity Loan Trust, par value of the notional amount of New Century Home Equity Loan Trust Series 2004-4 Class M9, 7.0788% 2/25/35 | March 2035 | 610,000 | 5,491 | ||
Receive quarterly notional amount multiplied by .20% and pay Merrill Lynch, Inc. upon default event of American Transmission Co. LLC, par value of the notional amount of American Transmission Co. LLC 7.125% 3/15/11 | May 2007 | 1,315,000 | 1,447 | ||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Credit Default Swaps - continued | |||||
Receive quarterly notional amount multiplied by .26% and pay Morgan Stanley, Inc. upon default event of Amerada Hess Corp., par value of the notional amount of Amerada Hess Corp. 6.65% 8/15/11 | March 2007 | $ 1,650,000 | $ 2,525 | ||
Receive quarterly notional amount multiplied by .28% and pay Morgan Stanley, Inc. upon default event of Amerada Hess Corp., par value of the notional amount of Amerada Hess 6.65% 8/15/11 | March 2007 | 2,000,000 | 3,280 | ||
Receive quarterly notional amount multiplied by .285% and pay Deutsche Bank upon default event of ConocoPhillips, par value of the notional amount of ConocoPhillips 4.75% 10/15/12 | Sept. 2011 | 2,200,000 | (3,036) | ||
Receive quarterly notional amount multiplied by .30% and pay Deutsche Bank upon default event of Entergy Corp., par value of the notional amount of Entergy Corp. 7.75% 12/15/09 | March 2008 | 1,390,000 | 1,904 | ||
Receive quarterly notional amount multiplied by .30% and pay Goldman Sachs upon default event of Entergy Corp., par value of the notional amount of Entergy Corp. 7.75% 12/15/09 | March 2008 | 1,015,000 | 1,391 | ||
Receive quarterly notional amount multiplied by .48% and pay Goldman Sachs upon default event of TXU Corp., par value of the notional amount of TXU Energy Co. LLC 7% 3/15/13 | Sept. 2008 | 1,840,000 | 8,869 | ||
Receive quarterly notional amount multiplied by .78% and pay Goldman Sachs upon default event of TXU Corp., par value of the notional amount of TXU Energy Co. LLC 7% 3/15/13 | Dec. 2008 | 1,750,000 | 20,265 | ||
Receive semi-annually notional amount multiplied by .42% and pay Credit Suisse First Boston upon default event of Russian Federation, par value of the notional amount of Russian Federation 5% 3/31/30 | June 2007 | 1,900,000 | 2,261 | ||
TOTAL CREDIT DEFAULT SWAPS | 19,650,732 | 39,762 | |||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Total Return Swaps | |||||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Oct. 2006 | $ 5,655,000 | $ 2,164 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Citibank | Nov. 2006 | 6,800,000 | 3,243 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Jan. 2007 | 4,900,000 | 2,048 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor plus 20 basis points and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Jan. 2007 | 3,000,000 | 705 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor plus 10 basis points and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Nov. 2006 | 8,900,000 | 4,147 | ||
TOTAL TOTAL RETURN SWAPS | 29,255,000 | 12,307 | |||
$ 48,905,732 | $ 52,069 |
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 $114,788,836 or 13.3% 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 $346,206. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited list of holdings for each fixed-income central fund, as of the investing fund's report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central fund's financial statements, which are not covered by the investing fund's Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $2,196,449 or 0.3% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Aspetuck Trust 5.7869% 10/16/06 | 12/14/05 | $ 2,195,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Ultra-Short Central Fund | $ 13,482,875 |
Additional information regarding the fund's fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows: |
Fund | Value, beginning of period | Purchases | Sales | Value,end of period | % ownership, |
Fidelity Ultra-Short Central Fund | $ 288,274,676 | $ - | $ 50,500,019 | $ 237,764,502 | 3.1% |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 85.1% |
United Kingdom | 8.4% |
France | 1.8% |
Cayman Islands | 1.1% |
Others (individually less than 1%) | 3.6% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $1,917,431 all of which will expire on July 31, 2014. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $23,839,000) - Unaffiliated issuers (cost $632,873,000) | $ 632,701,974 | |
Affiliated Central Funds (cost $237,531,138) | 237,764,502 | |
Total Investments (cost $870,404,138) | $ 870,466,476 | |
Cash | 916 | |
Receivable for swap agreements | 7,371 | |
Receivable for fund shares sold | 1,306,558 | |
Interest receivable | 3,522,720 | |
Receivable for daily variation on futures contracts | 10,087 | |
Swap agreements, at value | 52,069 | |
Other receivables | 155 | |
Total assets | 875,366,352 | |
Liabilities | ||
Payable for investments purchased | $ 10,689,698 | |
Delayed delivery | 1,499,415 | |
Payable for fund shares redeemed | 940,414 | |
Distributions payable | 407,013 | |
Accrued management fee | 238,511 | |
Distribution fees payable | 1,088 | |
Other affiliated payables | 96,970 | |
Total liabilities | 13,873,109 | |
Net Assets | $ 861,493,243 | |
Net Assets consist of: | ||
Paid in capital | $ 863,673,830 | |
Undistributed net investment income | 106,939 | |
Accumulated undistributed net realized gain (loss) on investments | (1,787,334) | |
Net unrealized appreciation (depreciation) on investments | (500,192) | |
Net Assets | $ 861,493,243 |
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, 2006 | ||
Calculation of Maximum Offering Price | $ 10.02 | |
Maximum offering price per share (100/98.50 of $10.02) | $ 10.17 | |
Class T: | $ 10.02 | |
Maximum offering price per share (100/98.50 of $10.02) | $ 10.17 | |
Ultra-Short Bond: | $ 10.02 | |
Institutional Class: | $ 10.02 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Interest | $ 28,826,439 | |
Income from affiliated Central Funds | 13,482,875 | |
Total income | 42,309,314 | |
Expenses | ||
Management fee | $ 2,887,734 | |
Transfer agent fees | 905,122 | |
Distribution fees | 10,051 | |
Fund wide operations fee | 254,545 | |
Independent trustees' compensation | 3,655 | |
Miscellaneous | 1,858 | |
Total expenses before reductions | 4,062,965 | |
Expense reductions | (5,737) | 4,057,228 |
Net investment income | 38,252,086 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | (134,456) | |
Affiliated Central Funds | (68,282) | |
Futures contracts | (1,229,016) | |
Swap agreements | 325,332 | |
Total net realized gain (loss) | (1,106,422) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 82,562 | |
Futures contracts | 9,496 | |
Swap agreements | (15,516) | |
Total change in net unrealized appreciation (depreciation) | 76,542 | |
Net gain (loss) | (1,029,880) | |
Net increase (decrease) in net assets resulting from operations | $ 37,222,206 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income | $ 38,252,086 | $ 18,477,979 |
Net realized gain (loss) | (1,106,422) | (526,929) |
Change in net unrealized appreciation (depreciation) | 76,542 | (889,284) |
Net increase (decrease) in net assets resulting | 37,222,206 | 17,061,766 |
Distributions to shareholders from net investment income | (38,283,502) | (18,371,771) |
Distributions to shareholders from net realized gain | - | (213,972) |
Total distributions | (38,283,502) | (18,585,743) |
Share transactions - net increase (decrease) | (51,227,531) | 334,021,363 |
Redemption fees | 28,307 | 34,215 |
Total increase (decrease) in net assets | (52,260,520) | 332,531,601 |
Net Assets | ||
Beginning of period | 913,753,763 | 581,222,162 |
End of period (including undistributed net investment income of $106,939 and undistributed net investment income of $26,805, respectively) | $ 861,493,243 | $ 913,753,763 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 H |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income E | .400 | .223 | .013 |
Net realized and unrealized gain (loss) | (.009) | (.026) | .011 |
Total from investment operations | .391 | .197 | .024 |
Distributions from net investment income | (.401) | (.214) | (.014) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.401) | (.217) | (.014) |
Redemption fees added to paid in capital E, J | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C, D | 3.97% | 1.98% | .24% |
Ratios to Average Net Assets F, I | |||
Expenses before reductions | .70% | .78% | .85% A |
Expenses net of fee waivers, if any | .70% | .70% | .70% A |
Expenses net of all reductions | .70% | .70% | .70% A |
Net investment income | 4.00% | 2.23% | 1.11% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 4,553 | $ 2,557 | $ 316 |
Portfolio turnover rate G | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J 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
Years ended July 31, | 2006 | 2005 | 2004 H |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income E | .404 | .222 | .013 |
Net realized and unrealized gain (loss) | (.011) | (.025) | .010 |
Total from investment operations | .393 | .197 | .023 |
Distributions from net investment income | (.403) | (.214) | (.013) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.403) | (.217) | (.013) |
Redemption fees added to paid in capital E, J | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C, D | 4.00% | 1.98% | .23% |
Ratios to Average Net Assets F, I | |||
Expenses before reductions | .68% | .77% | .86% A |
Expenses net of fee waivers, if any | .68% | .70% | .70% A |
Expenses net of all reductions | .68% | .70% | .70% A |
Net investment income | 4.03% | 2.23% | 1.11% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 4,624 | $ 4,044 | $ 356 |
Portfolio turnover rate G | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Ultra-Short Bond
Years ended July 31, | 2006 | 2005 | 2004 | 2003 G |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.02 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income D | .427 | .241 | .122 | .137 |
Net realized and unrealized gain (loss) | (.011) | (.026) | .029 | .052 |
Total from investment operations | .416 | .215 | .151 | .189 |
Distributions from net investment income | (.426) | (.232) | (.122) | (.173) |
Distributions from net realized gain | - | (.003) | - | - |
Total distributions | (.426) | (.235) | (.122) | (.173) |
Redemption fees added to paid in capital D | - I | - I | .001 | .004 |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 | $ 10.02 |
Total Return B, C | 4.23% | 2.16% | 1.52% | 1.94% |
Ratios to Average Net Assets E, H | ||||
Expenses before reductions | .45% | .58% | .62% | .70% A |
Expenses net of fee waivers, if any | .45% | .53% | .55% | .55% A |
Expenses net of all reductions | .45% | .53% | .55% | .55% A |
Net investment income | 4.26% | 2.41% | 1.21% | 1.50% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 850,329 | $ 906,644 | $ 580,174 | $ 225,203 |
Portfolio turnover rate F | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G For the period August 29, 2002 (commencement of operations) to July 31, 2003.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 G |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income D | .420 | .240 | .015 |
Net realized and unrealized gain (loss) | (.008) | (.026) | .010 |
Total from investment operations | .412 | .214 | .025 |
Distributions from net investment income | (.422) | (.231) | (.015) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.422) | (.234) | (.015) |
Redemption fees added to paid in capital D, I | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C | 4.19% | 2.15% | .25% |
Ratios to Average Net Assets E, H | |||
Expenses before reductions | .49% | .58% | .67% A |
Expenses net of fee waivers, if any | .49% | .55% | .55% A |
Expenses net of all reductions | .49% | .55% | .55% A |
Net investment income | 4.22% | 2.38% | 1.26% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 1,987 | $ 509 | $ 376 |
Portfolio turnover rate F | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I 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, 2006
1. Significant Accounting Policies.
Fidelity Ultra-Short Bond Fund (the Fund) is a non-diversified 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, Ultra-Short Bond (the original class), 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 Fund may invest in Fidelity Ultra-Short Central Fund (Ultra-Short Central Fund) referred to as the Central Fund, which is an open-end investment company available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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, which are also consistently followed by the Central Fund:
Security Valuation. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open-end mutual funds, including the Central Fund, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions, including the Fund's investment activity in the Central Fund, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income and distributions from the Central Fund are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing 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. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures transactions, swap agreements, market discount, financing transactions, capital loss carryforwards and losses deferred due to excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,312,725 | |
Unrealized depreciation | (1,126,965) | |
Net unrealized appreciation (depreciation) | 185,760 | |
Undistributed ordinary income | 324,954 | |
Capital loss carryforward | (1,917,431) | |
Cost for federal income tax purposes | $ 870,280,716 |
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, 2006 | July 31, 2005 | |
Ordinary Income | $ 38,283,502 | $ 18,371,770 |
Long-term Capital Gains | - | 213,973 |
Total | $ 38,283,502 | $ 18,585,743 |
Short-Term Trading (Redemption) Fees. Shares 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 FMR, are retained by the Fund and accounted for as an addition to paid in capital.
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
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
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Notes to Financial Statements - continued
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
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 and to fluctuations in interest rates. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. 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.
Annual Report
2. Operating Policies - continued
Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Total return swaps are agreements to exchange the return generated by one instrument or index 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, a fund will receive a payment from the counterparty. To the extent it is less, a 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 either it or its counterparty act as guarantors. By acting as the guarantor of a swap, a fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Periodic payments and premiums received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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 a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."
Mortgage Dollar Rolls. 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
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Mortgage Dollar Rolls - continued
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, a 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 $296,940,910 and $234,644,796, 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 .20% of the Fund's average net assets and a group fee rate that averaged ..12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.
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% | $ 4,724 | $ 432 |
Class T | 0% | .15% | 5,327 | 2,729 |
$ 10,051 | $ 3,161 |
Annual Report
4. Fees and Other Transactions with Affiliates - continued
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 range from .75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 2,219 |
Class T | 674 |
$ 2,893 |
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 Ultra-Short Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Ultra-Short Bond shares. FIIOC receives 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. FSC receives an asset-based fee of .10% of Ultra-Short Bond's average net assets. 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 | $ 6,362 | .20 |
Class T | 6,322 | .18 |
Ultra-Short Bond | 891,306 | .10 |
Institutional Class | 1,132 | .14 |
$ 905,122 |
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Ultra-Short Central Fund, managed by Fidelity Investments Money Management, Inc. (FIMM), which seeks to obtain a high level of current income consistent with preservation of capital by investing in U.S. dollar denominated money market and investment-grade debt securities.
The Fund's Schedule of Investments lists the Central Fund as an investment of the Fund but does not include the underlying holdings of the Central Fund. Based on its investment objectives, the Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the Central Fund and the Fund.
A complete unaudited list of holdings for the Central Fund, as of the Fund's report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the Fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the Central Fund financial statements, which are not covered by this Fund's Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
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, which amounts to $1,858 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $2,662. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Ultra-Short Bond | $ 3,075 |
Annual Report
7. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
8. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | ||
2006 | 2005 | |
From net investment income | ||
Class A | $ 126,997 | $ 41,869 |
Class T | 141,086 | 50,050 |
Ultra-Short Bond | 37,977,353 | 18,257,386 |
Institutional Class | 38,066 | 22,466 |
Total | $ 38,283,502 | $ 18,371,771 |
From net realized gain | ||
Class A | $ - | $ 407 |
Class T | - | 503 |
Ultra-Short Bond | - | 212,634 |
Institutional Class | - | 428 |
Total | $ - | $ 213,972 |
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2006 | 2005 | 2006 | 2005 | |
Class A | ||||
Shares sold | 574,958 | 314,954 | $ 5,763,274 | $ 3,163,548 |
Reinvestment of distributions | 10,043 | 3,804 | 100,637 | 38,189 |
Shares redeemed | (385,505) | (95,385) | (3,863,258) | (957,951) |
Net increase (decrease) | 199,496 | 223,373 | $ 2,000,653 | $ 2,243,786 |
Class T | ||||
Shares sold | 357,260 | 597,602 | $ 3,579,216 | $ 6,002,298 |
Reinvestment of distributions | 13,205 | 4,137 | 132,333 | 41,523 |
Shares redeemed | (312,176) | (234,046) | (3,129,874) | (2,350,424) |
Net increase (decrease) | 58,289 | 367,693 | $ 581,675 | $ 3,693,397 |
Annual Report
Notes to Financial Statements - continued
9. Share Transactions - continued
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2006 | 2005 | 2006 | 2005 | |
Ultra-Short Bond | ||||
Shares sold | 39,226,057 | 63,063,839 | $ 393,000,678 | $ 633,315,534 |
Reinvestment of distributions | 3,400,651 | 1,643,763 | 34,072,273 | 16,499,718 |
Shares redeemed | (48,147,604) | (32,055,308) | (482,361,462) | (321,868,107) |
Net increase (decrease) | (5,520,896) | 32,652,294 | $ (55,288,511) | $ 327,947,145 |
Institutional Class | ||||
Shares sold | 190,577 | 296,985 | $ 1,908,425 | $ 2,986,442 |
Reinvestment of distributions | 756 | 2,113 | 7,577 | 21,221 |
Shares redeemed | (43,621) | (285,834) | (437,350) | (2,870,628) |
Net increase (decrease) | 147,712 | 13,264 | $ 1,478,652 | $ 137,035 |
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, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the years in the period then ended, 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 2006
Annual Report
Trustees and Officers
The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 347 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate. Mr. Gamper oversees 292 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of the fund (2005 -present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003- present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003- present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). 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.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 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). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
Robert M. Gates (63) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). 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-present), and Brinker International (restaurant management, 2003-present). 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). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
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-present). 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 (62) | |
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. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
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 Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) 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 (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman Emeritus 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), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). 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. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Member and Executive Officers:
Correspondence intended for Mr. Keyes 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 | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Income Fund (2006). Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund (2003). Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2006 Vice President of the fund. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
David L. Murphy (58) | |
Year of Election or Appointment: 2005 Vice President of the fund. Mr. Murphy also serves as Vice President of Fidelity's Money Market Funds (2002-present), certain Asset Allocation Funds (2003-present), Fixed-Income Funds (2005-present), and Balanced Funds (2005-present). He serves as Senior Vice President (2000-present) and Head (2004-present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of Fidelity Investments Money Management, Inc. (2003-present) and an Executive Vice President of FMR (2005-present). Previously, Mr. Murphy served as Money Market Group Leader (2002-2004), Bond Group Leader (2000-2002), and Vice President of Fidelity's Taxable Bond Funds (2000-2002) and Fidelity's Municipal Bond Funds (2001-2002). | |
Thomas J. Silvia (45) | |
Year of Election or Appointment: 2005 Vice President of the fund. Mr. Silvia also serves as Vice President of Fidelity's Fixed-Income Funds (2005-present), certain Balanced Funds (2005-present), certain Asset Allocation Funds (2005-present), and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed-Income Division (2005-present). Previously, Mr. Silvia served as Director of Fidelity's Taxable Bond portfolio managers (2002-2004) and a portfolio manager in the Bond Group (1997-2004). | |
Andrew Dudley (41) | |
Year of Election or Appointment: 2002 Vice President of the fund. Mr. Dudley also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Dudley worked as a portfolio manager. | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 2002 Secretary of the fund. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of the fund. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) 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. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of the fund. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of the fund. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
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-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005- present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of the fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
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). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of the fund. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). 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). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
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. | |
Peter L. Lydecker (52) | |
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 (51) | |
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. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The fund designates $21,139,410 of distributions paid during the period January 1, 2006 to July 31, 2006 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on January 18, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 8,252,035,677.61 | 97.347 |
Withheld | 224,894,685.16 | 2.653 |
TOTAL | 8,476,930,362.77 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 8,252,680,829.70 | 97.355 |
Withheld | 224,249,533.07 | 2.645 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert M. Gates | ||
Affirmative | 8,239,007,314.92 | 97.193 |
Withheld | 237,923,047.85 | 2.807 |
TOTAL | 8,476,930,362.77 | 100.000 |
George H. Heilmeier | ||
Affirmative | 8,242,547,667.10 | 97.235 |
Withheld | 234,382,695.67 | 2.765 |
TOTAL | 8,476,930,362.77 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 8,207,133,817.28 | 96.817 |
Withheld | 269,796,545.49 | 3.183 |
TOTAL | 8,476,930,362.77 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 8,205,030,635.55 | 96.792 |
Withheld | 271,899,727.22 | 3.208 |
TOTAL | 8,476,930,362.77 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 8,239,700,661.39 | 97.201 |
Withheld | 237,229,701.38 | 2.799 |
TOTAL | 8,476,930,362.77 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 8,246,135,458.96 | 97.277 |
Withheld | 230,794,903.81 | 2.723 |
TOTAL | 8,476,930,362.77 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 8,247,874,320.21 | 97.298 |
Withheld | 229,056,042.56 | 2.702 |
TOTAL | 8,476,930,362.77 | 100.000 |
William O. McCoy | ||
Affirmative | 8,229,632,189.68 | 97.083 |
Withheld | 247,298,173.09 | 2.917 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 8,241,271,395.49 | 97.220 |
Withheld | 235,658,967.28 | 2.780 |
TOTAL | 8,476,930,362.77 | 100.000 |
Cornelia M. Small | ||
Affirmative | 8,249,991,018.59 | 97.323 |
Withheld | 226,939,344.18 | 2.677 |
TOTAL | 8,476,930,362.77 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 8,236,371,332.54 | 97.162 |
Withheld | 240,559,030.23 | 2.838 |
TOTAL | 8,476,930,362.77 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 8,244,328,417.87 | 97.256 |
Withheld | 232,601,944.90 | 2.744 |
TOTAL | 8,476,930,362.77 | 100.000 |
A Denotes trust-wide proposal and voting results. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Ultra-Short Bond Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Fixed-Income Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its June 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in June 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Annual Report
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. Because the fund had been in existence less than five calendar years, the following charts considered by the Board show, over the one- and three-year periods ended December 31, 2005, as applicable, the cumulative total returns of Class T and Fidelity Ultra-Short Bond (retail class), the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class T and Fidelity Ultra-Short Bond (retail class) represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Fidelity Ultra-Short Bond Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Fidelity Ultra-Short Bond (retail class) was in the first quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for the one-year period, although the three-year cumulative total return of Fidelity Ultra-Short Bond (retail class) compared favorably to its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
The Board considered two proprietary management fee comparisons for the 12-month (or shorter) periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 14% means that 86% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Ultra-Short Bond Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that it had approved changes (effective June 1, 2005) in the contractual arrangements for the fund that (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Ultra-Short Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Ultra-Short Bond (retail class) to 45 basis points. These contractual arrangements may not be increased without Board approval. The fund's Advisor classes continue to be subject to different class-level expenses (transfer agent fees and 12b-1 fees).
The Board noted that the total expenses of each class ranked below its competitive median for 2005. The Board considered that each class's total expenses reflect the contractual arrangements for 2005, as if the contractual arrangements were in effect for the entire year.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board noted that because the contractual arrangements that went into effect June 1, 2005 set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses. The Board realized, however, that the 35 basis point fee rate was below the lowest management fee rate available under the contractual arrangements that existed prior to June 1, 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including (Advisor classes only) reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases. The Board also noted that the reduction in the fund's individual fund fee rate by 10 basis points delivers significant economies to fund shareholders. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) funds and accounts managed by Fidelity other than the Fidelity funds, including fee arrangements; (iii) the total expenses of certain funds and classes relative to competitors; (iv) fund performance trends; and (v) Fidelity's fee structures.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
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(U.K.) Limited
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(formerly Fidelity Management &
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Fidelity Distributors Corporation
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Citibank, N.A.
New York, NY
AUSB-UANN-0906
1.804587.102
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity Advisor
Ultra-Short Bond
Fund - Institutional Class
Annual Report
July 31, 2006
Institutional Class
is a class of
Fidelity® Ultra-Short Bond Fund
(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 | ||
Board Approval of Investment Advisory Contracts and Management Fees |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit 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.
Annual Report
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) 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, 2006 | Past 1 | Life of | |
Institutional Class B | 4.19% | 2.49% |
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 changed, and also shows how the Lehman Brothers® 6 Month Swap Index performed 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
The domestic investment-grade bond market struggled during the 12-month period ending July 31, 2006, finishing with a 1.46% return as measured by the Lehman Brothers® Aggregate Bond Index. The negative momentum was typically a result of rising levels of core inflation, Federal Reserve Board interest rate hikes aimed to keep inflation at bay, and a yield curve that was sometimes inverted, meaning short-term yields exceeded long-term yields - a phenomenon that's often a precursor of a recession. In all, the Fed bumped up rates eight times during the period, hoisting the federal funds target rate to 5.25%, its highest level in five years. On the plus side, bonds scored well in the final quarter of the period, advancing 1.46%, which was identical to the debt market's return for the entire one-year period. Investors turned to high-quality debt in the last three months for a number of reasons: Equity performance stumbled; gross domestic product growth in the second quarter of 2006 gave strong evidence of a slowing economy; and the Fed supported that notion by announcing there was a good possibility of a pause in its rate hike campaign.
During the past year, the fund's Institutional Class shares gained 4.19%, while the Lehman Brothers 6 Month Swap Index returned 4.22%. Boosting the fund's performance relative to the index was yield-curve positioning, with a large position in the Fidelity® Ultra-Short Central Fund - a diversified internal pool of short-term assets designed to outperform cash-like instruments with similar risk characteristics - and an overweighting in bonds with maturities in the one-to-two year range. Also to the fund's benefit was advantageous sector positioning, led by a heavy emphasis on non-government bonds, including structured products such as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities. These structured securities, which I held directly and also indirectly through our investment in the Fidelity Ultra-Short Central Fund, significantly outpaced the index. Modestly detracting from returns were out-of-index exposures to corporate and mortgage pass-through securities, both of which slightly lagged the index during the period.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including 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, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annual Report
Shareholder Expense Example - continued
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,022.30 | $ 3.51 |
HypotheticalA | $ 1,000.00 | $ 1,021.32 | $ 3.51 |
Class T | |||
Actual | $ 1,000.00 | $ 1,022.50 | $ 3.46 |
HypotheticalA | $ 1,000.00 | $ 1,021.37 | $ 3.46 |
Ultra-Short Bond | |||
Actual | $ 1,000.00 | $ 1,023.70 | $ 2.26 |
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,023.50 | $ 2.41 |
HypotheticalA | $ 1,000.00 | $ 1,022.41 | $ 2.41 |
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 181/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central fund in which the fund invests are not included in the fund's annualized expense ratio.
Annualized | |
Class A | .70% |
Class T | .69% |
Ultra-Short Bond | .45% |
Institutional Class | .48% |
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of July 31, 2006 | As of January 31, 2006 | ||||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | AAA 25.9% | ![]() | AAA 26.8% | ||||
![]() | AA 11.5% | ![]() | AA 11.0% | ||||
![]() | A 13.0% | ![]() | A 11.2% | ||||
![]() | BBB 16.9% | ![]() | BBB 14.5% | ||||
![]() | BB and Below 0.6% | ![]() | BB and Below 0.5% | ||||
![]() | Not Rated 4.8% | ![]() | Not Rated 1.4% | ||||
![]() | 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, 2006 | ||
6 months ago | ||
Years | 1.9 | 1.7 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of July 31, 2006 | ||
6 months ago | ||
Years | 0.5 | 0.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006* | As of January 31, 2006** | ||||||
![]() | Corporate Bonds 10.6% | ![]() | Corporate Bonds 8.7% | ||||
![]() | U.S. Government and | ![]() | U.S. Government and | ||||
![]() | Asset-Backed | ![]() | Asset-Backed | ||||
![]() | CMOs and Other Mortgage Related Securities 23.1% | ![]() | CMOs and Other Mortgage Related Securities 22.8% | ||||
![]() | Short-Term | ![]() | Short-Term | ||||
* Foreign investments | 14.9% | ** Foreign investments | 11.0% | ||||
* Futures and Swaps | 18.0% | ** Futures and Swaps | 18.3% |
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
For an unaudited list of holdings for each fixed-income central fund, visit fidelity.com and/or advisor.fidelity.com, as applicable. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Nonconvertible Bonds - 8.6% | |||
Principal Amount | Value | ||
CONSUMER DISCRETIONARY - 1.7% | |||
Auto Components - 0.5% | |||
DaimlerChrysler NA Holding Corp.: | |||
5.74% 3/13/09 (d) | $ 1,800,000 | $ 1,801,874 | |
5.78% 9/10/07 (d) | 1,230,000 | 1,233,707 | |
Johnson Controls, Inc. 5.5988% 1/17/08 (d) | 1,515,000 | 1,517,862 | |
4,553,443 | |||
Media - 1.2% | |||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 900,000 | 902,359 | |
Cox Communications, Inc.: | |||
(Reg. S) 5.8694% 12/14/07 (d) | 2,330,000 | 2,341,387 | |
7.75% 8/15/06 | 360,000 | 360,184 | |
Liberty Media Corp. 6.8294% 9/17/06 (d) | 3,033,000 | 3,036,852 | |
Univision Communications, Inc. 2.875% 10/15/06 | 1,210,000 | 1,201,709 | |
Viacom, Inc. 5.6906% 6/16/09 (a)(d) | 2,000,000 | 1,999,848 | |
9,842,339 | |||
TOTAL CONSUMER DISCRETIONARY | 14,395,782 | ||
ENERGY - 0.3% | |||
Oil, Gas & Consumable Fuels - 0.3% | |||
Enterprise Products Operating LP 4% 10/15/07 | 2,670,000 | 2,613,340 | |
FINANCIALS - 3.3% | |||
Capital Markets - 0.1% | |||
Lehman Brothers Holdings E-Capital Trust I 5.9538% 8/19/65 (d) | 720,000 | 720,373 | |
Commercial Banks - 0.4% | |||
Santander Issuances SA Unipersonal 5.7006% 6/20/16 (a)(d) | 1,500,000 | 1,500,051 | |
Wells Fargo & Co. 5.34% 3/10/08 (d) | 2,300,000 | 2,301,267 | |
3,801,318 | |||
Consumer Finance - 0.7% | |||
MBNA Capital I 8.278% 12/1/26 | 810,000 | 848,375 | |
MBNA Europe Funding PLC 5.3363% 9/7/07 (a)(d) | 2,720,000 | 2,721,474 | |
SLM Corp. 5.6647% 7/26/10 (d) | 2,770,000 | 2,768,147 | |
6,337,996 | |||
Nonconvertible Bonds - continued | |||
Principal Amount | Value | ||
FINANCIALS - continued | |||
Diversified Financial Services - 0.5% | |||
Aspetuck Trust 5.7869% 10/16/06 (d)(g) | $ 2,195,000 | $ 2,196,449 | |
CC Funding Trust I 6.9% 2/16/07 | 1,695,000 | 1,705,309 | |
3,901,758 | |||
Insurance - 0.1% | |||
Oil Insurance Ltd. 5.545% 10/6/06 (a)(d) | 830,000 | 829,799 | |
Real Estate Investment Trusts - 0.5% | |||
iStar Financial, Inc. 5.9638% 3/16/09 (d) | 2,505,000 | 2,521,293 | |
Reckson Operating Partnership LP 6% 6/15/07 | 1,440,000 | 1,435,572 | |
3,956,865 | |||
Thrifts & Mortgage Finance - 1.0% | |||
Countrywide Financial Corp. 5.67% 4/11/07 (d) | 1,575,000 | 1,576,386 | |
Residential Capital Corp. 6.875% 6/29/07 (d) | 1,995,000 | 2,005,061 | |
Washington Mutual Bank: | |||
5.2388% 5/1/09 (d) | 3,000,000 | 3,001,119 | |
5.31% 8/25/08 (d) | 2,220,000 | 2,222,513 | |
8,805,079 | |||
TOTAL FINANCIALS | 28,353,188 | ||
INFORMATION TECHNOLOGY - 0.2% | |||
Communications Equipment - 0.2% | |||
Motorola, Inc. 4.608% 11/16/07 | 1,700,000 | 1,681,341 | |
TELECOMMUNICATION SERVICES - 1.9% | |||
Diversified Telecommunication Services - 1.8% | |||
AT&T, Inc. 5.2625% 5/15/08 (d) | 3,000,000 | 3,001,032 | |
Deutsche Telekom International Finance BV 5.6288% 3/23/09 (d) | 1,725,000 | 1,726,113 | |
Sprint Capital Corp. 4.78% 8/17/06 | 1,000,000 | 999,704 | |
Telecom Italia Capital SA 6.1081% 7/18/11 (d) | 3,000,000 | 3,001,473 | |
Telefonica Emisiones SAU 5.61% 6/19/09 (d) | 3,500,000 | 3,502,734 | |
Telefonos de Mexico SA de CV 4.5% 11/19/08 | 1,605,000 | 1,559,076 | |
TELUS Corp. yankee 7.5% 6/1/07 | 2,000,000 | 2,030,302 | |
15,820,434 | |||
Wireless Telecommunication Services - 0.1% | |||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 700,000 | 699,847 | |
TOTAL TELECOMMUNICATION SERVICES | 16,520,281 | ||
Nonconvertible Bonds - continued | |||
Principal Amount | Value | ||
UTILITIES - 1.2% | |||
Electric Utilities - 0.3% | |||
Pepco Holdings, Inc. 5.5% 8/15/07 | $ 2,710,000 | $ 2,706,794 | |
Independent Power Producers & Energy Traders - 0.3% | |||
Constellation Energy Group, Inc. 6.35% 4/1/07 | 910,000 | 913,714 | |
Duke Capital LLC 4.331% 11/16/06 | 1,590,000 | 1,583,018 | |
2,496,732 | |||
Multi-Utilities - 0.6% | |||
Dominion Resources, Inc. 5.79% 9/28/07 (d) | 2,300,000 | 2,301,663 | |
NiSource, Inc. 3.628% 11/1/06 | 1,055,000 | 1,049,284 | |
Sempra Energy 4.75% 5/15/09 | 2,000,000 | 1,956,382 | |
5,307,329 | |||
TOTAL UTILITIES | 10,510,855 | ||
TOTAL NONCONVERTIBLE BONDS (Cost $74,244,078) | 74,074,787 | ||
U.S. Government and Government Agency Obligations - 6.1% | |||
U.S. Government Agency Obligations - 6.0% | |||
Fannie Mae 0% 4/27/07 | 46,000,000 | 44,228,254 | |
Freddie Mac 0% 9/29/06 | 7,300,000 | 7,237,432 | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 51,465,686 | ||
U.S. Treasury Obligations - 0.1% | |||
U.S. Treasury Bills, yield at date of purchase 5.03% 10/19/06 (c) | 750,000 | 741,870 | |
TOTAL U.S. GOVERNMENT AND (Cost $52,261,448) | 52,207,556 | ||
U.S. Government Agency - Mortgage Securities - 1.1% | |||
Fannie Mae - 1.1% | |||
4.3% 10/1/34 (d) | 55,298 | 54,784 | |
4.307% 3/1/33 (d) | 138,726 | 137,167 | |
4.307% 10/1/33 (d) | 49,655 | 48,901 | |
4.323% 6/1/33 (d) | 61,166 | 60,476 | |
4.513% 10/1/35 (d) | 90,948 | 89,781 | |
U.S. Government Agency - Mortgage Securities - continued | |||
Principal Amount | Value | ||
Fannie Mae - continued | |||
4.553% 1/1/35 (d) | $ 223,468 | $ 221,694 | |
4.555% 9/1/34 (d) | 416,778 | 416,253 | |
4.593% 8/1/34 (d) | 138,275 | 137,752 | |
4.643% 1/1/33 (d) | 76,143 | 75,604 | |
4.658% 3/1/35 (d) | 53,780 | 53,374 | |
4.684% 9/1/34 (d) | 47,118 | 47,402 | |
4.708% 10/1/32 (d) | 24,827 | 24,737 | |
4.73% 2/1/33 (d) | 20,633 | 20,511 | |
4.732% 10/1/32 (d) | 31,928 | 32,271 | |
4.746% 1/1/35 (d) | 13,324 | 13,240 | |
4.811% 8/1/34 (d) | 118,558 | 118,217 | |
4.815% 5/1/33 (d) | 10,553 | 10,502 | |
4.988% 11/1/32 (d) | 86,703 | 86,872 | |
4.989% 12/1/32 (d) | 11,219 | 11,217 | |
5.016% 2/1/35 (d) | 46,737 | 46,556 | |
5.023% 7/1/34 (d) | 62,560 | 62,083 | |
5.063% 11/1/34 (d) | 25,481 | 25,593 | |
5.184% 8/1/33 (d) | 162,136 | 161,670 | |
5.294% 7/1/35 (d) | 67,769 | 67,718 | |
5.5% 11/1/16 to 2/1/19 | 4,010,734 | 3,976,024 | |
6.5% 7/1/16 to 3/1/35 | 2,261,507 | 2,296,635 | |
7% 8/1/17 to 5/1/32 | 1,215,544 | 1,243,832 | |
TOTAL FANNIE MAE | 9,540,866 | ||
Freddie Mac - 0.0% | |||
4.783% 10/1/32 (d) | 24,552 | 24,611 | |
4.86% 3/1/33 (d) | 62,962 | 62,507 | |
5.639% 4/1/32 (d) | 30,337 | 30,737 | |
TOTAL FREDDIE MAC | 117,855 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $9,903,646) | 9,658,721 | ||
Asset-Backed Securities - 29.3% | |||
Accredited Mortgage Loan Trust: | |||
Series 2004-2 Class A2, 5.685% 7/25/34 (d) | 386,570 | 387,853 | |
Series 2004-3 Class 2A4, 5.735% 10/25/34 (d) | 520,512 | 521,192 | |
Series 2004-4 Class A2D, 5.735% 1/25/35 (d) | 237,655 | 238,456 | |
Series 2005-1 Class M1, 5.855% 4/25/35 (d) | 1,545,000 | 1,552,561 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
ACE Securities Corp.: | |||
Series 2002-HE2 Class M1, 6.66% 8/25/32 (d) | $ 151,473 | $ 151,586 | |
Series 2003-HE1: | |||
Class M1, 6.035% 11/25/33 (d) | 113,099 | 113,568 | |
Class M2, 7.085% 11/25/33 (d) | 75,000 | 75,845 | |
Series 2003-HS1: | |||
Class M1, 6.135% 6/25/33 (d) | 50,000 | 50,301 | |
Class M2, 7.135% 6/25/33 (d) | 50,000 | 50,560 | |
Series 2003-NC1 Class M1, 6.165% 7/25/33 (d) | 100,000 | 100,370 | |
Series 2004-HE1: | |||
Class M1, 5.885% 2/25/34 (d) | 150,000 | 150,345 | |
Class M2, 6.485% 2/25/34 (d) | 175,000 | 176,377 | |
Series 2005-HE2: | |||
Class M2, 5.835% 4/25/35 (d) | 250,000 | 251,096 | |
Class M3, 5.865% 4/25/35 (d) | 145,000 | 145,974 | |
Class M4, 6.025% 4/25/35 (d) | 185,000 | 186,221 | |
Series 2005-HE3: | |||
Class A2A, 5.485% 5/25/35 (d) | 232,106 | 232,124 | |
Class A2B, 5.595% 5/25/35 (d) | 630,000 | 630,503 | |
Series 2005-SD1 Class A1, 5.785% 11/25/50 (d) | 173,919 | 174,169 | |
Series 2006-HE2: | |||
Class A2C, 5.545% 5/25/36 (d) | 995,000 | 995,930 | |
Class M1, 5.685% 5/25/36 (d) | 915,000 | 916,529 | |
Class M2, 5.705% 5/25/36 (d) | 305,000 | 305,238 | |
Class M3, 5.725% 5/25/36 (d) | 240,000 | 240,277 | |
Class M4, 5.785% 5/25/36 (d) | 200,000 | 200,305 | |
Class M5, 5.825% 5/25/36 (d) | 295,000 | 295,557 | |
Aesop Funding II LLC Series 2005-1A Class A2, 5.4381% 4/20/09 (a)(d) | 1,200,000 | 1,200,161 | |
American Express Credit Account Master Trust: | |||
Series 2004-1 Class B, 5.6188% 9/15/11 (d) | 410,000 | 411,573 | |
Series 2004-5 Class B, 5.6188% 4/16/12 (d) | 2,150,000 | 2,150,496 | |
Series 2004-C Class C, 5.8688% 2/15/12 (a)(d) | 591,770 | 593,267 | |
Series 2005-1 Class A, 5.3988% 10/15/12 (d) | 2,185,000 | 2,186,113 | |
Series 2005-6 Class C, 5.6188% 3/15/11 (a)(d) | 1,275,000 | 1,276,734 | |
AmeriCredit Automobile Receivables Trust: | |||
Series 2003-AM Class A4B, 5.8038% 11/6/09 (d) | 329,492 | 329,886 | |
Series 2003-BX Class A4B, 5.8038% 1/6/10 (d) | 84,194 | 84,304 | |
Series 2004-1 Class A3, 3.22% 7/6/08 | 72,682 | 72,582 | |
Series 2005-1 Class C, 4.73% 7/6/10 | 2,500,000 | 2,463,979 | |
Series 2006-RM Class A1, 5.37% 10/6/09 | 2,000,000 | 1,998,267 | |
Ameriquest Mortgage Securities, Inc.: | |||
Series 2003-1 Class M1, 6.285% 2/25/33 (d) | 474,619 | 475,824 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Ameriquest Mortgage Securities, Inc.: - continued | |||
Series 2003-11 Class M1, 6.075% 1/25/34 (d) | $ 1,930,000 | $ 1,947,423 | |
Series 2003-3 Class M1, 6.185% 3/25/33 (d) | 21,641 | 21,713 | |
Series 2003-AR1 Class M1, 6.535% 1/25/33 (d) | 370,506 | 371,746 | |
Series 2004-R11 Class M1, 6.045% 11/25/34 (d) | 560,000 | 564,212 | |
Series 2004-R2: | |||
Class M1, 5.815% 4/25/34 (d) | 85,000 | 84,998 | |
Class M2, 5.865% 4/25/34 (d) | 75,000 | 74,999 | |
Series 2004-R8 Class M9, 8.135% 9/25/34 (d) | 1,525,000 | 1,536,893 | |
Series 2004-R9: | |||
Class A3, 5.705% 10/25/34 (d) | 38,332 | 38,337 | |
Class M2, 6.035% 10/25/34 (d) | 720,000 | 725,567 | |
Class M4, 6.555% 10/25/34 (d) | 925,000 | 937,697 | |
Series 2005-R1: | |||
Class M1, 5.835% 3/25/35 (d) | 770,000 | 771,978 | |
Class M2, 5.865% 3/25/35 (d) | 260,000 | 261,056 | |
Series 2005-R2 Class M1, 5.835% 4/25/35 (d) | 1,700,000 | 1,706,851 | |
Amortizing Residential Collateral Trust: | |||
Series 2002-BC1 Class M2, 6.485% 1/25/32 (d) | 35,456 | 35,701 | |
Series 2002-BC6 Class M1, 6.135% 8/25/32 (d) | 100,000 | 100,454 | |
ARG Funding Corp.: | |||
Series 2005-1A Class A2, 5.4781% 4/20/09 (a)(d) | 1,500,000 | 1,502,188 | |
Series 2005-2A Class A2, 5.4881% 5/20/09 (a)(d) | 800,000 | 799,989 | |
Argent Securities, Inc.: | |||
Series 2003-W3 Class M2, 7.185% 9/25/33 (d) | 800,000 | 809,499 | |
Series 2004-W5 Class M1, 5.985% 4/25/34 (d) | 1,420,000 | 1,421,663 | |
Series 2004-W7: | |||
Class M1, 5.935% 5/25/34 (d) | 305,000 | 307,122 | |
Class M2, 5.985% 5/25/34 (d) | 250,000 | 251,791 | |
Series 2006-W1 Class M10, 7.885% 3/25/36 (d) | 995,000 | 916,994 | |
Series 2006-W4: | |||
Class A2C, 5.545% 5/25/36 (d) | 1,200,000 | 1,200,575 | |
Class M2, 5.705% 5/25/36 (d) | 1,265,000 | 1,264,466 | |
Class M3, 5.725% 5/25/36 (d) | 1,010,000 | 1,009,579 | |
Arran Funding Ltd. Series 2005-A Class C, 5.1875% 12/15/10 (d) | 3,235,000 | 3,234,030 | |
Asset Backed Funding Certificates Series 2004-HE1 Class M2, 6.535% 1/25/34 (d) | 230,000 | 233,902 | |
Asset Backed Securities Corp. Home Equity Loan Trust: | |||
Series 2003-HE2 Class M1, 6.2688% 4/15/33 (d) | 1,165,025 | 1,166,976 | |
Series 2003-HE6 Class M1, 6.035% 11/25/33 (d) | 215,000 | 216,507 | |
Series 2003-HE7 Class A3, 5.7288% 12/15/33 (d) | 45,714 | 45,858 | |
Series 2004-HE6 Class A2, 5.745% 6/25/34 (d) | 825,475 | 827,448 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Asset Backed Securities Corp. Home Equity Loan Trust: - continued | |||
Series 2005-HE1 Class M1, 5.885% 3/25/35 (d) | $ 540,000 | $ 543,203 | |
Series 2005-HE2: | |||
Class M1, 5.835% 3/25/35 (d) | 1,105,000 | 1,111,225 | |
Class M2, 5.885% 3/25/35 (d) | 275,000 | 277,143 | |
Series 2005-HE3 Class A4, 5.585% 4/25/35 (d) | 1,234,989 | 1,235,468 | |
Bank One Issuance Trust: | |||
Series 2002-B1 Class B1, 5.7488% 12/15/09 (d) | 465,000 | 465,681 | |
Series 2002-C1 Class C1, 6.3288% 12/15/09 (d) | 675,000 | 678,457 | |
Series 2003-C4 Class C4, 6.3988% 2/15/11 (d) | 2,010,000 | 2,039,325 | |
Series 2004-C1 Class C1, 5.8688% 11/15/11 (d) | 25,000 | 25,172 | |
Bayview Financial Acquisition Trust Series 2004-C Class A1, 5.82% 5/28/44 (d) | 581,257 | 582,260 | |
Bayview Financial Asset Trust Series 2003-F Class A, 5.9% 9/28/43 (d) | 150,114 | 150,187 | |
Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.85% 2/28/44 (d) | 270,073 | 270,606 | |
Bayview Financial Securities Co. LLC Series 2006-A Class 2A1, 5.52% 2/28/41 (d) | 1,758,247 | 1,758,686 | |
Bear Stearns Asset Backed Securities I: | |||
Series 2004-BO1: | |||
Class M2, 6.135% 9/25/34 (d) | 390,000 | 394,804 | |
Class M3, 6.435% 9/25/34 (d) | 265,000 | 268,223 | |
Class M4, 6.585% 9/25/34 (d) | 225,000 | 228,983 | |
Class M5, 6.785% 9/25/34 (d) | 210,000 | 213,924 | |
Series 2004-HE9 Class M2, 6.585% 11/25/34 (d) | 490,000 | 497,767 | |
Series 2005-HE2: | |||
Class M1, 5.885% 2/25/35 (d) | 905,000 | 909,666 | |
Class M2, 6.135% 2/25/35 (d) | 330,000 | 332,901 | |
Capital Auto Receivables Asset Trust: | |||
Series 2003-1 Class B, 5.8388% 6/15/10 (a)(d) | 51,292 | 51,332 | |
Series 2005-1 Class B, 5.7438% 6/15/10 (d) | 850,000 | 854,020 | |
Capital One Auto Finance Trust: | |||
Series 2003-A Class A4B, 5.6488% 1/15/10 (d) | 307,508 | 307,815 | |
Series 2004-B Class A4, 5.4788% 8/15/11 (d) | 1,700,000 | 1,700,399 | |
Series 2006-B Class A2, 5.53% 4/15/09 | 1,805,000 | 1,805,451 | |
Capital One Master Trust: | |||
Series 2001-1 Class B, 5.8788% 12/15/10 (d) | 500,000 | 502,162 | |
Series 2001-6 Class C, 6.7% 6/15/11 (a) | 2,200,000 | 2,247,524 | |
Series 2001-8A Class B, 5.9188% 8/17/09 (d) | 405,000 | 405,278 | |
Capital One Multi-Asset Execution Trust: | |||
Series 2003-B6 Class B6, 5.8988% 9/15/11 (d) | 1,125,000 | 1,133,824 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Capital One Multi-Asset Execution Trust: - continued | |||
Series 2004-B1 Class B1, 5.8088% 11/15/11 (d) | $ 1,180,000 | $ 1,186,016 | |
Series 2004-C1 Class C1, 3.4% 11/16/09 | 2,480,000 | 2,453,886 | |
Capital Trust Ltd. Series 2004-1: | |||
Class A2, 5.8281% 7/20/39 (a)(d) | 265,000 | 265,404 | |
Class B, 6.1281% 7/20/39 (a)(d) | 140,000 | 141,095 | |
Class C, 6.4781% 7/20/39 (a)(d) | 180,000 | 181,251 | |
Carrington Mortgage Loan Trust Series 2006-FRE1: | |||
Class M7, 6.335% 7/25/36 (d) | 445,000 | 444,989 | |
Class M9, 7.285% 7/25/36 (d) | 285,000 | 284,992 | |
Cayman ABSC NIMS Trust Series 2004-HE2 Class A1, 6.75% 4/25/34 (a) | 20,691 | 20,639 | |
CDC Mortgage Capital Trust: | |||
Series 2003-HE3 Class M1, 6.085% 11/25/33 (d) | 91,792 | 92,635 | |
Series 2004-HE2 Class M2, 6.585% 7/26/34 (d) | 175,000 | 176,159 | |
Cendant Timeshare Receivables Funding LLC Series 2005 1A Class 2A2, 5.5581% 5/20/17 (a)(d) | 824,603 | 823,465 | |
Chase Credit Card Owner Trust: | |||
Series 2001-6 Class B, 5.8488% 3/16/09 (d) | 200,000 | 200,185 | |
Series 2003-6 Class C, 6.1688% 2/15/11 (d) | 2,210,000 | 2,237,447 | |
Series 2004-1 Class B, 5.5688% 5/15/09 (d) | 295,000 | 294,996 | |
Chase Issuance Trust: | |||
Series 2004-C3 Class C3, 5.8388% 6/15/12 (d) | 1,645,000 | 1,654,241 | |
Series 2006-C3 Class C3, 5.5988% 6/15/11 (d) | 1,975,000 | 1,975,000 | |
CIT Equipment Collateral Trust Series 2005-VT1 Class C, 4.18% 11/20/12 | 668,782 | 659,902 | |
Citibank Credit Card Issuance Trust: | |||
Series 2001-B2 Class B2, 5.77% 12/10/08 (d) | 615,000 | 615,385 | |
Series 2002-B1 Class B1, 5.79% 6/25/09 (d) | 655,000 | 656,170 | |
Series 2002-C1 Class C1, 6.15% 2/9/09 (d) | 900,000 | 903,467 | |
Series 2003-C1 Class C1, 6.5888% 4/7/10 (d) | 1,685,000 | 1,710,608 | |
College Loan Corp. Trust I Series 2006-1 Class A7B, 5.11% 4/25/46 (a)(d) | 3,195,000 | 3,195,000 | |
Countrywide Home Loans, Inc.: | |||
Series 2002-6 Class AV1, 5.815% 5/25/33 (d) | 37,045 | 37,094 | |
Series 2003-BC1 Class M2, 7.385% 9/25/32 (d) | 672,497 | 675,205 | |
Series 2003-SD3 Class A1, 5.805% 12/25/32 (a)(d) | 16,368 | 16,431 | |
Series 2004-2 Class M1, 5.885% 5/25/34 (d) | 375,000 | 376,454 | |
Series 2004-3: | |||
Class 3A4, 5.635% 8/25/34 (d) | 2,820,359 | 2,823,923 | |
Class M1, 5.885% 6/25/34 (d) | 100,000 | 100,491 | |
Series 2004-4 Class M2, 5.915% 6/25/34 (d) | 315,000 | 316,646 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Countrywide Home Loans, Inc.: - continued | |||
Series 2005-1: | |||
Class 1AV2, 5.585% 7/25/35 (d) | $ 1,220,000 | $ 1,220,514 | |
Class MV1, 5.785% 7/25/35 (d) | 435,000 | 436,453 | |
Class MV2, 5.825% 7/25/35 (d) | 525,000 | 527,176 | |
Series 2005-AB1 Class A2, 5.595% 8/25/35 (d) | 2,480,000 | 2,483,407 | |
Series 2005-IM1 Class A1, 5.515% 11/25/35 (d) | 386,492 | 386,501 | |
CPS Auto Receivables Trust Series 2006-B Class A2, 5.71% 6/15/16 (a) | 4,000,000 | 4,006,875 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 2003-8 Class A2, 5.775% 4/25/34 (d) | 31,426 | 31,509 | |
Series 2004-FRE1: | |||
Class B1, 7.185% 4/25/34 (d) | 605,000 | 604,991 | |
Class M3, 6.035% 4/25/34 (d) | 41,121 | 41,120 | |
Discover Card Master Trust I: | |||
Series 2003-4 Class B1, 5.6988% 5/16/11 (d) | 550,000 | 552,842 | |
Series 2005-1 Class B, 5.5188% 9/16/10 (d) | 1,580,000 | 1,581,148 | |
Series 2005-3 Class B, 5.5588% 5/15/11 (d) | 2,000,000 | 2,001,659 | |
Series 2006-1 Class B1, 5.5188% 8/16/11 (d) | 1,845,000 | 1,845,425 | |
Series 2006-2 Class B1, 5.5138% 1/17/12 (d) | 2,000,000 | 2,000,000 | |
Fannie Mae guaranteed REMIC pass thru certificates | |||
Class AB1, 5.6867% 5/28/35 (d) | 285,897 | 285,852 | |
Class AB3, 5.8394% 5/28/35 (d) | 119,329 | 119,347 | |
Class AB8, 5.7933% 5/28/35 (d) | 28,648 | 28,644 | |
Fieldstone Mortgage Investment Corp.: | |||
Series 2004-3 Class M5, 6.835% 8/25/34 (d) | 1,500,000 | 1,519,970 | |
Series 2005-2 Class 2A1, 5.505% 12/25/35 (d) | 1,239,438 | 1,239,517 | |
Series 2006-2: | |||
Class 2A2, 5.555% 7/25/36 (d) | 880,000 | 880,000 | |
Class M1, 5.695% 7/25/36 (d) | 1,765,000 | 1,765,000 | |
First Franklin Mortgage Loan Asset Backed Certificates | 169,170 | 169,186 | |
First Franklin Mortgage Loan Trust Series 2004-FF2: | |||
Class M3, 5.935% 3/25/34 (d) | 25,000 | 25,062 | |
Class M4, 6.285% 3/25/34 (d) | 25,000 | 25,140 | |
First Investors Auto Owner Trust Series 2006-A Class A3, 4.93% 2/15/11 (a) | 830,000 | 822,364 | |
Ford Credit Auto Owner Trust Series 2003-B Class B2, 5.7988% 10/15/07 (d) | 650,000 | 650,022 | |
Ford Credit Floorplan Master Owner Trust: | |||
Series 2005-1: | |||
Class A, 5.5188% 5/15/10 (d) | 1,375,000 | 1,374,980 | |
Class B, 5.8088% 5/15/10 (d) | 1,110,000 | 1,111,511 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Ford Credit Floorplan Master Owner Trust: - continued | |||
Series 2006-3: | |||
Class A, 5.5488% 6/15/11 (d) | $ 990,000 | $ 990,309 | |
Class B, 5.8188% 6/15/11 (d) | 1,405,000 | 1,405,439 | |
Fremont Home Loan Trust: | |||
Series 2003-B Class M6, 9.885% 12/25/33 (d) | 312,930 | 313,807 | |
Series 2004-A Class M2, 6.535% 1/25/34 (d) | 341,042 | 342,913 | |
Series 2004-B Class M1, 5.965% 5/25/34 (d) | 205,000 | 206,133 | |
Series 2004-C: | |||
Class 2A2, 5.935% 8/25/34 (d) | 1,000,000 | 1,004,941 | |
Class M1, 6.035% 8/25/34 (d) | 540,000 | 545,900 | |
Class M3, 6.535% 8/25/34 (d) | 1,000,000 | 1,016,224 | |
Series 2004-D Class 3A2, 5.665% 11/25/34 (d) | 167,575 | 167,953 | |
Series 2005-2 Class 2A1, 5.495% 6/25/35 (d) | 271,993 | 271,992 | |
Series 2005-A: | |||
Class 2A2, 5.625% 2/25/35 (d) | 916,019 | 916,704 | |
Class M1, 5.815% 1/25/35 (d) | 225,000 | 226,489 | |
Class M2, 5.845% 1/25/35 (d) | 325,000 | 326,689 | |
Class M3, 5.875% 1/25/35 (d) | 175,000 | 176,229 | |
Class M4, 6.065% 1/25/35 (d) | 125,000 | 126,275 | |
Series 2006-A: | |||
Class M3, 5.765% 5/25/36 (d) | 455,000 | 454,990 | |
Class M4, 5.785% 5/25/36 (d) | 685,000 | 684,984 | |
Class M5, 5.885% 5/25/36 (d) | 365,000 | 365,964 | |
GE Business Loan Trust Series 2003-1 Class A, 5.7988% 4/15/31 (a)(d) | 213,666 | 214,664 | |
GE Capital Credit Card Master Note Trust Series 2005-2 | 925,000 | 925,624 | |
Gracechurch Card Funding PLC: | |||
Series 11 Class C, 5.6488% 11/15/10 (d) | 2,490,000 | 2,490,000 | |
Series 5: | |||
Class B, 5.5988% 8/15/08 (d) | 80,000 | 80,004 | |
Class C, 6.2988% 8/15/08 (d) | 295,000 | 295,063 | |
Series 6 Class B, 5.5588% 2/17/09 (d) | 75,000 | 74,987 | |
Series 8 Class C, 5.6988% 6/15/10 (d) | 2,650,000 | 2,650,000 | |
Series 9: | |||
Class B, 5.5188% 9/15/10 (d) | 485,000 | 485,000 | |
Class C, 5.6788% 9/15/10 (d) | 1,800,000 | 1,802,178 | |
GSAMP Trust: | |||
Series 2002-NC1 Class A2, 5.705% 7/25/32 (d) | 2,606 | 2,639 | |
Series 2003-FM1 Class M1, 6.1981% 3/20/33 (d) | 636,784 | 637,176 | |
Series 2004-AHL Class A2D, 5.745% 8/25/34 (d) | 978,654 | 982,633 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
GSAMP Trust: - continued | |||
Series 2004-FM1: | |||
Class M1, 6.035% 11/25/33 (d) | $ 168,544 | $ 168,541 | |
Class M2, 6.785% 11/25/33 (d) | 135,000 | 136,597 | |
Series 2004-FM2 Class M1, 5.885% 1/25/34 (d) | 249,683 | 249,679 | |
Series 2004-HE1: | |||
Class M1, 5.935% 5/25/34 (d) | 320,000 | 319,993 | |
Class M2, 6.535% 5/25/34 (d) | 150,000 | 151,872 | |
Series 2005-6: | |||
Class A2, 5.595% 6/25/35 (d) | 1,800,000 | 1,798,675 | |
Class M3, 6.035% 6/25/35 (d) | 1,555,000 | 1,552,686 | |
Series 2005-9 Class 2A1, 5.505% 8/25/35 (d) | 1,126,702 | 1,126,141 | |
Series 2005-HE2 Class M, 5.815% 3/25/35 (d) | 1,220,000 | 1,225,568 | |
Series 2005-MTR1 Class A1, 5.525% 10/25/35 (d) | 1,543,591 | 1,543,591 | |
Series 2005-NC1 Class M1, 5.835% 2/25/35 (d) | 1,205,000 | 1,211,318 | |
Series 2006-NC2 Class M4, 5.735% 6/25/36 (d) | 1,541,000 | 1,542,196 | |
Guggenheim Structured Real Estate Funding Ltd. Series 2005-1 Class C, 6.465% 5/25/30 (a)(d) | 2,880,000 | 2,880,000 | |
Harwood Street Funding I LLC Series 2004-1A Class CTFS, 7.3781% 9/20/09 (a)(d) | 1,700,000 | 1,702,387 | |
Home Equity Asset Trust: | |||
Series 2002-3 Class A5, 5.825% 2/25/33 (d) | 14 | 14 | |
Series 2002-5 Class M1, 6.585% 5/25/33 (d) | 165,729 | 165,842 | |
Series 2003-1 Class M1, 6.385% 6/25/33 (d) | 524,845 | 525,267 | |
Series 2003-2 Class M1, 6.265% 8/25/33 (d) | 66,323 | 66,458 | |
Series 2003-3 Class M1, 6.245% 8/25/33 (d) | 320,568 | 321,515 | |
Series 2003-4 Class M1, 6.185% 10/25/33 (d) | 96,601 | 96,904 | |
Series 2003-5: | |||
Class A2, 5.735% 12/25/33 (d) | 24,569 | 24,634 | |
Class M1, 6.085% 12/25/33 (d) | 160,000 | 161,089 | |
Class M2, 7.115% 12/25/33 (d) | 70,000 | 71,188 | |
Series 2003-7: | |||
Class A2, 5.765% 3/25/34 (d) | 109,722 | 109,773 | |
Class M1, 6.035% 3/25/34 (d) | 795,000 | 797,654 | |
Series 2003-8 Class M1, 6.105% 4/25/34 (d) | 260,000 | 262,574 | |
Series 2004-4 Class A2, 5.705% 10/25/34 (d) | 174,129 | 174,417 | |
Series 2004-6 Class A2, 5.735% 12/25/34 (d) | 510,559 | 511,666 | |
Series 2005-1: | |||
Class M1, 5.815% 5/25/35 (d) | 1,270,000 | 1,274,938 | |
Class M2, 5.835% 5/25/35 (d) | 1,410,000 | 1,415,368 | |
Series 2005-2: | |||
Class 2A2, 5.585% 7/25/35 (d) | 1,830,000 | 1,831,223 | |
Class M1, 5.835% 7/25/35 (d) | 890,000 | 893,340 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Household Affinity Credit Card Master Note Trust I | $ 500,000 | $ 499,937 | |
Household Home Equity Loan Trust: | |||
Series 2003-2: | |||
Class A, 5.7081% 9/20/33 (d) | 100,180 | 100,233 | |
Class M, 5.9581% 9/20/33 (d) | 47,513 | 47,546 | |
Series 2004-1 Class M, 5.7869% 9/20/33 (d) | 136,170 | 136,768 | |
Household Mortgage Loan Trust Series 2004-HC1: | |||
Class A, 5.7281% 2/20/34 (d) | 193,833 | 193,968 | |
Class M, 5.8781% 2/20/34 (d) | 117,556 | 117,634 | |
Household Private Label Credit Card Master Note Trust I | 1,000,000 | 1,000,668 | |
HSBC Automotive Trust: | |||
Series 2006-1 Class A2, 5.4% 6/17/09 | 3,410,000 | 3,407,464 | |
Series 2006-2 Class A2, 5.61% 6/17/09 | 1,500,000 | 1,502,051 | |
HSBC Home Equity Loan Trust: | |||
Series 2005-2: | |||
Class M1, 5.8381% 1/20/35 (d) | 268,818 | 269,417 | |
Class M2, 5.8681% 1/20/35 (d) | 200,120 | 200,828 | |
Series 2005-3: | |||
Class A1, 5.5269% 1/20/35 (d) | 601,236 | 601,788 | |
Class M1, 5.6869% 1/20/35 (d) | 353,051 | 353,703 | |
IXIS Real Estate Capital Trust Series 2005-HE1: | |||
Class A1, 5.635% 6/25/35 (d) | 649,165 | 649,604 | |
Class M1, 5.855% 6/25/35 (d) | 550,000 | 551,986 | |
John Deere Owner Trust Series 2006-A Class A2, 5.41% 11/17/08 | 1,805,000 | 1,804,368 | |
Keycorp Student Loan Trust Series 1999-A Class A2, 5.81% 12/27/09 (d) | 225,423 | 226,072 | |
Long Beach Mortgage Loan Trust: | |||
Series 2003-2 Class M1, 6.205% 6/25/33 (d) | 462,597 | 463,452 | |
Series 2003-3 Class M1, 6.135% 7/25/33 (d) | 337,423 | 338,642 | |
Series 2006-6: | |||
Class 2A3, 5.5438% 7/25/36 (d) | 1,435,000 | 1,435,000 | |
Class M4, 5.7538% 7/25/36 (d) | 425,000 | 425,000 | |
Class M5, 5.7838% 7/25/36 (d) | 265,000 | 265,000 | |
Class M6, 5.8438% 7/25/36 (d) | 265,000 | 265,000 | |
MASTR Asset Backed Securities Trust: | |||
Series 2004-FRE1 Class M1, 5.935% 7/25/34 (d) | 485,000 | 485,947 | |
Series 2004-HE1 Class M1, 6.035% 9/25/34 (d) | 685,000 | 690,186 | |
MBNA Credit Card Master Note Trust: | |||
Series 2001-B2 Class B2, 5.7288% 1/15/09 (d) | 1,000,000 | 999,901 | |
Series 2002-B2 Class B2, 5.7488% 10/15/09 (d) | 1,034,000 | 1,036,490 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
MBNA Credit Card Master Note Trust: - continued | |||
Series 2002-B4 Class B4, 5.8688% 3/15/10 (d) | $ 630,000 | $ 633,045 | |
Series 2003-B1 Class B1, 5.8088% 7/15/10 (d) | 1,510,000 | 1,518,348 | |
Series 2003-B2 Class B2, 5.7588% 10/15/10 (d) | 125,000 | 125,667 | |
Series 2003-B3 Class B3, 5.7438% 1/18/11 (d) | 1,550,000 | 1,557,092 | |
Series 2003-B5 Class B5, 5.7388% 2/15/11 (d) | 2,000,000 | 2,011,750 | |
Series 2003-C2 Class C2, 6.9688% 6/15/10 (d) | 2,000,000 | 2,041,099 | |
Series 2005-C3 Class C, 5.6388% 3/15/11 (d) | 2,830,000 | 2,836,502 | |
MBNA Master Credit Card Trust II: | |||
Series 1998-E Class B, 5.8369% 9/15/10 (d) | 200,000 | 200,920 | |
Series 1998-G Class B, 5.7688% 2/17/09 (d) | 500,000 | 500,140 | |
Meritage Mortgage Loan Trust Series 2004-1: | |||
Class M1, 5.885% 7/25/34 (d) | 150,000 | 150,303 | |
Class M2, 5.935% 7/25/34 (d) | 25,000 | 25,058 | |
Class M3, 6.335% 7/25/34 (d) | 50,000 | 50,298 | |
Class M4, 6.485% 7/25/34 (d) | 50,000 | 50,315 | |
Merrill Lynch Mortgage Investors, Inc.: | |||
Series 2004-FM1 Class M2, 6.535% 1/25/35 (d) | 150,000 | 150,785 | |
Series 2004-HE2: | |||
Class A1B, 5.855% 8/25/35 (d) | 284,892 | 286,141 | |
Class A2B, 5.765% 8/25/35 (d) | 759,441 | 761,765 | |
Merrill Lynch Mortgage Ltd. Series 2004-OP1N Class N1, 4.75% 6/25/35 (a) | 4,048 | 4,017 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-HE3 Class M1, 6.485% 12/27/32 (d) | 125,000 | 126,119 | |
Series 2003-NC10 Class M1, 6.065% 10/25/33 (d) | 792,708 | 796,609 | |
Series 2003-NC8 Class M1, 6.085% 9/25/33 (d) | 119,992 | 120,416 | |
Series 2004-HE6 Class A2, 5.725% 8/25/34 (d) | 430,254 | 431,413 | |
Series 2004-NC2 Class M1, 5.935% 12/25/33 (d) | 375,000 | 377,343 | |
Series 2004-NC6 Class A2, 5.725% 7/25/34 (d) | 90,032 | 90,113 | |
Series 2005-1 Class M2, 5.855% 12/25/34 (d) | 570,000 | 573,129 | |
Series 2005-HE1: | |||
Class A3B, 5.605% 12/25/34 (d) | 277,636 | 277,924 | |
Class M1, 5.835% 12/25/34 (d) | 150,000 | 150,975 | |
Class M2, 5.855% 12/25/34 (d) | 385,000 | 387,259 | |
Series 2005-HE2: | |||
Class M1, 5.785% 1/25/35 (d) | 370,000 | 372,361 | |
Class M2, 5.825% 1/25/35 (d) | 265,000 | 266,117 | |
Series 2005-NC1: | |||
Class M1, 5.825% 1/25/35 (d) | 325,000 | 327,217 | |
Class M2, 5.855% 1/25/35 (d) | 325,000 | 325,988 | |
Class M3, 5.895% 1/25/35 (d) | 325,000 | 327,358 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Morgan Stanley ABS Capital I, Inc.: - continued | |||
Series 2006-HE4: | |||
Class M1, 5.665% 6/25/36 (d) | $ 440,000 | $ 440,174 | |
Class M2: | |||
5.685% 6/25/36 (d) | 770,000 | 770,300 | |
5.695% 6/25/36 (d) | 550,000 | 549,987 | |
Class M4, 5.735% 6/25/36 (d) | 1,160,000 | 1,159,973 | |
Series 2006-HE5 Class B1, 6.355% 8/25/36 (d) | 2,415,000 | 2,415,507 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-AM1 Class M1, 6.66% 2/25/32 (d) | 334,289 | 336,741 | |
Series 2001-NC1 Class M2, 6.99% 10/25/31 (d) | 10,752 | 10,762 | |
Series 2001-NC4 Class M1, 6.885% 1/25/32 (d) | 69,227 | 69,294 | |
Series 2002-AM3 Class A3, 5.875% 2/25/33 (d) | 14,114 | 14,148 | |
Series 2002-HE1 Class M1, 5.985% 7/25/32 (d) | 590,000 | 596,834 | |
Series 2002-NC3 Class M1, 6.105% 8/25/32 (d) | 100,000 | 100,124 | |
Series 2002-OP1 Class M1, 6.135% 9/25/32 (d) | 435,350 | 435,640 | |
Navistar Financial Dealer Note Master Trust Series 2005-1 Class A, 5.495% 2/25/13 (d) | 2,050,000 | 2,054,685 | |
New Century Home Equity Loan Trust Series 2005-1: | |||
Class M1, 5.835% 3/25/35 (d) | 595,000 | 597,291 | |
Class M2, 5.865% 3/25/35 (d) | 595,000 | 597,945 | |
Class M3, 5.905% 3/25/35 (d) | 290,000 | 292,165 | |
Nissan Auto Lease Trust: | |||
Series 2003-A Class A3A, 5.5088% 6/15/09 (d) | 45,061 | 45,064 | |
Series 2004-A Class A4A, 5.4388% 6/15/10 (d) | 1,325,000 | 1,325,763 | |
Series 2005-A Class A4, 5.4188% 8/15/11 (d) | 2,210,000 | 2,210,001 | |
NovaStar Home Equity Loan Series 2004-1: | |||
Class M1, 5.835% 6/25/34 (d) | 97,514 | 97,986 | |
Class M4, 6.36% 6/25/34 (d) | 170,000 | 171,374 | |
NovaStar Mortgage Funding Trust Series 2003-3 Class A3, 5.835% 12/25/33 (d) | 57,779 | 57,934 | |
Ocala Funding LLC Series 2006-1A Class A, 6.6669% 3/20/11 (a)(d) | 965,000 | 965,000 | |
Option One Mortgage Loan Trust Series 2003-6 Class M1, 6.035% 11/25/33 (d) | 1,025,000 | 1,033,378 | |
Ownit Mortgage Loan Asset-Backed Certificates Series 2005-3 Class A2A, 5.505% 6/25/36 (d) | 1,066,437 | 1,066,545 | |
Park Place Securities, Inc.: | |||
Series 2004 WWF1 Class M4, 6.485% 1/25/35 (d) | 945,000 | 958,458 | |
Series 2004-WCW1: | |||
Class M1, 6.015% 9/25/34 (d) | 385,000 | 389,714 | |
Class M2, 6.065% 9/25/34 (d) | 160,000 | 161,468 | |
Class M3, 6.635% 9/25/34 (d) | 310,000 | 313,779 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Park Place Securities, Inc.: - continued | |||
Series 2004-WCW1: | |||
Class M4, 6.835% 9/25/34 (d) | $ 435,000 | $ 440,130 | |
Series 2004-WCW2 Class A2, 5.765% 10/25/34 (d) | 267,982 | 268,346 | |
Series 2004-WWF1 Class A5, 5.855% 1/25/35 (d) | 176,386 | 176,772 | |
Series 2005-WCH1: | |||
Class A3B, 5.605% 1/25/35 (d) | 220,853 | 221,079 | |
Class M2, 5.905% 1/25/35 (d) | 1,130,000 | 1,136,212 | |
Class M3, 5.945% 1/25/35 (d) | 425,000 | 428,411 | |
Class M5, 6.265% 1/25/35 (d) | 400,000 | 404,316 | |
Series 2005-WHQ1 Class M7, 6.635% 3/25/35 (d) | 910,000 | 915,268 | |
Providian Master Note Trust: | |||
Series 2005-2 Class C2, 5.8688% 11/15/12 (a)(d) | 2,160,000 | 2,167,042 | |
Series 2006-C1A Class C1, 5.9188% 3/16/15 (a)(d) | 1,575,000 | 1,575,000 | |
Residential Asset Mortgage Products, Inc.: | |||
Series 2004-RS10 Class MII2, 6.635% 10/25/34 (d) | 1,300,000 | 1,326,007 | |
Series 2004-RS6: | |||
Class 2M2, 6.685% 6/25/34 (d) | 250,000 | 249,995 | |
Class 2M3, 6.835% 6/25/34 (d) | 250,000 | 249,995 | |
Series 2005-SP2 Class 1A1, 5.535% 5/25/44 (d) | 837,715 | 837,899 | |
Residential Asset Securities Corp.: | |||
Series 2004-KS10 Class AI2, 5.705% 3/25/29 (d) | 42,163 | 42,260 | |
Series 2005-KS7 Class A1, 5.485% 8/25/35 (d) | 537,341 | 537,392 | |
Salomon Brothers Mortgage Securities VII, Inc. | 1,451 | 1,454 | |
Saxon Asset Securities Trust: | |||
Series 2004-1 Class M1, 5.915% 3/25/35 (d) | 640,000 | 641,014 | |
Series 2004-2 Class MV1, 5.965% 8/25/35 (d) | 415,000 | 416,651 | |
Sharps SP I LLC Net Interest Margin Trust Series 2004-HE3N Class NA, 5.19% 11/25/34 (a) | 282,916 | 281,994 | |
Sierra Timeshare Receivables Fund LLC Series 2006-1A | 4,160,000 | 4,158,569 | |
Specialty Underwriting & Residential Finance: | |||
Series 2003-BC3 Class M1, 6.035% 8/25/34 (d) | 1,000,000 | 1,003,638 | |
Series 2003-BC4 Class M1, 5.985% 11/25/34 (d) | 260,000 | 261,499 | |
Structured Asset Investment Loan Trust: | |||
Series 2003-BC9 Class M1, 6.085% 8/25/33 (d) | 1,135,000 | 1,137,921 | |
Series 2004-8 Class M5, 6.535% 9/25/34 (d) | 290,000 | 294,067 | |
Series 2005-1 Class M4, 6.145% 2/25/35 (a)(d) | 485,000 | 490,687 | |
Structured Asset Securities Corp. Series 2004-GEL1 Class A, 5.745% 2/25/34 (d) | 39,085 | 39,084 | |
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 5.8188% 3/15/11 (a)(d) | 675,000 | 675,000 | |
Asset-Backed Securities - continued | |||
Principal Amount | Value | ||
Superior Wholesale Inventory Financing Trust XII | $ 980,000 | $ 981,880 | |
Terwin Mortgage Trust: | |||
Series 2003-4HE Class A1, 5.815% 9/25/34 (d) | 56,585 | 56,853 | |
Series 2003-6HE Class A1, 5.855% 11/25/33 (d) | 41,734 | 41,899 | |
Series 2005-14HE Class AF1, 5.525% 8/25/36 (d) | 618,961 | 619,009 | |
Series 2006-9HGA Class A1, 5.451% 10/25/37 (a)(b)(d) | 1,500,000 | 1,499,400 | |
Triad Auto Receivables Owner Trust Series 2006-B Class A2, 5.36% 11/12/09 | 2,585,000 | 2,582,497 | |
Turquoise Card Backed Securities PLC Series 2006-1A Class C, 5.5536% 5/16/11 (a)(d) | 2,165,000 | 2,165,000 | |
UPFC Auto Receivables Trust Series 2006-A Class A2, 5.44% 6/15/09 | 685,000 | 684,371 | |
Washington Mutual Asset Holdings Corp. Series 2006-5 | 2,159,436 | 2,150,764 | |
WFS Financial Owner Trust: | |||
Series 2004-3 Class D, 4.07% 2/17/12 | 303,038 | 299,080 | |
Series 2004-4 Class D, 3.58% 5/17/12 | 276,891 | 271,413 | |
Series 2005-1 Class D, 4.09% 8/15/12 | 290,262 | 285,247 | |
Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (a)(d) | 2,180,000 | 2,180,000 | |
TOTAL ASSET-BACKED SECURITIES (Cost $252,505,307) | 252,873,611 | ||
Collateralized Mortgage Obligations - 15.7% | |||
Private Sponsor - 11.3% | |||
Adjustable Rate Mortgage Trust floater: | |||
Series 2004-2 Class 7A3, 5.785% 2/25/35 (d) | 685,423 | 687,801 | |
Series 2004-4 Class 5A2, 5.785% 3/25/35 (d) | 206,688 | 207,031 | |
Series 2005-1 Class 5A2, 5.715% 5/25/35 (d) | 396,381 | 395,302 | |
Series 2005-10 Class 5A2, 5.705% 1/25/36 (d) | 1,422,145 | 1,423,870 | |
Series 2005-2: | |||
Class 6A2, 5.665% 6/25/35 (d) | 168,083 | 168,346 | |
Class 6M2, 5.865% 6/25/35 (d) | 1,375,000 | 1,383,106 | |
Series 2005-3 Class 8A2, 5.625% 7/25/35 (d) | 1,371,650 | 1,374,279 | |
Series 2005-5 Class 6A2, 5.615% 9/25/35 (d) | 1,109,441 | 1,109,911 | |
Series 2005-8 Class 7A2, 5.665% 11/25/35 (d) | 700,240 | 702,174 | |
American Home Mortgage Assets Trust floater Series 2006-1 Class 2A1, 5.575% 5/25/46 (d) | 1,451,520 | 1,450,977 | |
Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1058% 8/25/35 (d) | 1,951,660 | 1,937,851 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Bear Stearns Alt-A Trust floater: | |||
Series 2005-1 Class A1, 5.665% 1/25/35 (d) | $ 1,619,538 | $ 1,622,178 | |
Series 2005-2 Class 1A1, 5.635% 3/25/35 (d) | 1,130,774 | 1,130,938 | |
Citigroup Mortgage Loan Trust Series 2006-NC1: | |||
Class M4, 5.74% 8/25/36 (d) | 1,205,000 | 1,205,000 | |
Class M5, 5.77% 8/25/36 (d) | 860,000 | 860,000 | |
CS First Boston Mortgage Securities Corp. floater: | |||
Series 2004-AR2 Class 6A1, 5.785% 3/25/34 (d) | 109,804 | 109,958 | |
Series 2004-AR3 Class 6A2, 5.755% 4/25/34 (d) | 54,382 | 54,424 | |
Series 2004-AR5 Class 11A2, 5.755% 6/25/34 (d) | 101,539 | 101,616 | |
Series 2004-AR6 Class 9A2, 5.755% 10/25/34 (d) | 134,619 | 134,860 | |
Series 2004-AR7 Class 6A2, 5.765% 8/25/34 (d) | 236,872 | 237,461 | |
Series 2004-AR8 Class 8A2, 5.765% 9/25/34 (d) | 193,067 | 194,007 | |
CWALT, Inc. floater Series 2005-56 Class 3A1, 5.675% 11/25/35 (d) | 754,178 | 756,673 | |
First Horizon Mortgage pass thru Trust floater Series 2004-FL1 Class 2A1, 5.8719% 12/25/34 (d) | 172,408 | 172,641 | |
Gracechurch Mortgage Funding PLC floater Series 1A: | |||
Class A2B, 5.0981% 10/11/41 (a)(d) | 3,695,000 | 3,695,813 | |
Class CB, 5.3081% 10/11/41 (a)(d) | 260,000 | 260,000 | |
Class DB, 5.4981% 10/11/41 (a)(d) | 1,060,000 | 1,060,000 | |
Granite Master Issuer PLC floater: | |||
Series 2005-1: | |||
Class A3, 5.4938% 12/21/24 (d) | 700,000 | 700,799 | |
Class B1, 5.5438% 12/20/54 (d) | 950,000 | 949,959 | |
Class M1, 5.6438% 12/20/54 (d) | 700,000 | 699,972 | |
Series 2005-2 Class C1, 5.6894% 12/20/54 (d) | 1,200,000 | 1,199,880 | |
Series 2005-4: | |||
Class C1, 5.6194% 12/20/54 (d) | 925,000 | 925,000 | |
Class M2, 5.4694% 12/20/54 (d) | 1,830,000 | 1,830,072 | |
Granite Mortgages PLC floater: | |||
Series 2004-2: | |||
Class 1A2, 5.4838% 6/20/28 (d) | 67,641 | 67,636 | |
Class 1B, 5.5838% 6/20/44 (d) | 13,518 | 13,526 | |
Class 1C, 6.1138% 6/20/44 (d) | 49,372 | 49,422 | |
Class 1M, 5.6938% 6/20/44 (d) | 295,784 | 296,119 | |
Series 2004-3: | |||
Class 1B, 5.5738% 9/20/44 (d) | 95,901 | 95,912 | |
Class 1C, 6.0038% 9/20/44 (d) | 443,542 | 443,923 | |
Class 1M, 5.6838% 9/20/44 (d) | 47,950 | 47,961 | |
GSAMP Trust floater Series 2004-11 Class 2A1, 5.715% 12/20/34 (d) | 1,005,428 | 1,007,118 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Holmes Financing No. 10 PLC floater Series 10A: | |||
Class 1C, 5.7382% 7/15/40 (a)(d) | $ 415,000 | $ 415,000 | |
Class 2A, 5.4982% 7/15/40 (a)(d) | 1,040,000 | 1,040,000 | |
Class 2C, 5.8182% 7/15/40 (a)(d) | 975,000 | 975,000 | |
Holmes Financing No. 8 PLC floater Series 2: | |||
Class A, 5.5869% 4/15/11 (d) | 1,400,000 | 1,401,218 | |
Class B, 5.6769% 7/15/40 (d) | 190,000 | 190,059 | |
Class C, 6.2269% 7/15/40 (d) | 775,000 | 776,211 | |
Homestar Mortgage Acceptance Corp. floater Series 2004-5 Class A1, 5.835% 10/25/34 (d) | 752,610 | 755,514 | |
Impac CMB Trust floater: | |||
Series 2004-11 Class 2A2, 5.755% 3/25/35 (d) | 594,453 | 595,963 | |
Series 2004-6 Class 1A2, 5.775% 10/25/34 (d) | 189,309 | 189,747 | |
Series 2005-1: | |||
Class M1, 5.845% 4/25/35 (d) | 273,170 | 273,709 | |
Class M2, 5.885% 4/25/35 (d) | 483,079 | 483,966 | |
Class M3, 5.915% 4/25/35 (d) | 117,894 | 118,322 | |
Class M4, 6.135% 4/25/35 (d) | 71,887 | 72,155 | |
Class M5, 6.155% 4/25/35 (d) | 71,887 | 72,182 | |
Class M6, 6.205% 4/25/35 (d) | 112,143 | 112,457 | |
Series 2005-2 Class 1A2, 5.695% 4/25/35 (d) | 1,148,589 | 1,151,820 | |
Series 2005-4 Class 1B1, 6.685% 5/25/35 (d) | 492,479 | 493,094 | |
Series 2005-7: | |||
Class M1, 5.865% 11/25/35 (d) | 206,828 | 206,976 | |
Class M2, 5.905% 11/25/35 (d) | 155,121 | 155,554 | |
Class M3, 6.005% 11/25/35 (d) | 775,605 | 777,767 | |
Class M4, 6.045% 11/25/35 (d) | 370,567 | 371,673 | |
Lehman Structured Securities Corp. floater Series 2005-1 | 1,258,584 | 1,260,551 | |
Lehman XS Trust floater Series 2006-GP1 Class A1, 5.475% 5/25/46 (d) | 2,431,376 | 2,431,376 | |
Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.236% 8/25/17 (d) | 539,680 | 545,226 | |
MASTR Adjustable Rate Mortgages Trust floater: | |||
Series 2004-11: | |||
Class 1A4, 5.875% 11/25/34 (d) | 114,714 | 115,301 | |
Class 2A1, 5.765% 11/25/34 (d) | 370,401 | 372,032 | |
Class 2A2, 5.825% 11/25/34 (d) | 81,544 | 81,706 | |
Series 2005-1 Class 1A1, 5.655% 3/25/35 (d) | 519,432 | 520,545 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Merrill Lynch Mortgage Investors, Inc.: | |||
floater: | |||
Series 2003-A: | |||
Class 2A1, 5.775% 3/25/28 (d) | $ 161,005 | $ 161,929 | |
Class 2A2, 5.3738% 3/25/28 (d) | 57,502 | 57,645 | |
Series 2003-B Class A1, 5.725% 4/25/28 (d) | 155,025 | 155,703 | |
Series 2003-D Class A, 5.695% 8/25/28 (d) | 705,789 | 707,053 | |
Series 2003-E Class A2, 5.2938% 10/25/28 (d) | 288,006 | 288,063 | |
Series 2003-F Class A2, 5.42% 10/25/28 (d) | 298,406 | 298,568 | |
Series 2004-A Class A2, 4.34% 4/25/29 (d) | 388,677 | 388,123 | |
Series 2004-B Class A2, 5.5875% 6/25/29 (d) | 397,820 | 397,697 | |
Series 2004-C Class A2, 5.01% 7/25/29 (d) | 503,723 | 503,011 | |
Series 2004-D Class A2, 5.3238% 9/25/29 (d) | 537,729 | 537,741 | |
Series 2004-E Class A2D, 5.6294% 11/25/29 (d) | 565,980 | 567,948 | |
Series 2004-G Class A2, 5.8719% 11/25/29 (d) | 248,639 | 248,849 | |
Series 2005-A Class A2, 5.2138% 2/25/30 (d) | 700,737 | 700,907 | |
Series 2005-B Class A2, 5.5475% 7/25/30 (d) | 755,944 | 756,086 | |
Series 2003-G Class XA1, 1% 1/25/29 (f) | 1,628,696 | 12,662 | |
MortgageIT Trust floater Series 2004-2: | |||
Class A1, 5.755% 12/25/34 (d) | 436,503 | 436,187 | |
Class A2, 5.835% 12/25/34 (d) | 589,604 | 595,024 | |
Opteum Mortgage Acceptance Corp. floater: | |||
Series 2005-3 Class APT, 5.675% 7/25/35 (d) | 1,952,122 | 1,954,258 | |
Series 2005-5 Class 1A1B, 5.585% 12/25/35 (d) | 920,000 | 920,000 | |
Permanent Financing No. 3 PLC floater Series 2 Class C, 6.35% 6/10/42 (d) | 1,205,000 | 1,208,247 | |
Permanent Financing No. 4 PLC floater Series 2 Class C, 6.02% 6/10/42 (d) | 1,145,000 | 1,149,501 | |
Permanent Financing No. 5 PLC floater: | |||
Series 2: | |||
Class A, 5.41% 6/10/11 (d) | 5,000,000 | 5,003,143 | |
Class C, 5.95% 6/10/42 (d) | 390,000 | 391,341 | |
Series 3 Class C, 6.12% 6/10/42 (d) | 1,030,000 | 1,040,300 | |
Permanent Financing No. 6 PLC floater Series 6 Class 2C, 5.75% 6/10/42 (d) | 1,600,000 | 1,602,125 | |
Permanent Financing No. 7 PLC floater Series 7 Class 2C, 5.63% 6/10/42 (d) | 1,140,000 | 1,141,158 | |
Permanent Financing No. 8 PLC floater: | |||
Series 3C, 5.82% 6/10/42 (d) | 910,000 | 910,419 | |
Series 8 Class 2C, 5.7% 6/10/42 (d) | 1,435,000 | 1,435,222 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
Residential Asset Mortgage Products, Inc.: | |||
sequential pay: | |||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | $ 206,596 | $ 207,313 | |
Series 2004-SL2 Class A1, 6.5% 10/25/16 | 80,982 | 81,668 | |
Series 2005-AR5 Class 1A1, 4.8362% 9/19/35 (d) | 552,013 | 546,706 | |
Residential Finance LP/Residential Finance Development Corp. floater Series 2003-A: | |||
Class B4, 7.145% 3/10/35 (a)(d) | 94,445 | 95,395 | |
Class B5, 7.695% 3/10/35 (a)(d) | 94,445 | 95,703 | |
Residential Funding Securities Corp.: | |||
Series 2003-RP1 Class A1, 5.885% 11/25/34 (d) | 22,946 | 22,967 | |
Series 2003-RP2 Class A1, 5.8438% 6/25/33 (a)(d) | 122,085 | 122,619 | |
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (a)(f) | 4,780,733 | 16,554 | |
Sequoia Mortgage Trust floater: | |||
Series 2003-5 Class A2, 5.27% 9/20/33 (d) | 272,790 | 272,773 | |
Series 2003-7 Class A2, 5.6419% 1/20/34 (d) | 128,584 | 128,582 | |
Series 2004-1 Class A, 5.8825% 2/20/34 (d) | 189,103 | 189,228 | |
Series 2004-10 Class A4, 5.56% 11/20/34 (d) | 590,168 | 590,639 | |
Series 2004-12 Class 1A2, 5.82% 1/20/35 (d) | 910,595 | 912,892 | |
Series 2004-4 Class A, 5.48% 5/20/34 (d) | 695,180 | 695,009 | |
Series 2004-5 Class A3, 5.5769% 6/20/34 (d) | 259,241 | 259,325 | |
Series 2004-6: | |||
Class A3A, 5.8275% 6/20/35 (d) | 291,509 | 291,851 | |
Class A3B, 5.1069% 7/20/34 (d) | 583,019 | 583,144 | |
Series 2004-7: | |||
Class A3A, 5.265% 8/20/34 (d) | 340,782 | 341,461 | |
Class A3B, 5.49% 7/20/34 (d) | 661,713 | 664,435 | |
Series 2004-8 Class A2, 5.31% 9/20/34 (d) | 1,022,266 | 1,022,727 | |
Series 2005-1 Class A2, 5.8325% 2/20/35 (d) | 492,855 | 493,754 | |
Series 2005-2 Class A2, 5.19% 3/20/35 (d) | 884,660 | 883,635 | |
Structured Asset Securities Corp. floater: | |||
Series 2004-NP1 Class A, 5.785% 9/25/33 (a)(d) | 120,048 | 120,142 | |
Series 2005-AR1 Class B1, 7.385% 9/25/35 (a)(d) | 1,155,000 | 990,413 | |
Thornburg Mortgage Securities Trust floater: | |||
Series 2004-3 Class A, 5.755% 9/25/34 (d) | 1,974,785 | 1,981,992 | |
Series 2005-3 Class A4, 5.655% 10/25/35 (d) | 2,152,569 | 2,148,993 | |
WaMu Mortgage pass thru certificates: | |||
floater: | |||
Series 2005-AR11 Class A1C1, 5.585% 8/25/45 (d) | 895,747 | 895,897 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
Private Sponsor - continued | |||
WaMu Mortgage pass thru certificates: - continued | |||
floater: | |||
Series 2005-AR13 Class A1C1, 5.575% 10/25/45 (d) | $ 1,333,812 | $ 1,333,947 | |
Series 2005-AR17 Class A1C1, 5.575% 12/25/45 (d) | 1,011,410 | 1,011,601 | |
Series 2005-AR19 Class A1C1, 5.575% 12/25/45 (d) | 1,410,284 | 1,410,946 | |
sequential pay Series 2002-S6 Class A25, 6% 10/25/32 | 123,203 | 122,678 | |
Washington Mutual Mortgage Securities Corp. sequential pay Series 2003-MS9 Class 2A1, 7.5% 12/25/33 | 56,799 | 58,231 | |
Wells Fargo Mortgage Backed Securities Trust: | |||
Series 2004-M Class A3, 4.6748% 8/25/34 (d) | 1,368,256 | 1,358,478 | |
Series 2005-AR10 Class 2A2, 4.1096% 6/25/35 (d) | 4,531,302 | 4,435,326 | |
Series 2005-AR12 Class 2A1, 4.3193% 7/25/35 (d) | 2,954,017 | 2,897,960 | |
TOTAL PRIVATE SPONSOR | 97,572,534 | ||
U.S. Government Agency - 4.4% | |||
Fannie Mae: | |||
floater Series 2002-89 Class F, 5.685% 1/25/33 (d) | 102,476 | 102,609 | |
planned amortization class: | |||
Series 1993-207 Class G, 6.15% 4/25/23 | 422,076 | 422,956 | |
Series 2003-24 CLass PB, 4.5% 12/25/12 | 1,847,539 | 1,829,445 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
floater: | |||
Series 2001-38 Class QF, 6.365% 8/25/31 (d) | 933,207 | 959,669 | |
Series 2002-11 Class QF, 5.885% 3/25/32 (d) | 140,519 | 142,239 | |
Series 2002-36 Class FT, 5.885% 6/25/32 (d) | 139,612 | 140,811 | |
Series 2002-49 Class FB, 5.9688% 11/18/31 (d) | 1,410,446 | 1,422,989 | |
Series 2002-60 Class FV, 6.385% 4/25/32 (d) | 304,586 | 314,877 | |
Series 2002-64 Class FE, 5.7188% 10/18/32 (d) | 71,884 | 71,822 | |
Series 2002-68 Class FH, 5.8688% 10/18/32 (d) | 1,181,150 | 1,198,536 | |
Series 2002-74 Class FV, 5.835% 11/25/32 (d) | 92,253 | 92,957 | |
Series 2002-75 Class FA, 6.385% 11/25/32 (d) | 623,941 | 645,328 | |
Series 2003-11: | |||
Class DF, 5.835% 2/25/33 (d) | 73,850 | 74,399 | |
Class EF, 5.835% 2/25/33 (d) | 39,740 | 39,862 | |
Series 2003-122 Class FL, 5.735% 7/25/29 (d) | 512,689 | 515,628 | |
Series 2003-15 Class WF, 5.735% 8/25/17 (d) | 611,239 | 613,830 | |
Series 2004-33 Class FW, 5.785% 8/25/25 (d) | 882,161 | 885,294 | |
Series 2004-54 Class FE, 6.535% 2/25/33 (d) | 508,219 | 511,951 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
U.S. Government Agency - continued | |||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | |||
planned amortization class: | |||
Series 2002-11 Class QB, 5.5% 3/25/15 | $ 213,301 | $ 212,536 | |
Series 2002-28 Class PJ, 6.5% 3/25/31 | 50,460 | 50,270 | |
Series 2002-52 Class PA, 6% 4/25/31 | 9,977 | 9,948 | |
Series 2005-72 Class FG, 5.635% 5/25/35 (d) | 6,595,031 | 6,582,477 | |
Series 2002-50 Class LE, 7% 12/25/29 | 43,082 | 43,211 | |
Series 2004-31 Class IA, 4.5% 6/25/10 (f) | 226,157 | 3,005 | |
Freddie Mac planned amortization class Series 2162 Class PH, 6% 6/15/29 | 1,376,634 | 1,380,978 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
floater: | |||
Series 2406: | |||
Class FP, 6.3488% 1/15/32 (d) | 1,164,721 | 1,196,188 | |
Class PF, 6.3488% 12/15/31 (d) | 1,135,000 | 1,168,134 | |
Series 2410 Class PF, 6.3488% 2/15/32 (d) | 2,340,465 | 2,411,797 | |
Series 2526 Class FC, 5.7688% 11/15/32 (d) | 20,227 | 20,344 | |
Series 2538 Class FB, 5.7688% 12/15/32 (d) | 170,656 | 171,395 | |
Series 2551 Class FH, 5.8188% 1/15/33 (d) | 65,833 | 66,062 | |
Series 2553 Class FB, 5.8688% 3/15/29 (d) | 2,813,108 | 2,832,002 | |
Series 2577 Class FW, 5.8688% 1/15/30 (d) | 1,861,274 | 1,875,770 | |
Series 2861 Class JF, 5.6688% 4/15/17 (d) | 810,184 | 811,482 | |
Series 2994 Class FB, 5.5188% 6/15/20 (d) | 698,199 | 696,348 | |
Series 3066 Class HF, 0% 1/15/34 (d) | 78,930 | 81,672 | |
planned amortization class: | |||
Series 2389 Class DA, 6.2688% 11/15/30 (d) | 1,773,892 | 1,788,914 | |
Series 2395 Class PE, 6% 2/15/30 | 114,483 | 114,339 | |
Series 2543 CLass PM, 5.5% 8/15/18 | 524,597 | 523,401 | |
Series 2614 Class IC, 4.5% 12/15/10 (f) | 848,785 | 12,230 | |
Series 2640 Class GR, 3% 3/15/10 | 150,344 | 149,993 | |
Series 2650 Class FV, 5.7688% 12/15/32 (d) | 1,684,141 | 1,693,004 | |
Series 2676: | |||
Class KN, 3% 12/15/13 | 1,033,721 | 1,018,577 | |
Class QA, 3% 8/15/16 | 207,425 | 206,810 | |
Series 2683 Class UH, 3% 3/15/19 | 1,303,749 | 1,292,960 | |
Series 2748 Class IB, 4.5% 3/15/10 (f) | 417,752 | 3,458 | |
Series 2776 Class UJ, 4.5% 5/15/20 (f) | 338,136 | 8,928 | |
Series 2828 Class JA, 4.5% 1/15/10 | 780,360 | 776,069 | |
Series 1803 Class A, 6% 12/15/08 | 253,438 | 253,641 | |
Collateralized Mortgage Obligations - continued | |||
Principal Amount | Value | ||
U.S. Government Agency - continued | |||
Ginnie Mae guaranteed REMIC pass thru securities: | |||
floater Series 2001-21 Class FB, 5.7688% 1/16/27 (d) | $ 105,339 | $ 105,961 | |
planned amortization class Series 2002-5 Class PD, 6.5% 5/16/31 | 199,449 | 200,616 | |
TOTAL U.S. GOVERNMENT AGENCY | 37,747,722 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $135,473,039) | 135,320,256 | ||
Commercial Mortgage Securities - 6.8% | |||
Banc of America Large Loan, Inc.: | |||
floater: | |||
Series 2003-BBA2: | |||
Class A3, 5.6888% 11/15/15 (a)(d) | 203,257 | 203,360 | |
Class C, 5.8388% 11/15/15 (a)(d) | 70,000 | 70,146 | |
Class D, 5.9188% 11/15/15 (a)(d) | 110,000 | 110,257 | |
Class F, 6.2688% 11/15/15 (a)(d) | 80,000 | 80,190 | |
Class H, 6.7688% 11/15/15 (a)(d) | 70,000 | 70,192 | |
Class J, 7.3188% 11/15/15 (a)(d) | 70,000 | 70,195 | |
Class K, 7.9688% 11/15/15 (a)(d) | 65,000 | 64,910 | |
Series 2005-BBA6: | |||
Class B, 5.5788% 1/15/19 (a)(d) | 390,000 | 390,154 | |
Class C, 5.6188% 1/15/19 (a)(d) | 400,000 | 400,322 | |
Class D, 5.6688% 1/15/19 (a)(d) | 390,000 | 390,274 | |
Class E, 5.7088% 1/15/19 (a)(d) | 245,000 | 245,234 | |
Class F, 5.7588% 1/15/19 (a)(d) | 165,000 | 165,116 | |
Class G, 5.7888% 1/15/19 (a)(d) | 125,000 | 125,100 | |
Series 2005-BOCA: | |||
Class H, 6.3188% 12/15/16 (a)(d) | 290,000 | 290,105 | |
Class J, 6.4688% 12/15/16 (a)(d) | 140,000 | 140,050 | |
Class K, 6.7188% 12/15/16 (a)(d) | 250,000 | 250,090 | |
Series 2005-ESHA: | |||
Class F, 6.1088% 7/14/20 (a)(d) | 860,000 | 863,676 | |
Class G, 6.2388% 7/14/20 (a)(d) | 585,000 | 587,497 | |
Class H, 6.4588% 7/14/20 (a)(d) | 720,000 | 722,797 | |
Series 2005-MIB1: | |||
Class B, 5.6288% 3/15/22 (a)(d) | 475,000 | 475,307 | |
Class C, 5.6788% 3/15/22 (a)(d) | 200,000 | 200,128 | |
Class D, 5.7288% 3/15/22 (a)(d) | 205,000 | 205,135 | |
Class E, 5.7688% 3/15/22 (a)(d) | 390,000 | 390,257 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Banc of America Large Loan, Inc.: - continued | |||
floater: - continued | |||
Series 2005-MIB1: | |||
Class F, 5.8388% 3/15/22 (a)(d) | $ 200,000 | $ 200,132 | |
Class G, 5.8988% 3/15/22 (a)(d) | 130,000 | 130,086 | |
Series 2006-LAQ: | |||
Class H, 6.025% 2/9/21 (a)(d) | 440,000 | 441,689 | |
Class J, 6.115% 2/9/21 (a)(d) | 320,000 | 321,226 | |
Class K, 6.345% 2/9/21 (a)(d) | 880,000 | 882,794 | |
Series 2005-ESHA Class X1, 0.9161% 7/14/20 (a)(d)(f) | 44,830,000 | 372,331 | |
Series 2006-ESH: | |||
Class A, 6.2288% 7/14/11 (a)(d) | 938,219 | 936,476 | |
Class B, 6.3288% 7/14/11 (a)(d) | 467,860 | 466,559 | |
Class C, 6.4788% 7/14/11 (a)(d) | 936,970 | 933,678 | |
Class D, 7.1088% 7/14/11 (a)(d) | 544,559 | 542,970 | |
Bayview Commercial Asset Trust floater: | |||
Series 2003-1 Class A, 5.965% 8/25/33 (a)(d) | 219,351 | 221,955 | |
Series 2003-2 Class A, 5.965% 12/25/33 (a)(d) | 648,758 | 650,785 | |
Series 2004-1: | |||
Class A, 5.745% 4/25/34 (a)(d) | 383,570 | 384,529 | |
Class B, 7.285% 4/25/34 (a)(d) | 63,928 | 64,568 | |
Series 2004-2: | |||
Class A, 5.815% 8/25/34 (a)(d) | 476,940 | 478,729 | |
Class M1, 5.965% 8/25/34 (a)(d) | 152,770 | 153,534 | |
Series 2004-3: | |||
Class A1, 5.755% 1/25/35 (a)(d) | 688,434 | 690,585 | |
Class A2, 5.805% 1/25/35 (a)(d) | 80,992 | 81,144 | |
Class M1, 5.885% 1/25/35 (a)(d) | 121,488 | 122,172 | |
Class M2, 6.385% 1/25/35 (a)(d) | 80,992 | 81,979 | |
Series 2005-2A: | |||
Class M1, 5.815% 8/25/35 (a)(d) | 171,124 | 171,461 | |
Class M2, 5.865% 8/25/35 (a)(d) | 286,749 | 287,596 | |
Class M3, 5.885% 8/25/35 (a)(d) | 157,249 | 157,713 | |
Class M4, 5.995% 8/25/35 (a)(d) | 143,375 | 143,796 | |
Series 2005-3A: | |||
Class A1, 5.705% 11/25/35 (a)(d) | 782,184 | 784,916 | |
Class M1, 5.825% 11/25/35 (a)(d) | 111,741 | 112,017 | |
Class M2, 5.875% 11/25/35 (a)(d) | 153,643 | 154,176 | |
Class M3, 5.895% 11/25/35 (a)(d) | 139,676 | 140,159 | |
Class M4, 5.985% 11/25/35 (a)(d) | 172,267 | 172,690 | |
Series 2005-4A: | |||
Class A2, 5.775% 1/25/36 (a)(d) | 1,057,859 | 1,059,182 | |
Class B1, 6.785% 1/25/36 (a)(d) | 96,169 | 97,191 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Bayview Commercial Asset Trust floater: - continued | |||
Series 2005-4A: | |||
Class M1, 5.835% 1/25/36 (a)(d) | $ 384,676 | $ 385,758 | |
Class M2, 5.855% 1/25/36 (a)(d) | 96,169 | 96,439 | |
Class M3, 5.885% 1/25/36 (a)(d) | 192,338 | 192,759 | |
Class M4, 5.995% 1/25/36 (a)(d) | 96,169 | 96,590 | |
Class M5, 6.035% 1/25/36 (a)(d) | 96,169 | 96,650 | |
Class M6, 6.085% 1/25/36 (a)(d) | 96,169 | 96,470 | |
Series 2006-2A: | |||
Class A2, 5.665% 7/25/36 (a)(d) | 292,928 | 292,882 | |
Class B1, 6.255% 7/25/36 (a)(d) | 107,407 | 107,390 | |
Class B3, 8.085% 7/25/36 (a)(d) | 175,757 | 175,729 | |
Class M1, 5.695% 7/25/36 (a)(d) | 307,575 | 307,527 | |
Class M2, 5.715% 7/25/36 (a)(d) | 219,696 | 219,662 | |
Class M3, 5.735% 7/25/36 (a)(d) | 170,875 | 170,848 | |
Class M4, 5.805% 7/25/36 (a)(d) | 117,171 | 117,153 | |
Class M5, 5.855% 7/25/36 (a)(d) | 141,582 | 141,560 | |
Class M6, 5.925% 7/25/36 (a)(d) | 224,578 | 224,543 | |
Bear Stearns Commercial Mortgage Securities, Inc. floater Series 2004-BBA3 Class E, 6.0688% 6/15/17 (a)(d) | 960,000 | 960,435 | |
COMM floater Series 2002-FL7: | |||
Class F, 6.6688% 11/15/14 (a)(d) | 1,000,000 | 1,000,781 | |
Class H, 7.6188% 11/15/14 (a)(d) | 150,000 | 150,071 | |
Commercial Mortgage pass thru certificates floater: | |||
Series 2004-HTL1: | |||
Class B, 5.8188% 7/15/16 (a)(d) | 8,103 | 8,108 | |
Class D, 5.9188% 7/15/16 (a)(d) | 17,733 | 17,745 | |
Class E, 6.1188% 7/15/16 (a)(d) | 12,482 | 12,495 | |
Class F, 6.1688% 7/15/16 (a)(d) | 29,623 | 29,659 | |
Class H, 6.6688% 7/15/16 (a)(d) | 87,041 | 87,268 | |
Class J, 6.8188% 7/15/16 (a)(d) | 32,745 | 32,888 | |
Class K, 7.7188% 7/15/16 (a)(d) | 565,375 | 568,832 | |
Series 2005-F10A: | |||
Class B, 5.5988% 4/15/17 (a)(d) | 1,005,000 | 1,005,121 | |
Class C, 5.6388% 4/15/17 (a)(d) | 425,000 | 425,019 | |
Class D, 5.6788% 4/15/17 (a)(d) | 345,000 | 345,143 | |
Class E, 5.7388% 4/15/17 (a)(d) | 260,000 | 260,068 | |
Class F, 5.7788% 4/15/17 (a)(d) | 145,000 | 145,015 | |
Class G, 5.9188% 4/15/17 (a)(d) | 145,000 | 145,016 | |
Class H, 5.9888% 4/15/17 (a)(d) | 145,000 | 145,042 | |
Class I, 6.2188% 4/15/17 (a)(d) | 50,000 | 50,016 | |
Class MOA3, 5.6688% 3/15/20 (a)(d) | 650,000 | 650,069 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Commercial Mortgage pass thru certificates floater: - continued | |||
Series 2005-FL11: | |||
Class B, 5.6188% 11/15/17 (a)(d) | $ 354,841 | $ 354,856 | |
Class C, 5.6688% 11/15/17 (a)(d) | 709,681 | 709,511 | |
Class D, 5.7088% 11/15/17 (a)(d) | 123,011 | 123,121 | |
Class E, 5.7588% 11/15/17 (a)(d) | 189,248 | 189,278 | |
Class F, 5.8188% 11/15/17 (a)(d) | 170,324 | 170,350 | |
Class G, 5.8688% 11/15/17 (a)(d) | 269,679 | 269,660 | |
Series 2006-CN2A Class AJFL, 5.5944% 2/5/19 (a)(d) | 1,135,000 | 1,139,103 | |
CS First Boston Mortgage Securities Corp. floater: | |||
Series 2004-FL1 Class B, 5.8188% 5/15/14 (a)(d) | 306,618 | 306,697 | |
Series 2004-TF2A Class E, 5.7888% 11/15/19 (a)(d) | 640,000 | 640,260 | |
Series 2004-TFL1: | |||
Class E, 5.9188% 2/15/14 (a)(d) | 200,000 | 200,094 | |
Class F, 5.9688% 2/15/14 (a)(d) | 175,000 | 175,119 | |
Class G, 6.2188% 2/15/14 (a)(d) | 125,000 | 125,052 | |
Class H, 6.4688% 2/15/14 (a)(d) | 100,000 | 100,055 | |
Class J, 6.7688% 2/15/14 (a)(d) | 50,000 | 50,064 | |
Series 2005-CN2A Class A1J, 5.6988% | 2,165,000 | 2,166,055 | |
Series 2005-TF2A Class F, 5.8688% | 230,000 | 230,093 | |
Series 2005-TF3A Class A2, 5.6488% 1 | 2,775,000 | 2,778,489 | |
Series 2005-TFLA: | |||
Class C, 5.6088% 2/15/20 (a)(d) | 800,000 | 800,431 | |
Class E, 5.6988% 2/15/20 (a)(d) | 560,000 | 560,533 | |
Class F, 5.7488% 2/15/20 (a)(d) | 250,000 | 250,184 | |
Class G, 5.8888% 2/15/20 (a)(d) | 70,000 | 70,045 | |
Class H, 6.1188% 2/15/20 (a)(d) | 100,000 | 100,074 | |
CSMC Commercial Mortgage Trust floater | |||
Class D, 5.6488% 4/15/21 (a)(d) | 300,000 | 300,490 | |
Class E, 5.6988% 4/15/21 (a)(d) | 300,000 | 300,366 | |
Class G, 5.7888% 4/15/21 (a)(d) | 300,000 | 300,267 | |
Class H, 6.0988% 4/15/21 (a)(d) | 300,000 | 300,290 | |
Class J, 6.1688% 4/15/21 (a)(d) | 200,000 | 200,226 | |
Class K, 6.5688% 4/15/21 (a)(d) | 1,005,000 | 1,005,804 | |
Freddie Mac Multi-class participation certificates | 1,436,331 | 1,480,619 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
Greenwich Capital Commercial Funding Corp. floater | |||
Class H-AON: | |||
6.3344% 10/5/20 (a)(d) | $ 180,000 | $ 180,023 | |
6.5844% 10/5/20 (a)(d) | 220,000 | 220,028 | |
Class M-AON, 6.8344% 10/5/20 (a)(d) | 215,000 | 215,027 | |
Class N-AON, 7.1844% 10/5/20 (a)(d) | 550,000 | 550,069 | |
GS Mortgage Securities Corp. II: | |||
floater: | |||
Series 2002-FL5A Class B, 5.6888% 6/16/14 (a)(d) | 2,075,000 | 2,074,847 | |
Series 2005-FL7A Class A1, 5.4944% 11/6/19 (a)(d) | 29,397 | 29,397 | |
Series 2006-FL8: | |||
Class C, 5.61% 6/6/20 (a)(d) | 145,000 | 145,000 | |
Class D, 5.65% 6/6/20 (a)(d) | 405,000 | 405,000 | |
Class E, 5.74% 6/6/20 (a)(d) | 800,000 | 800,000 | |
Class F, 5.81% 6/6/20 (a)(d) | 575,000 | 575,000 | |
Guggenheim Structure Real Estate Funding Ltd. Series 2006-3: | |||
Class B, 5.8% 9/25/46 (a)(d) | 450,000 | 450,000 | |
Class C, 5.95% 9/25/46 (a)(d) | 1,150,000 | 1,150,000 | |
Hilton Hotel Pool Trust floater Series 2000-HLTA Class A2, 5.7463% 10/3/15 (a)(d) | 3,000,000 | 3,022,563 | |
Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2003-LLFA Class K1, 7.9088% 12/16/14 (a)(d) | 435,000 | 434,559 | |
Merrill Lynch Mortgage Trust Series 2005-GGP1 Class X, 0.1416% 11/15/10 (a)(d)(f) | 417,400,000 | 361,761 | |
Morgan Stanley Capital I, Inc.: | |||
floater Series 2005-XLF: | |||
Class B, 5.5788% 8/15/19 (a)(d) | 935,000 | 934,635 | |
Class C, 5.6088% 8/15/19 (a)(d) | 75,000 | 74,914 | |
Class D, 5.6288% 8/15/19 (a)(d) | 270,000 | 269,692 | |
Class E, 5.6488% 8/15/19 (a)(d) | 245,000 | 244,904 | |
Class F, 5.6888% 8/15/19 (a)(d) | 170,000 | 169,934 | |
Class G, 5.7388% 8/15/19 (a)(d) | 120,000 | 119,987 | |
Class H, 5.7588% 8/15/19 (a)(d) | 100,000 | 99,961 | |
Class J, 5.8288% 8/15/19 (a)(d) | 75,000 | 74,964 | |
Series 2006-XLF: | |||
Class C, 6.6% 7/15/19 (a)(d) | 570,000 | 570,000 | |
Class D, 5.65% 7/15/19 (a)(d) | 415,000 | 415,000 | |
Class E, 5.69% 7/15/19 (a)(d) | 345,000 | 345,000 | |
Class F, 5.72% 7/15/19 (a)(d) | 535,000 | 535,000 | |
Class G, 5.72% 7/15/19 (a)(d) | 255,000 | 255,000 | |
Commercial Mortgage Securities - continued | |||
Principal Amount | Value | ||
STRIPS III Ltd./STRIPS III Corp. floater Series 2004-1A Class A, 5.88% 3/24/18 (a)(d) | $ 396,989 | $ 397,733 | |
Wachovia Bank Commercial Mortgage Trust floater | |||
Class A2, 5.6188% 10/15/17 (a)(d) | 990,000 | 990,290 | |
Class B, 5.6688% 10/15/17 (a)(d) | 200,000 | 200,038 | |
Class D, 5.7988% 10/15/17 (a)(d) | 400,000 | 400,277 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $58,663,250) | 58,817,850 | ||
Certificates of Deposit - 2.8% | |||
BNP Paribas SA yankee 5.045% 2/21/07 | 4,000,000 | 3,987,651 | |
Deutsche Bank AG yankee 5.045% 2/21/07 | 4,000,000 | 3,987,651 | |
HBOS Treasury Services PLC yankee 5.04% 2/21/07 | 4,000,000 | 3,987,768 | |
Rabobank Nederland Coop. Central yankee 5.01% | 4,000,000 | 3,987,150 | |
Royal Bank of Scotland PLC yankee 5.04% 2/21/07 | 4,000,000 | 3,987,544 | |
Societe Generale euro 5.05% 2/21/07 | 4,000,000 | 3,987,826 | |
TOTAL CERTIFICATES OF DEPOSIT (Cost $23,999,269) | 23,925,590 | ||
Commercial Paper - 0.2% | |||
Rockies Express Pipeline LLC 5.7422% 9/20/06 | 2,000,000 | 1,984,603 | |
Fixed-Income Funds - 27.6% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 2,390,073 | 237,764,502 | |
Cash Equivalents - 2.8% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at 5.3%, dated 7/31/06 due 8/1/06 | $ 23,842,508 | $ 23,839,000 | |
TOTAL INVESTMENT PORTFOLIO - 101.0% (Cost $870,404,138) | 870,466,476 | ||
NET OTHER ASSETS - (1.0)% | (8,973,233) | ||
NET ASSETS - 100% | $ 861,493,243 |
Futures Contracts | |||||
Expiration Date | Underlying | Unrealized Appreciation/ | |||
Purchased | |||||
Eurodollar Contracts | |||||
103 Eurodollar 90 Day Index Contracts | Sept. 2006 | $ 101,588,900 | $ (321,000) | ||
103 Eurodollar 90 Day Index Contracts | Dec. 2006 | 101,596,625 | (251,475) | ||
103 Eurodollar 90 Day Index Contracts | March 2007 | 101,619,800 | (158,887) | ||
103 Eurodollar 90 Day Index Contracts | June 2007 | 101,648,125 | 9,638 | ||
103 Eurodollar 90 Day Index Contracts | Sept. 2007 | 101,666,150 | 70,542 | ||
TOTAL EURODOLLAR CONTRACTS | $ (651,182) | ||||
Sold | |||||
Eurodollar Contracts | |||||
5 Eurodollar 90 Day Index Contracts | Dec. 2007 | 4,935,500 | 8,955 | ||
5 Eurodollar 90 Day Index Contracts | March 2008 | 4,935,500 | 8,780 | ||
4 Eurodollar 90 Day Index Contracts | June 2008 | 3,948,200 | 7,859 | ||
3 Eurodollar 90 Day Index Contracts | Sept. 2008 | 2,960,963 | 5,926 | ||
2 Eurodollar 90 Day Index Contracts | Dec. 2008 | 1,973,775 | 3,367 | ||
1 Eurodollar 90 Day Index Contracts | March 2009 | 986,825 | 1,696 | ||
TOTAL EURODOLLAR CONTRACTS | 36,583 | ||||
$ (614,599) | |||||
Swap Agreements | |||||
Expiration Date | Notional Amount | Value | |||
Credit Default Swaps | |||||
Receive monthly notional amount multiplied by 3.3% and pay to Morgan Stanley, Inc. upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R11 Class M9, 8.885% 11/25/34 | Dec. 2034 | $ 275,000 | $ 4,749 | ||
Receive from Citibank, upon default event of DaimlerChrysler NA Holding Corp., par value of the notional amount of DaimlerChrysler NA Holding Corp. 6.5% 11/15/13, and pay quarterly notional amount multiplied by .8% | June 2007 | 1,000,000 | (6,580) | ||
Receive monthly notional amount multiplied by 1.9% and pay Morgan Stanley, Inc., upon default event of Morgan Stanley ABS Capital, par value of the notional amount of Morgan Stanley ABS Capital I Series 2006-HE3 Class B3, 7.2225% 4/25/36 | May 2036 | 500,000 | (2,967) | ||
Receive monthly notional amount multiplied by 2.39% and pay UBS upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.73% 2/25/34 | March 2034 | 1,055,000 | 2,496 | ||
Receive monthly notional amount multiplied by 2.4% and pay Deutsche Bank upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.2288% 1/25/34 | Feb. 2034 | 305,732 | 405 | ||
Receive monthly notional amount multiplied by 2.7% and pay Morgan Stanley, Inc. upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M9, 6.41% 5/25/35 | June 2035 | 845,000 | (2,738) | ||
Receive monthly notional amount multiplied by 2.79% and pay Merrill Lynch, Inc. upon default event of New Century Home Equity Loan Trust, par value of the notional amount of New Century Home Equity Loan Trust Series 2004-4 Class M9, 7.0788% 2/25/35 | March 2035 | 610,000 | 5,491 | ||
Receive quarterly notional amount multiplied by .20% and pay Merrill Lynch, Inc. upon default event of American Transmission Co. LLC, par value of the notional amount of American Transmission Co. LLC 7.125% 3/15/11 | May 2007 | 1,315,000 | 1,447 | ||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Credit Default Swaps - continued | |||||
Receive quarterly notional amount multiplied by .26% and pay Morgan Stanley, Inc. upon default event of Amerada Hess Corp., par value of the notional amount of Amerada Hess Corp. 6.65% 8/15/11 | March 2007 | $ 1,650,000 | $ 2,525 | ||
Receive quarterly notional amount multiplied by .28% and pay Morgan Stanley, Inc. upon default event of Amerada Hess Corp., par value of the notional amount of Amerada Hess 6.65% 8/15/11 | March 2007 | 2,000,000 | 3,280 | ||
Receive quarterly notional amount multiplied by .285% and pay Deutsche Bank upon default event of ConocoPhillips, par value of the notional amount of ConocoPhillips 4.75% 10/15/12 | Sept. 2011 | 2,200,000 | (3,036) | ||
Receive quarterly notional amount multiplied by .30% and pay Deutsche Bank upon default event of Entergy Corp., par value of the notional amount of Entergy Corp. 7.75% 12/15/09 | March 2008 | 1,390,000 | 1,904 | ||
Receive quarterly notional amount multiplied by .30% and pay Goldman Sachs upon default event of Entergy Corp., par value of the notional amount of Entergy Corp. 7.75% 12/15/09 | March 2008 | 1,015,000 | 1,391 | ||
Receive quarterly notional amount multiplied by .48% and pay Goldman Sachs upon default event of TXU Corp., par value of the notional amount of TXU Energy Co. LLC 7% 3/15/13 | Sept. 2008 | 1,840,000 | 8,869 | ||
Receive quarterly notional amount multiplied by .78% and pay Goldman Sachs upon default event of TXU Corp., par value of the notional amount of TXU Energy Co. LLC 7% 3/15/13 | Dec. 2008 | 1,750,000 | 20,265 | ||
Receive semi-annually notional amount multiplied by .42% and pay Credit Suisse First Boston upon default event of Russian Federation, par value of the notional amount of Russian Federation 5% 3/31/30 | June 2007 | 1,900,000 | 2,261 | ||
TOTAL CREDIT DEFAULT SWAPS | 19,650,732 | 39,762 | |||
Swap Agreements - continued | |||||
Expiration Date | Notional Amount | Value | |||
Total Return Swaps | |||||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Oct. 2006 | $ 5,655,000 | $ 2,164 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Citibank | Nov. 2006 | 6,800,000 | 3,243 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Jan. 2007 | 4,900,000 | 2,048 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor plus 20 basis points and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Jan. 2007 | 3,000,000 | 705 | ||
Receive monthly notional amount multiplied by the nominal spread appreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor plus 10 basis points and pay monthly notional amount multiplied by the nominal spread depreciation of the Lehman Brothers CMBS U.S. Aggregate Index adjusted by a modified duration factor with Lehman Brothers, Inc. | Nov. 2006 | 8,900,000 | 4,147 | ||
TOTAL TOTAL RETURN SWAPS | 29,255,000 | 12,307 | |||
$ 48,905,732 | $ 52,069 |
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 $114,788,836 or 13.3% 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 $346,206. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited list of holdings for each fixed-income central fund, as of the investing fund's report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central fund's financial statements, which are not covered by the investing fund's Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $2,196,449 or 0.3% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Aspetuck Trust 5.7869% 10/16/06 | 12/14/05 | $ 2,195,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Ultra-Short Central Fund | $ 13,482,875 |
Additional information regarding the fund's fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows: |
Fund | Value, beginning of period | Purchases | Sales | Value,end of period | % ownership, |
Fidelity Ultra-Short Central Fund | $ 288,274,676 | $ - | $ 50,500,019 | $ 237,764,502 | 3.1% |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 85.1% |
United Kingdom | 8.4% |
France | 1.8% |
Cayman Islands | 1.1% |
Others (individually less than 1%) | 3.6% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $1,917,431 all of which will expire on July 31, 2014. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $23,839,000) - Unaffiliated issuers (cost $632,873,000) | $ 632,701,974 | |
Affiliated Central Funds (cost $237,531,138) | 237,764,502 | |
Total Investments (cost $870,404,138) | $ 870,466,476 | |
Cash | 916 | |
Receivable for swap agreements | 7,371 | |
Receivable for fund shares sold | 1,306,558 | |
Interest receivable | 3,522,720 | |
Receivable for daily variation on futures contracts | 10,087 | |
Swap agreements, at value | 52,069 | |
Other receivables | 155 | |
Total assets | 875,366,352 | |
Liabilities | ||
Payable for investments purchased | $ 10,689,698 | |
Delayed delivery | 1,499,415 | |
Payable for fund shares redeemed | 940,414 | |
Distributions payable | 407,013 | |
Accrued management fee | 238,511 | |
Distribution fees payable | 1,088 | |
Other affiliated payables | 96,970 | |
Total liabilities | 13,873,109 | |
Net Assets | $ 861,493,243 | |
Net Assets consist of: | ||
Paid in capital | $ 863,673,830 | |
Undistributed net investment income | 106,939 | |
Accumulated undistributed net realized gain (loss) on investments | (1,787,334) | |
Net unrealized appreciation (depreciation) on investments | (500,192) | |
Net Assets | $ 861,493,243 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 10.02 | |
Maximum offering price per share (100/98.50 of $10.02) | $ 10.17 | |
Class T: | $ 10.02 | |
Maximum offering price per share (100/98.50 of $10.02) | $ 10.17 | |
Ultra-Short Bond: | $ 10.02 | |
Institutional Class: | $ 10.02 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Interest | $ 28,826,439 | |
Income from affiliated Central Funds | 13,482,875 | |
Total income | 42,309,314 | |
Expenses | ||
Management fee | $ 2,887,734 | |
Transfer agent fees | 905,122 | |
Distribution fees | 10,051 | |
Fund wide operations fee | 254,545 | |
Independent trustees' compensation | 3,655 | |
Miscellaneous | 1,858 | |
Total expenses before reductions | 4,062,965 | |
Expense reductions | (5,737) | 4,057,228 |
Net investment income | 38,252,086 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | (134,456) | |
Affiliated Central Funds | (68,282) | |
Futures contracts | (1,229,016) | |
Swap agreements | 325,332 | |
Total net realized gain (loss) | (1,106,422) | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 82,562 | |
Futures contracts | 9,496 | |
Swap agreements | (15,516) | |
Total change in net unrealized appreciation (depreciation) | 76,542 | |
Net gain (loss) | (1,029,880) | |
Net increase (decrease) in net assets resulting from operations | $ 37,222,206 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income | $ 38,252,086 | $ 18,477,979 |
Net realized gain (loss) | (1,106,422) | (526,929) |
Change in net unrealized appreciation (depreciation) | 76,542 | (889,284) |
Net increase (decrease) in net assets resulting | 37,222,206 | 17,061,766 |
Distributions to shareholders from net investment income | (38,283,502) | (18,371,771) |
Distributions to shareholders from net realized gain | - | (213,972) |
Total distributions | (38,283,502) | (18,585,743) |
Share transactions - net increase (decrease) | (51,227,531) | 334,021,363 |
Redemption fees | 28,307 | 34,215 |
Total increase (decrease) in net assets | (52,260,520) | 332,531,601 |
Net Assets | ||
Beginning of period | 913,753,763 | 581,222,162 |
End of period (including undistributed net investment income of $106,939 and undistributed net investment income of $26,805, respectively) | $ 861,493,243 | $ 913,753,763 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 H |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income E | .400 | .223 | .013 |
Net realized and unrealized gain (loss) | (.009) | (.026) | .011 |
Total from investment operations | .391 | .197 | .024 |
Distributions from net investment income | (.401) | (.214) | (.014) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.401) | (.217) | (.014) |
Redemption fees added to paid in capital E, J | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C, D | 3.97% | 1.98% | .24% |
Ratios to Average Net Assets F, I | |||
Expenses before reductions | .70% | .78% | .85% A |
Expenses net of fee waivers, if any | .70% | .70% | .70% A |
Expenses net of all reductions | .70% | .70% | .70% A |
Net investment income | 4.00% | 2.23% | 1.11% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 4,553 | $ 2,557 | $ 316 |
Portfolio turnover rate G | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J 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
Years ended July 31, | 2006 | 2005 | 2004 H |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income E | .404 | .222 | .013 |
Net realized and unrealized gain (loss) | (.011) | (.025) | .010 |
Total from investment operations | .393 | .197 | .023 |
Distributions from net investment income | (.403) | (.214) | (.013) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.403) | (.217) | (.013) |
Redemption fees added to paid in capital E, J | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C, D | 4.00% | 1.98% | .23% |
Ratios to Average Net Assets F, I | |||
Expenses before reductions | .68% | .77% | .86% A |
Expenses net of fee waivers, if any | .68% | .70% | .70% A |
Expenses net of all reductions | .68% | .70% | .70% A |
Net investment income | 4.03% | 2.23% | 1.11% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 4,624 | $ 4,044 | $ 356 |
Portfolio turnover rate G | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
J Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Ultra-Short Bond
Years ended July 31, | 2006 | 2005 | 2004 | 2003 G |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.02 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income D | .427 | .241 | .122 | .137 |
Net realized and unrealized gain (loss) | (.011) | (.026) | .029 | .052 |
Total from investment operations | .416 | .215 | .151 | .189 |
Distributions from net investment income | (.426) | (.232) | (.122) | (.173) |
Distributions from net realized gain | - | (.003) | - | - |
Total distributions | (.426) | (.235) | (.122) | (.173) |
Redemption fees added to paid in capital D | - I | - I | .001 | .004 |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 | $ 10.02 |
Total Return B, C | 4.23% | 2.16% | 1.52% | 1.94% |
Ratios to Average Net Assets E, H | ||||
Expenses before reductions | .45% | .58% | .62% | .70% A |
Expenses net of fee waivers, if any | .45% | .53% | .55% | .55% A |
Expenses net of all reductions | .45% | .53% | .55% | .55% A |
Net investment income | 4.26% | 2.41% | 1.21% | 1.50% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 850,329 | $ 906,644 | $ 580,174 | $ 225,203 |
Portfolio turnover rate F | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G For the period August 29, 2002 (commencement of operations) to July 31, 2003.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Amount represents less than $.001 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 G |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 10.03 | $ 10.05 | $ 10.04 |
Income from Investment Operations | |||
Net investment income D | .420 | .240 | .015 |
Net realized and unrealized gain (loss) | (.008) | (.026) | .010 |
Total from investment operations | .412 | .214 | .025 |
Distributions from net investment income | (.422) | (.231) | (.015) |
Distributions from net realized gain | - | (.003) | - |
Total distributions | (.422) | (.234) | (.015) |
Redemption fees added to paid in capital D, I | - | - | - |
Net asset value, end of period | $ 10.02 | $ 10.03 | $ 10.05 |
Total Return B, C | 4.19% | 2.15% | .25% |
Ratios to Average Net Assets E, H | |||
Expenses before reductions | .49% | .58% | .67% A |
Expenses net of fee waivers, if any | .49% | .55% | .55% A |
Expenses net of all reductions | .49% | .55% | .55% A |
Net investment income | 4.22% | 2.38% | 1.26% A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 1,987 | $ 509 | $ 376 |
Portfolio turnover rate F | 39% | 33% | 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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G For the period June 16, 2004 (commencement of sale of shares) to July 31, 2004.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I 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, 2006
1. Significant Accounting Policies.
Fidelity Ultra-Short Bond Fund (the Fund) is a non-diversified 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, Ultra-Short Bond (the original class), 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 Fund may invest in Fidelity Ultra-Short Central Fund (Ultra-Short Central Fund) referred to as the Central Fund, which is an open-end investment company available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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, which are also consistently followed by the Central Fund:
Security Valuation. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities. Investments in open-end mutual funds, including the Central Fund, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
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1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions, including the Fund's investment activity in the Central Fund, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income and distributions from the Central Fund are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing 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. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to futures transactions, swap agreements, market discount, financing transactions, capital loss carryforwards and losses deferred due to excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 1,312,725 | |
Unrealized depreciation | (1,126,965) | |
Net unrealized appreciation (depreciation) | 185,760 | |
Undistributed ordinary income | 324,954 | |
Capital loss carryforward | (1,917,431) | |
Cost for federal income tax purposes | $ 870,280,716 |
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 38,283,502 | $ 18,371,770 |
Long-term Capital Gains | - | 213,973 |
Total | $ 38,283,502 | $ 18,585,743 |
Short-Term Trading (Redemption) Fees. Shares 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 FMR, are retained by the Fund and accounted for as an addition to paid in capital.
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
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
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2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
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 and to fluctuations in interest rates. Buying futures tends to increase a fund's exposure to the underlying instrument, while selling futures tends to decrease a fund's exposure to the underlying instrument or hedge other fund investments. Upon entering into a futures contract, a fund is required to deposit with a clearing broker, no later than the following business day, an amount ("initial margin") equal to a certain percentage of the face value of the contract. The initial margin may be in the form of cash or securities and is transferred to a segregated account on settlement date. Subsequent payments ("variation margin") are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses. Realized gains (losses) are recorded upon the expiration or closing of the futures contract. Securities deposited to meet margin requirements are identified in the Schedule of Investments. Futures contracts involve, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption "Futures Contracts." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counterparties do not perform under the contract's terms. 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.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Total return swaps are agreements to exchange the return generated by one instrument or index 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, a fund will receive a payment from the counterparty. To the extent it is less, a 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 either it or its counterparty act as guarantors. By acting as the guarantor of a swap, a fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Periodic payments and premiums received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively.
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 a fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the Fund's Schedule of Investments under the caption "Swap Agreements."
Mortgage Dollar Rolls. 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
Annual Report
2. Operating Policies - continued
Mortgage Dollar Rolls - continued
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, a 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 $296,940,910 and $234,644,796, 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 .20% of the Fund's average net assets and a group fee rate that averaged ..12% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .32% of the Fund's average net assets.
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% | $ 4,724 | $ 432 |
Class T | 0% | .15% | 5,327 | 2,729 |
$ 10,051 | $ 3,161 |
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
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 range from .75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 2,219 |
Class T | 674 |
$ 2,893 |
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 Ultra-Short Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Ultra-Short Bond shares. FIIOC receives 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. FSC receives an asset-based fee of .10% of Ultra-Short Bond's average net assets. 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 | $ 6,362 | .20 |
Class T | 6,322 | .18 |
Ultra-Short Bond | 891,306 | .10 |
Institutional Class | 1,132 | .14 |
$ 905,122 |
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fee was equivalent to an annual rate of .03% of average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Ultra-Short Central Fund, managed by Fidelity Investments Money Management, Inc. (FIMM), which seeks to obtain a high level of current income consistent with preservation of capital by investing in U.S. dollar denominated money market and investment-grade debt securities.
The Fund's Schedule of Investments lists the Central Fund as an investment of the Fund but does not include the underlying holdings of the Central Fund. Based on its investment objectives, the Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the Central Fund and the Fund.
A complete unaudited list of holdings for the Central Fund, as of the Fund's report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the Fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the Central Fund financial statements, which are not covered by this Fund's Report of Independent Registered Public Accounting Firm, are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
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, which amounts to $1,858 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
Through arrangements with the Fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $2,662. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Ultra-Short Bond | $ 3,075 |
Annual Report
Notes to Financial Statements - continued
7. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
8. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | ||
2006 | 2005 | |
From net investment income | ||
Class A | $ 126,997 | $ 41,869 |
Class T | 141,086 | 50,050 |
Ultra-Short Bond | 37,977,353 | 18,257,386 |
Institutional Class | 38,066 | 22,466 |
Total | $ 38,283,502 | $ 18,371,771 |
From net realized gain | ||
Class A | $ - | $ 407 |
Class T | - | 503 |
Ultra-Short Bond | - | 212,634 |
Institutional Class | - | 428 |
Total | $ - | $ 213,972 |
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2006 | 2005 | 2006 | 2005 | |
Class A | ||||
Shares sold | 574,958 | 314,954 | $ 5,763,274 | $ 3,163,548 |
Reinvestment of distributions | 10,043 | 3,804 | 100,637 | 38,189 |
Shares redeemed | (385,505) | (95,385) | (3,863,258) | (957,951) |
Net increase (decrease) | 199,496 | 223,373 | $ 2,000,653 | $ 2,243,786 |
Class T | ||||
Shares sold | 357,260 | 597,602 | $ 3,579,216 | $ 6,002,298 |
Reinvestment of distributions | 13,205 | 4,137 | 132,333 | 41,523 |
Shares redeemed | (312,176) | (234,046) | (3,129,874) | (2,350,424) |
Net increase (decrease) | 58,289 | 367,693 | $ 581,675 | $ 3,693,397 |
Annual Report
9. Share Transactions - continued
Shares | Dollars | |||
Years ended July 31, | Years ended July 31, | |||
2006 | 2005 | 2006 | 2005 | |
Ultra-Short Bond | ||||
Shares sold | 39,226,057 | 63,063,839 | $ 393,000,678 | $ 633,315,534 |
Reinvestment of distributions | 3,400,651 | 1,643,763 | 34,072,273 | 16,499,718 |
Shares redeemed | (48,147,604) | (32,055,308) | (482,361,462) | (321,868,107) |
Net increase (decrease) | (5,520,896) | 32,652,294 | $ (55,288,511) | $ 327,947,145 |
Institutional Class | ||||
Shares sold | 190,577 | 296,985 | $ 1,908,425 | $ 2,986,442 |
Reinvestment of distributions | 756 | 2,113 | 7,577 | 21,221 |
Shares redeemed | (43,621) | (285,834) | (437,350) | (2,870,628) |
Net increase (decrease) | 147,712 | 13,264 | $ 1,478,652 | $ 137,035 |
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, 2006, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the years in the period then ended, 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 2006
Annual Report
Trustees and Officers
The Trustees, Member of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and Albert R. Gamper, Jr., each of the Trustees oversees 347 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate. Mr. Gamper oversees 292 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Member hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1984 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of the fund (2005 -present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003- present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003- present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). 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.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 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). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2006 Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
Robert M. Gates (63) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). 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-present), and Brinker International (restaurant management, 2003-present). 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). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
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-present). 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 (62) | |
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. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
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 Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) 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 (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman Emeritus 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), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). 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. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). |
Annual Report
Advisory Board Member and Executive Officers:
Correspondence intended for Mr. Keyes 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 | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Income Fund (2006). Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Income Fund (2003). Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2006 Vice President of the fund. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
David L. Murphy (58) | |
Year of Election or Appointment: 2005 Vice President of the fund. Mr. Murphy also serves as Vice President of Fidelity's Money Market Funds (2002-present), certain Asset Allocation Funds (2003-present), Fixed-Income Funds (2005-present), and Balanced Funds (2005-present). He serves as Senior Vice President (2000-present) and Head (2004-present) of the Fidelity Investments Fixed Income Division. Mr. Murphy is also a Senior Vice President of Fidelity Investments Money Management, Inc. (2003-present) and an Executive Vice President of FMR (2005-present). Previously, Mr. Murphy served as Money Market Group Leader (2002-2004), Bond Group Leader (2000-2002), and Vice President of Fidelity's Taxable Bond Funds (2000-2002) and Fidelity's Municipal Bond Funds (2001-2002). | |
Thomas J. Silvia (45) | |
Year of Election or Appointment: 2005 Vice President of the fund. Mr. Silvia also serves as Vice President of Fidelity's Fixed-Income Funds (2005-present), certain Balanced Funds (2005-present), certain Asset Allocation Funds (2005-present), and Senior Vice President and Bond Group Leader of the Fidelity Investments Fixed-Income Division (2005-present). Previously, Mr. Silvia served as Director of Fidelity's Taxable Bond portfolio managers (2002-2004) and a portfolio manager in the Bond Group (1997-2004). | |
Andrew Dudley (41) | |
Year of Election or Appointment: 2002 Vice President of the fund. Mr. Dudley also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Dudley worked as a portfolio manager. | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 2002 Secretary of the fund. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of the fund. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) 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. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of the fund. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of the fund. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
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-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005- present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of the fund. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
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). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of the fund. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). 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). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
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. | |
Peter L. Lydecker (52) | |
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 (51) | |
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. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of the fund. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). |
Annual Report
Distributions
The fund designates $21,139,410 of distributions paid during the period January 1, 2006 to July 31, 2006 as qualifying to be taxed as interest-related dividends for nonresident alien shareholders.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Proxy Voting Results
A special meeting of the fund's shareholders was held on January 18, 2006. The results of votes taken among shareholders on the proposal before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting.
PROPOSAL 1 | ||
To elect a Board of Trustees. A | ||
# of | % of | |
Dennis J. Dirks | ||
Affirmative | 8,252,035,677.61 | 97.347 |
Withheld | 224,894,685.16 | 2.653 |
TOTAL | 8,476,930,362.77 | 100.000 |
Albert R. Gamper, Jr. | ||
Affirmative | 8,252,680,829.70 | 97.355 |
Withheld | 224,249,533.07 | 2.645 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert M. Gates | ||
Affirmative | 8,239,007,314.92 | 97.193 |
Withheld | 237,923,047.85 | 2.807 |
TOTAL | 8,476,930,362.77 | 100.000 |
George H. Heilmeier | ||
Affirmative | 8,242,547,667.10 | 97.235 |
Withheld | 234,382,695.67 | 2.765 |
TOTAL | 8,476,930,362.77 | 100.000 |
Abigail P. Johnson | ||
Affirmative | 8,207,133,817.28 | 96.817 |
Withheld | 269,796,545.49 | 3.183 |
TOTAL | 8,476,930,362.77 | 100.000 |
Edward C. Johnson 3d | ||
Affirmative | 8,205,030,635.55 | 96.792 |
Withheld | 271,899,727.22 | 3.208 |
TOTAL | 8,476,930,362.77 | 100.000 |
Stephen P. Jonas | ||
Affirmative | 8,239,700,661.39 | 97.201 |
Withheld | 237,229,701.38 | 2.799 |
TOTAL | 8,476,930,362.77 | 100.000 |
# of | % of | |
Marie L. Knowles | ||
Affirmative | 8,246,135,458.96 | 97.277 |
Withheld | 230,794,903.81 | 2.723 |
TOTAL | 8,476,930,362.77 | 100.000 |
Ned C. Lautenbach | ||
Affirmative | 8,247,874,320.21 | 97.298 |
Withheld | 229,056,042.56 | 2.702 |
TOTAL | 8,476,930,362.77 | 100.000 |
William O. McCoy | ||
Affirmative | 8,229,632,189.68 | 97.083 |
Withheld | 247,298,173.09 | 2.917 |
TOTAL | 8,476,930,362.77 | 100.000 |
Robert L. Reynolds | ||
Affirmative | 8,241,271,395.49 | 97.220 |
Withheld | 235,658,967.28 | 2.780 |
TOTAL | 8,476,930,362.77 | 100.000 |
Cornelia M. Small | ||
Affirmative | 8,249,991,018.59 | 97.323 |
Withheld | 226,939,344.18 | 2.677 |
TOTAL | 8,476,930,362.77 | 100.000 |
William S. Stavropoulos | ||
Affirmative | 8,236,371,332.54 | 97.162 |
Withheld | 240,559,030.23 | 2.838 |
TOTAL | 8,476,930,362.77 | 100.000 |
Kenneth L. Wolfe | ||
Affirmative | 8,244,328,417.87 | 97.256 |
Withheld | 232,601,944.90 | 2.744 |
TOTAL | 8,476,930,362.77 | 100.000 |
A Denotes trust-wide proposal and voting results. |
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Ultra-Short Bond Fund
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Fixed-Income Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its June 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers. In addition, the Board considered the trading resources that are an integrated part of the fixed-income portfolio management investment process.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in June 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. Because the fund had been in existence less than five calendar years, the following charts considered by the Board show, over the one- and three-year periods ended December 31, 2005, as applicable, the cumulative total returns of Class T and Fidelity Ultra-Short Bond (retail class), the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class T and Fidelity Ultra-Short Bond (retail class) represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Fidelity Ultra-Short Bond Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Fidelity Ultra-Short Bond (retail class) was in the first quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for the one-year period, although the three-year cumulative total return of Fidelity Ultra-Short Bond (retail class) compared favorably to its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month (or shorter) periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 14% means that 86% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Ultra-Short Bond Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Furthermore, the Board considered that it had approved an amendment (effective June 1, 2005) to the fund's management contract that lowered the fund's individual fund fee rate from 30 basis points to 20 basis points. The Board considered that the chart reflects the fund's lower management fee for 2005, as if the lower rate were in effect for the entire year.
Annual Report
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board also considered that it had approved changes (effective June 1, 2005) in the contractual arrangements for the fund that (i) have the effect of setting the total "fund-level" expenses (including, among certain other expenses, the management fee) for each class at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee for Fidelity Ultra-Short Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Ultra-Short Bond (retail class) to 45 basis points. These contractual arrangements may not be increased without Board approval. The fund's Advisor classes continue to be subject to different class-level expenses (transfer agent fees and 12b-1 fees).
The Board noted that the total expenses of each class ranked below its competitive median for 2005. The Board considered that each class's total expenses reflect the contractual arrangements for 2005, as if the contractual arrangements were in effect for the entire year.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board noted that because the contractual arrangements that went into effect June 1, 2005 set the total fund-level expenses for each class at 35 basis points, increases or decreases in the management fee due to changes in the group fee rate will not impact total expenses. The Board realized, however, that the 35 basis point fee rate was below the lowest management fee rate available under the contractual arrangements that existed prior to June 1, 2005.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including (Advisor classes only) reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases. The Board also noted that the reduction in the fund's individual fund fee rate by 10 basis points delivers significant economies to fund shareholders. The Board concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Annual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) funds and accounts managed by Fidelity other than the Fidelity funds, including fee arrangements; (iii) the total expenses of certain funds and classes relative to competitors; (iv) fund performance trends; and (v) Fidelity's fee structures.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
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
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agent
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
AUSBI-UANN-0906
1.804593.102
(Fidelity Investment logo)(registered trademark)
Item 2. Code of Ethics
As of the end of the period, July 31, 2006, Fidelity Income Fund (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Marie L. Knowles is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Knowles is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees.
For the fiscal years ended July 31, 2006 and July 31, 2005, 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, 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 | 2006A | 2005A |
Fidelity Ginnie Mae Fund | $112,000 | $99,000 |
Fidelity Government Income Fund | $70,000 | $61,000 |
Fidelity Intermediate Government Income Fund | $63,000 | $56,000 |
Fidelity Ultra-Short Bond Fund | $54,000 | $33,000 |
All funds in the Fidelity Group of Funds audited by PwC | $12,800,000 | $11,600,000 |
A | Aggregate amounts may reflect rounding. |
(b) Audit-Related Fees.
In each of the fiscal years ended July 31, 2006 and July 31, 2005 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 | 2006A | 2005A |
Fidelity Ginnie Mae Fund | $0 | $0 |
Fidelity Government Income Fund | $0 | $0 |
Fidelity Intermediate Government Income Fund | $0 | $0 |
Fidelity Ultra-Short Bond Fund | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended July 31, 2006 and July 31, 2005, 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 | 2006A | 2005A |
PwC | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
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, 2006 and July 31, 2005, 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 | 2006A | 2005A |
Fidelity Ginnie Mae Fund | $2,700 | $2,500 |
Fidelity Government Income Fund | $2,700 | $2,500 |
Fidelity Intermediate Government Income Fund | $2,700 | $2,500 |
Fidelity Ultra-Short Bond Fund | $2,700 | $2,500 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended July 31, 2006 and July 31, 2005, 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 | 2006A | 2005A |
PwC | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
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, 2006 and July 31, 2005, the aggregate Other Fees billed by PwC for all other non-audit services rendered to the Funds is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Ginnie Mae Fund | $4,600 | $4,900 |
Fidelity Government Income Fund | $6,100 | $5,400 |
Fidelity Intermediate Government Income Fund | $2,100 | $2,200 |
Fidelity Ultra-Short Bond Fund | $2,100 | $2,000 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended July 31, 2006 and July 31, 2005, 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 | 2006A | 2005A |
PwC | $155,000 | $280,000 |
A | Aggregate amounts may reflect rounding. |
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 that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of each Fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 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 that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of each Fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 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 that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of each Fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each Fund.
(f) Not applicable.
(g) For the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate fees billed by PwC of $1,180,000A and $1,450,000A,B 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.
2006A | 2005A | |
Covered Services | $180,000 | $350,000 |
Non-Covered Services | $1,000,000 | $1,100,000 B |
A | Aggregate amounts may reflect rounding. |
B | Reflects current period presentation. |
(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. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) for each Fund provide reasonable assurances that material information relating to such Fund 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 a Fund's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, a Fund's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Income Fund
By: | /s/Christine Reynolds |
Christine Reynolds | |
President and Treasurer | |
Date: | September 25, 2006 |
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 25, 2006 |
By: | /s/Joseph B. Hollis |
Joseph B. Hollis | |
Chief Financial Officer | |
Date: | September 25, 2006 |