N-CSR 1 stp.htm

Fidelity®

Investment Grade Bond

Fund

Annual Report

August 31, 2006

(2_fidelity_logos) (Registered_Trademark)

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders.

Performance

<Click Here>

How the fund has done over time.

Management's Discussion

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The manager's review of fund performance, strategy and outlook.

Shareholder Expense Example

<Click Here>

An example of shareholder expenses.

Investment Changes

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A summary of major shifts in the fund's investments over the past four months.

Investments

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A complete list of the fund's investments with their market values.

Financial Statements

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Statements of assets and liabilities, operations, and changes in net assets,
as well as financial highlights.

Notes

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Notes to the financial statements.

Report of Independent Registered Public Accounting Firm

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Trustees and Officers

<Click Here>

Distributions

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Board Approval of Investment Advisory Contracts and Management Fees

<Click Here>

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 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 fund nor Fidelity Distributors Corporation is a bank.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.

One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.

You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).

A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.

We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of Investment Grade 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.

Note to Shareholders: The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Performance data reflects returns for periods ended August 31, 2006.

Average Annual Total Returns

Periods ended August 31, 2006

Past 1
year

Past 5
years

Past 10
years

Investment Grade Bond

2.34%

5.04%

6.31%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Investment Grade Bond on August 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® Aggregate Bond Index performed over the same period.



Annual Report

Management's Discussion of Fund Performance

Comments from Jeffrey Moore, Portfolio Manager of Fidelity® Investment Grade Bond Fund

A weak start, a strong finish and a modestly positive overall return highlighted investment-grade bond performance for the year ending August 31, 2006. Bonds sank in the first two months of the period after Gulf Coast hurricanes sent energy prices soaring, prompting fears of a corresponding leap in inflation. However, core inflation readings - which strip out volatile food and energy prices - remained relatively benign. That, combined with an easing of oil prices, helped bonds rally between November and February. But the asset class fell again from March through May, partly as a result of continued interest rate hikes by the Federal Reserve Board. In all, the Fed raised interest rates seven times during the past year. Bonds rose again in July and August, though, after Fed Chairman Ben Bernanke hinted at a pause in its rate hike campaign, which was soon realized when the central bank left rates unchanged at its August meeting. The late rally helped the debt market gain 1.71% for the year overall according to the Lehman Brothers® Aggregate Bond Index.

For the 12-month period ending August 31, 2006 - the fund's new fiscal year end - the fund returned 2.34%, compared with 1.71% for the Lehman Brothers index. For the four months ending August 31, 2006 - the period since I last reported to you - both the fund and the index gained 3.01%. The fund's yield-curve positioning was a significant positive versus the index during the past year. As the 12 months began, I maintained a "barbell" strategy - meaning concentrated in shorter- and longer-maturity investments. This yield-curve positioning helped greatly during the fourth quarter of 2005. Early in 2006, I removed the barbell and switched to a "bulleted" strategy - reducing exposure to short-term instruments and longer-dated bonds while buying two- and five-year maturities, which had been underperforming. The bulleted structure likely had a modest negative impact during the period's second half. Sector and security selection within the corporate bond segment were pluses, as was an emphasis on securitized products - including collateralized mortgage obligations and asset-backed securities. The fund also was helped by its allocation to the Fidelity Ultra-Short Central Fund, a diversified pool of short-term assets designed to outperform cash-like investments with similar characteristics. Curbing gains somewhat was a lack of exposure to strong performing government agency securities.

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

The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Expenses are based on the past six months of activity for the period ended August 31, 2006.

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2006 to August 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 funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Annual Report

Beginning
Account Value
March 1, 2006

Ending
Account Value
August 31, 2006

Expenses Paid
During Period*
March 1, 2006
to August 31, 2006

Class A

Actual

$ 1,000.00

$ 1,020.20

$ 3.56

Hypothetical A

$ 1,000.00

$ 1,021.68

$ 3.57

Class T

Actual

$ 1,000.00

$ 1,018.30

$ 4.12

Hypothetical A

$ 1,000.00

$ 1,021.12

$ 4.13

Class B

Actual

$ 1,000.00

$ 1,016.20

$ 7.57

Hypothetical A

$ 1,000.00

$ 1,017.69

$ 7.58

Class C

Actual

$ 1,000.00

$ 1,015.70

$ 8.03

Hypothetical A

$ 1,000.00

$ 1,017.24

$ 8.03

Investment Grade Bond

Actual

$ 1,000.00

$ 1,021.50

$ 2.29

Hypothetical A

$ 1,000.00

$ 1,022.94

$ 2.29

Institutional Class

Actual

$ 1,000.00

$ 1,021.30

$ 2.50

Hypothetical A

$ 1,000.00

$ 1,022.74

$ 2.50

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central funds in which the fund invests are not included in the fund's annualized expense ratio.

Annualized
Expense Ratio

Class A

.70%

Class T

.81%

Class B

1.49%

Class C

1.58%

Investment Grade Bond

.45%

Institutional Class

.49%

Annual Report

Investment Changes

The current period information is as of the Fund's new fiscal year end. The comparative information is as of the Fund's most recently published annual report.

Quality Diversification (% of fund's net assets)

As of August 31, 2006

As of April 30, 2006

U.S. Government and
U.S. Government
Agency Obligations 52.9%

U.S. Government and
U.S. Government
Agency Obligations 55.4%

AAA 14.6%

AAA 15.2%

AA 4.0%

AA 4.2%

A 8.0%

A 7.8%

BBB 20.3%

BBB 15.9%

BB and Below 4.2%

BB and Below 3.4%

Not Rated 1.8%

Not Rated 1.9%

Short-Term
Investments and
Net Other Assets (dagger) (5.8)%

Short-Term
Investments and
Net Other Assets (dagger) (3.8)%



We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings.

Average Years to Maturity as of August 31, 2006

4 months ago

Years

6.1

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 August 31, 2006

4 months ago

Years

4.5

4.4

Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example.

Asset Allocation (% of fund's net assets)

As of August 31, 2006 *

As of April 30, 2006 **

Corporate Bonds 27.5%

Corporate Bonds 21.9%

U.S. Government
and U.S. Government Agency Obligations 52.9%

U.S. Government and
U.S. Government
Agency Obligations 55.4%

Asset-Backed
Securities 10.9%

Asset-Backed
Securities 11.0%

CMOs and Other Mortgage Related Securities 14.0%

CMOs and Other Mortgage Related Securities 13.8%

Other Investments 0.5%

Other Investments 1.7%

Short-Term
Investments and
Net Other Assets (dagger) (5.8)%

Short-Term
Investments and
Net Other Assets (dagger) (3.8)%

* Foreign investments

10.1%

** Foreign investments

9.2%

* Futures and Swaps

18.4%

** Futures and Swaps

17.5%



(dagger) Short-term Investments and Net Other Assets are not included in the pie chart.

The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.

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 August 31, 2006

Showing Percentage of Net Assets

Nonconvertible Bonds - 25.2%

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER DISCRETIONARY - 2.9%

Auto Components - 0.2%

DaimlerChrysler NA Holding Corp. 5.875% 3/15/11

$ 20,050

$ 20,132

Automobiles - 0.5%

Ford Motor Co.:

6.375% 2/1/29

11,350

8,427

6.625% 10/1/28

6,365

4,774

7.45% 7/16/31

40,245

31,592

General Motors Corp. 8.375% 7/15/33 (b)

13,140

10,972

55,765

Household Durables - 0.2%

Fortune Brands, Inc. 5.125% 1/15/11

17,520

17,174

Media - 2.0%

Comcast Corp.:

4.95% 6/15/16

23,509

21,683

5.5% 3/15/11

5,890

5,880

5.85% 1/15/10

6,275

6,342

6.45% 3/15/37

17,500

17,161

Cox Communications, Inc.:

4.625% 1/15/10

9,500

9,203

7.125% 10/1/12

17,915

18,953

Liberty Media Corp.:

5.7% 5/15/13

8,500

7,926

8.25% 2/1/30

19,105

19,008

News America Holdings, Inc. 7.75% 12/1/45

8,175

8,976

News America, Inc. 6.2% 12/15/34

11,825

11,050

TCI Communications, Inc. 9.8% 2/1/12

19,400

22,850

Time Warner Entertainment Co. LP:

8.875% 10/1/12

750

851

10.15% 5/1/12

500

591

Time Warner, Inc. 6.625% 5/15/29

22,900

22,442

Univision Communications, Inc. 3.875% 10/15/08

9,840

9,387

Viacom, Inc. 5.75% 4/30/11 (c)

18,040

17,892

200,195

TOTAL CONSUMER DISCRETIONARY

293,266

CONSUMER STAPLES - 0.3%

Beverages - 0.1%

FBG Finance Ltd. 5.125% 6/15/15 (c)

11,020

10,425

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER STAPLES - continued

Food Products - 0.1%

H.J. Heinz Co. 6.428% 12/1/08 (c)(i)

$ 12,360

$ 12,594

Tobacco - 0.1%

Altria Group, Inc. 7% 11/4/13

5,910

6,429

TOTAL CONSUMER STAPLES

29,448

ENERGY - 1.8%

Energy Equipment & Services - 0.2%

Cooper Cameron Corp. 2.65% 4/15/07

9,550

9,382

Kinder Morgan, Inc. 6.5% 9/1/12

7,185

7,046

16,428

Oil, Gas & Consumable Fuels - 1.6%

Canadian Oil Sands Ltd. 4.8% 8/10/09 (c)

12,390

12,123

Duke Capital LLC 6.75% 2/15/32

4,835

4,975

Kerr-McGee Corp. 6.95% 7/1/24

19,000

19,831

Kinder Morgan Finance Co. ULC 5.35% 1/5/11

26,853

25,737

Louis Dreyfus Natural Gas Corp. 6.875% 12/1/07

7,700

7,821

National Gas Co. of Trinidad & Tobago Ltd. 6.05% 1/15/36 (c)

5,985

5,687

Pemex Project Funding Master Trust:

5.75% 12/15/15 (c)

15,330

14,916

5.75% 12/15/15

22,600

21,990

6.625% 6/15/35 (c)

12,586

12,359

6.625% 6/15/35

65

64

7.375% 12/15/14

33,610

36,416

Transcontinental Gas Pipe Line Corp. 6.4% 4/15/16 (c)

9,120

8,846

170,765

TOTAL ENERGY

187,193

FINANCIALS - 10.7%

Capital Markets - 1.4%

Bank of New York Co., Inc.:

3.4% 3/15/13 (i)

7,500

7,288

4.25% 9/4/12 (i)

8,565

8,484

Goldman Sachs Group, Inc.:

5.25% 10/15/13

19,220

18,837

6.45% 5/1/36

21,260

21,521

JP Morgan Chase Capital XVIII 6.95% 8/17/36

16,165

17,012

Lazard Group LLC 7.125% 5/15/15

16,430

17,179

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Capital Markets - continued

Merrill Lynch & Co., Inc. 4.25% 2/8/10

$ 21,840

$ 21,137

Morgan Stanley 6.6% 4/1/12

17,435

18,390

Nuveen Investments, Inc. 5% 9/15/10

11,055

10,803

140,651

Commercial Banks - 1.7%

Bank One Corp. 5.25% 1/30/13

13,775

13,621

Corporacion Andina de Fomento 5.2% 5/21/13

3,910

3,808

Export-Import Bank of Korea:

4.125% 2/10/09 (c)

4,240

4,123

5.125% 2/14/11

23,860

23,517

5.25% 2/10/14 (c)

7,225

7,085

HSBC Holdings PLC 6.5% 5/2/36

11,470

12,078

KeyCorp Capital Trust VII 5.7% 6/15/35

18,660

17,046

Korea Development Bank:

3.875% 3/2/09

18,270

17,667

4.75% 7/20/09

8,155

8,035

5.75% 9/10/13

14,578

14,744

PNC Funding Corp. 4.2% 3/10/08

2,280

2,239

Santander Issuances SA Unipersonal 5.805% 6/20/16 (c)(i)

9,620

9,716

Wachovia Bank NA 4.875% 2/1/15

20,250

19,328

Wachovia Corp. 4.875% 2/15/14

1,791

1,717

Wells Fargo Bank NA, San Francisco 7.55% 6/21/10

5,100

5,503

Wells Fargo Bank National Association 5.95% 8/26/36

11,564

11,645

171,872

Consumer Finance - 0.9%

General Electric Capital Corp.:

5.5% 4/28/11

36,350

36,721

6.75% 3/15/32

17,695

19,971

Household Finance Corp. 4.125% 11/16/09

20,856

20,126

HSBC Finance Corp. 5.7% 6/1/11

14,410

14,619

MBNA America Bank NA 4.625% 8/3/09

5,000

4,921

96,358

Diversified Financial Services - 1.3%

BAC Capital Trust XI 6.625% 5/23/36

24,475

25,541

Citigroup, Inc. 6% 2/21/12

5,960

6,151

ILFC E-Capital Trust II 6.25% 12/21/65 (c)(i)

4,325

4,264

JPMorgan Chase & Co.:

4.875% 3/15/14

10,460

10,033

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Diversified Financial Services - continued

JPMorgan Chase & Co.: - continued

4.891% 9/1/15 (i)

$ 5,380

$ 5,264

5.6% 6/1/11

21,015

21,241

5.75% 1/2/13

2,935

2,968

JPMorgan Chase Capital XVII 5.85% 8/1/35

3,865

3,650

Mizuho Financial Group Cayman Ltd. 5.79% 4/15/14 (c)

15,505

15,571

Prime Property Funding, Inc. 5.125% 6/1/15 (c)

13,035

12,309

ZFS Finance USA Trust I 6.15% 12/15/65 (c)(i)

17,990

17,728

ZFS Finance USA Trust II 6.45% 12/15/65 (c)(i)

7,500

7,261

131,981

Insurance - 0.8%

Assurant, Inc. 5.625% 2/15/14

6,095

6,021

Axis Capital Holdings Ltd. 5.75% 12/1/14

21,815

21,172

Liberty Mutual Group, Inc.:

6.7% 8/15/16 (c)

7,305

7,305

7.5% 8/15/36 (c)

3,975

3,898

Lincoln National Corp. 7% 5/17/66 (i)

8,870

9,190

QBE Insurance Group Ltd. 5.647% 7/1/23 (c)(i)

18,775

18,171

Symetra Financial Corp. 6.125% 4/1/16 (c)

10,405

10,401

Travelers Property Casualty Corp. 6.375% 3/15/33

6,275

6,303

82,461

Real Estate Investment Trusts - 2.4%

AMB Property LP 5.9% 8/15/13

9,635

9,724

Archstone-Smith Operating Trust:

5.25% 12/1/10

5,185

5,141

5.25% 5/1/15

12,430

12,054

Boston Properties, Inc. 6.25% 1/15/13

7,487

7,722

Brandywine Operating Partnership LP:

5.625% 12/15/10

10,855

10,855

5.75% 4/1/12

9,625

9,634

Camden Property Trust:

5.875% 6/1/07

6,320

6,336

5.875% 11/30/12

6,435

6,491

Colonial Properties Trust:

4.75% 2/1/10

12,060

11,708

5.5% 10/1/15

12,730

12,307

6.875% 8/15/12

5,000

5,262

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Real Estate Investment Trusts - continued

Developers Diversified Realty Corp.:

4.625% 8/1/10

$ 975

$ 942

5% 5/3/10

6,840

6,729

5.25% 4/15/11

5,400

5,327

5.375% 10/15/12

5,485

5,392

Duke Realty LP 5.95% 2/15/17

4,085

4,112

Equity One, Inc. 6.25% 1/15/17

4,535

4,612

Equity Residential 5.125% 3/15/16

10,765

10,294

Federal Realty Investment Trust:

6% 7/15/12

3,355

3,420

6.2% 1/15/17

2,215

2,277

Healthcare Realty Trust, Inc. 5.125% 4/1/14

4,130

3,906

HRPT Properties Trust 5.75% 11/1/15

2,925

2,879

iStar Financial, Inc.:

5.65% 9/15/11

15,495

15,442

5.8% 3/15/11

10,095

10,120

Liberty Property LP 6.375% 8/15/12

4,617

4,800

Mack-Cali Realty LP 5.05% 4/15/10

1,270

1,244

Simon Property Group LP:

4.6% 6/15/10

8,400

8,169

5.1% 6/15/15

16,415

15,692

5.45% 3/15/13

8,720

8,627

5.75% 12/1/15

10,655

10,660

Tanger Properties LP 6.15% 11/15/15

17,300

17,443

United Dominion Realty Trust 5.25% 1/15/15

1,950

1,869

Washington (REIT) 5.95% 6/15/11

10,660

10,814

252,004

Real Estate Management & Development - 1.1%

Colonial Realty LP 6.05% 9/1/16

11,060

11,072

EOP Operating LP:

4.65% 10/1/10

19,625

18,965

4.75% 3/15/14

14,345

13,416

5.875% 1/15/13

7,592

7,618

6.75% 2/15/12

9,295

9,761

7.5% 4/19/29

13,025

14,407

7.75% 11/15/07

12,245

12,551

Post Apartment Homes LP 6.3% 6/1/13

11,550

11,786

Regency Centers LP 6.75% 1/15/12

12,435

13,118

112,694

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Thrifts & Mortgage Finance - 1.1%

Independence Community Bank Corp.:

3.75% 4/1/14 (i)

$ 7,640

$ 7,319

4.9% 9/23/10

33,700

32,852

Residential Capital Corp.:

6.375% 6/30/10

19,180

19,346

6.5% 4/17/13

8,915

8,994

6.875% 6/30/15

10,955

11,345

Washington Mutual, Inc.:

4.625% 4/1/14

18,130

16,801

5.7956% 9/17/12 (i)

19,000

19,027

115,684

TOTAL FINANCIALS

1,103,705

INDUSTRIALS - 2.2%

Aerospace & Defense - 0.1%

Bombardier, Inc.:

6.3% 5/1/14 (c)

6,000

5,340

7.45% 5/1/34 (c)

12,035

10,410

15,750

Airlines - 1.5%

American Airlines, Inc. pass thru trust certificates:

6.855% 10/15/10

1,222

1,238

6.978% 10/1/12

3,162

3,245

7.024% 4/15/11

4,465

4,582

7.324% 4/15/11

13,531

13,260

7.858% 4/1/13

26,059

27,834

Continental Airlines, Inc. pass thru trust certificates:

6.32% 11/1/08

7,178

7,217

6.545% 8/2/20

4,398

4,426

6.648% 3/15/19

7,281

7,248

6.795% 2/2/20

2,369

2,244

7.056% 3/15/11

705

727

Delta Air Lines, Inc. pass thru trust certificates:

7.111% 3/18/13

16,260

16,260

7.57% 11/18/10

8,108

8,138

U.S. Airways pass thru trust certificates 6.85% 7/30/19

7,408

7,464

United Airlines pass thru certificates:

6.071% 9/1/14

5,825

5,825

6.201% 3/1/10

3,383

3,387

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

INDUSTRIALS - continued

Airlines - continued

United Airlines pass thru certificates: - continued

6.602% 9/1/13

$ 10,243

$ 10,241

7.032% 4/1/12

6,912

7,124

7.186% 10/1/12

17,099

17,441

7.811% 10/1/09 (m)

4,909

5,194

153,095

Commercial Services & Supplies - 0.0%

R.R. Donnelley & Sons Co. 5.5% 5/15/15

5,085

4,539

Industrial Conglomerates - 0.1%

Hutchison Whampoa International 03/33 Ltd. 7.45% 11/24/33 (c)

9,550

10,689

Road & Rail - 0.1%

CSX Corp. 6.75% 3/15/11

9,000

9,471

Transportation Infrastructure - 0.4%

BNSF Funding Trust I 6.613% 12/15/55 (i)

38,188

37,909

TOTAL INDUSTRIALS

231,453

INFORMATION TECHNOLOGY - 0.4%

Electronic Equipment & Instruments - 0.2%

Avnet, Inc. 6% 9/1/15

14,850

14,224

Semiconductors & Semiconductor Equipment - 0.2%

Chartered Semiconductor Manufacturing Ltd.:

5.75% 8/3/10

9,825

9,742

6.375% 8/3/15

13,495

13,291

23,033

Software - 0.0%

Oracle Corp./Ozark Holding, Inc. 5% 1/15/11

2,500

2,461

TOTAL INFORMATION TECHNOLOGY

39,718

MATERIALS - 0.3%

Chemicals - 0.1%

Agrium, Inc. 7.125% 5/23/36

11,735

12,267

Metals & Mining - 0.1%

Corporacion Nacional del Cobre (Codelco) 6.375% 11/30/12 (c)

3,460

3,591

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

MATERIALS - continued

Paper & Forest Products - 0.1%

International Paper Co. 4.25% 1/15/09

$ 11,580

$ 11,299

TOTAL MATERIALS

27,157

TELECOMMUNICATION SERVICES - 3.0%

Diversified Telecommunication Services - 2.6%

Ameritech Capital Funding Corp. 6.25% 5/18/09

6,440

6,529

AT&T, Inc. 6.8% 5/15/36

5,985

6,189

BellSouth Capital Funding Corp. 7.875% 2/15/30

9,250

10,350

British Telecommunications PLC 8.375% 12/15/10

1,779

1,972

Deutsche Telekom International Finance BV 5.25% 7/22/13

11,230

10,815

Embarq Corp.:

7.082% 6/1/16

17,205

17,555

7.995% 6/1/36

12,817

13,396

KT Corp. 5.875% 6/24/14 (c)

7,455

7,526

Sprint Capital Corp.:

6.875% 11/15/28

14,975

15,121

7.625% 1/30/11

11,500

12,339

Telecom Italia Capital SA:

4% 1/15/10

14,810

14,072

4.875% 10/1/10

18,035

17,499

4.95% 9/30/14

11,250

10,372

6.375% 11/15/33

19,850

18,743

Telefonica Emisiones SAU 7.045% 6/20/36

45,800

47,894

TELUS Corp. yankee 7.5% 6/1/07

18,550

18,808

Verizon Global Funding Corp.:

5.85% 9/15/35

7,208

6,636

7.75% 12/1/30

15,467

17,382

Verizon New York, Inc. 6.875% 4/1/12

10,520

10,923

264,121

Wireless Telecommunication Services - 0.4%

America Movil SA de CV 6.375% 3/1/35

13,585

12,924

Nextel Communications, Inc. 5.95% 3/15/14

10,170

9,941

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Vodafone Group PLC:

5% 12/16/13

$ 7,380

$ 7,028

5.5% 6/15/11

15,385

15,298

45,191

TOTAL TELECOMMUNICATION SERVICES

309,312

UTILITIES - 3.6%

Electric Utilities - 1.5%

Cleveland Electric Illuminating Co. 5.65% 12/15/13

11,490

11,421

Entergy Corp. 7.75% 12/15/09 (c)

12,500

13,271

Exelon Corp. 4.9% 6/15/15

27,100

25,366

FirstEnergy Corp. 6.45% 11/15/11

5,815

6,031

Nevada Power Co. 6.5% 5/15/18 (c)

24,160

24,663

Oncor Electric Delivery Co. 6.375% 5/1/12

10,150

10,430

Pacific Gas & Electric Co.:

4.2% 3/1/11

2,855

2,723

4.8% 3/1/14

2,670

2,553

Pepco Holdings, Inc. 4% 5/15/10

9,275

8,785

Progress Energy, Inc.:

7% 10/30/31

6,000

6,536

7.1% 3/1/11

12,875

13,735

Public Service Co. of Colorado:

5.5% 4/1/14

7,500

7,508

7.875% 10/1/12

5,630

6,332

Southern California Edison Co.:

4.65% 4/1/15

990

930

5% 1/15/14

585

567

Southwestern Public Service Co. 5.125% 11/1/06

5,000

4,997

TXU Energy Co. LLC 7% 3/15/13

10,903

11,376

157,224

Gas Utilities - 0.1%

Consolidated Natural Gas Co. 6.85% 4/15/11

2,735

2,866

Texas Eastern Transmission Corp. 7.3% 12/1/10

7,915

8,431

11,297

Independent Power Producers & Energy Traders - 0.8%

Constellation Energy Group, Inc. 7% 4/1/12

8,730

9,255

Duke Capital LLC:

4.331% 11/16/06

3,435

3,425

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

UTILITIES - continued

Independent Power Producers & Energy Traders - continued

Duke Capital LLC: - continued

5.668% 8/15/14

$ 13,400

$ 13,096

Exelon Generation Co. LLC 5.35% 1/15/14

26,963

26,320

PPL Energy Supply LLC 6.2% 5/15/16

11,895

12,171

PSEG Power LLC 7.75% 4/15/11

11,000

11,900

TXU Corp. 5.55% 11/15/14

7,555

6,999

83,166

Multi-Utilities - 1.2%

Dominion Resources, Inc.:

4.75% 12/15/10

13,875

13,455

5.95% 6/15/35

15,955

15,118

7.5% 6/30/66 (i)

12,110

12,506

DTE Energy Co. 7.05% 6/1/11

6,255

6,589

Duke Energy Corp. 5.625% 11/30/12

12,290

12,406

MidAmerican Energy Holdings, Inc. 6.125% 4/1/36 (c)

23,640

23,343

National Grid PLC 6.3% 8/1/16

26,485

27,084

TECO Energy, Inc. 7% 5/1/12

11,415

11,743

122,244

TOTAL UTILITIES

373,931

TOTAL NONCONVERTIBLE BONDS

(Cost $2,602,173)

2,595,183

U.S. Government and Government Agency Obligations - 16.4%

U.S. Government Agency Obligations - 2.5%

Fannie Mae:

4.375% 7/17/13

24,005

22,954

6.25% 2/1/11

115,475

120,226

Freddie Mac:

5.25% 11/5/12

8,420

8,291

5.875% 3/21/11

90,065

92,443

Tennessee Valley Authority 5.375% 4/1/56

15,097

15,141

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

259,055

U.S. Treasury Inflation Protected Obligations - 5.3%

U.S. Treasury Inflation-Indexed Notes 2% 1/15/14 (f)

549,831

539,957

U.S. Government and Government Agency Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

U.S. Treasury Obligations - 8.6%

U.S. Treasury Bond - principal STRIPS:

2/15/15

$ 289,357

$ 194,395

5/15/30

108,558

34,190

U.S. Treasury Bonds 8% 11/15/21

61,152

80,964

U.S. Treasury Notes:

4.25% 8/15/13 (b)

18,280

17,774

4.75% 5/15/14 (d)

199,025

199,323

U.S. Treasury Notes - principal STRIPS:

2/15/10

100,000

85,140

8/15/10

52,255

43,584

2/15/12

241,630

187,935

8/15/12

57,120

43,440

TOTAL U.S. TREASURY OBLIGATIONS

886,745

TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $1,683,791)

1,685,757

U.S. Government Agency - Mortgage Securities - 29.5%

Fannie Mae - 25.8%

3.744% 1/1/35 (i)

516

508

3.748% 12/1/34 (i)

955

939

3.757% 10/1/33 (i)

1,254

1,228

3.788% 6/1/34 (i)

5,593

5,445

3.796% 12/1/34 (i)

78

77

3.81% 6/1/33 (i)

269

265

3.834% 1/1/35 (i)

3,399

3,341

3.839% 11/1/34 (i)

6,914

6,860

3.846% 1/1/35 (i)

310

304

3.847% 5/1/34 (i)

31,173

30,409

3.88% 6/1/33 (i)

4,823

4,746

3.898% 10/1/34 (i)

382

379

3.905% 12/1/34 (i)

314

310

3.938% 11/1/34 (i)

2,251

2,231

3.941% 5/1/34 (i)

364

366

3.952% 1/1/35 (i)

401

397

3.954% 12/1/34 (i)

315

312

3.955% 12/1/34 (i)

7,601

7,522

3.957% 5/1/33 (i)

420

414

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

3.992% 1/1/35 (i)

$ 255

$ 253

3.996% 12/1/34 (i)

211

209

3.996% 12/1/34 (i)

380

375

3.998% 2/1/35 (i)

1,078

1,065

4% 7/1/18 to 9/1/18

16,434

15,511

4.022% 1/1/35 (i)

2,067

2,046

4.029% 1/1/35 (i)

151

149

4.034% 10/1/18 (i)

1,048

1,031

4.037% 1/1/35 (i)

241

238

4.041% 2/1/35 (i)

975

963

4.052% 12/1/34 (i)

574

571

4.058% 1/1/35 (i)

546

539

4.079% 2/1/35 (i)

1,892

1,870

4.082% 4/1/33 (i)

417

413

4.083% 2/1/35 (i)

646

639

4.086% 2/1/35 (i)

706

698

4.094% 11/1/34 (i)

437

433

4.102% 2/1/35 (i)

3,524

3,493

4.108% 1/1/35 (i)

2,136

2,111

4.114% 1/1/35 (i)

572

567

4.116% 2/1/35 (i)

2,406

2,379

4.126% 1/1/35 (i)

3,539

3,501

4.143% 2/1/35 (i)

1,867

1,847

4.156% 1/1/35 (i)

1,043

1,038

4.171% 1/1/35 (i)

2,585

2,523

4.181% 11/1/34 (i)

131

130

4.187% 1/1/35 (i)

1,801

1,787

4.202% 1/1/35 (i)

1,134

1,126

4.214% 1/1/34 (i)

5,652

5,567

4.249% 1/1/34 (i)

3,596

3,543

4.25% 2/1/35 (i)

1,293

1,264

4.272% 3/1/35 (i)

1,179

1,167

4.274% 2/1/35 (i)

681

677

4.275% 8/1/33 (i)

2,401

2,376

4.287% 12/1/34 (i)

189

187

4.306% 5/1/35 (i)

1,632

1,617

4.313% 3/1/33 (i)

659

644

4.337% 9/1/34 (i)

4,251

4,214

4.35% 1/1/35 (i)

1,353

1,325

4.351% 9/1/34 (i)

1,756

1,754

4.356% 4/1/35 (i)

756

749

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

4.362% 2/1/34 (i)

$ 2,807

$ 2,770

4.39% 11/1/34 (i)

11,040

11,044

4.393% 10/1/34 (i)

7,455

7,336

4.394% 5/1/35 (i)

3,699

3,672

4.396% 2/1/35 (i)

1,952

1,913

4.423% 10/1/34 (i)

5,679

5,668

4.426% 1/1/35 (i)

1,512

1,500

4.438% 3/1/35 (i)

1,775

1,741

4.456% 8/1/34 (i)

3,737

3,691

4.464% 5/1/35 (i)

1,269

1,258

4.489% 3/1/35 (i)

4,110

4,034

4.494% 1/1/35 (i)

1,674

1,659

4.497% 8/1/34 (i)

691

697

4.5% 12/1/17 to 4/1/35

322,091

308,654

4.5% 9/1/21 (d)

4,810

4,625

4.5% 9/1/21 (d)

16,044

15,427

4.516% 3/1/35 (i)

3,899

3,829

4.527% 2/1/35 (i)

15,939

15,772

4.532% 2/1/35 (i)

7,655

7,603

4.539% 7/1/35 (i)

4,604

4,565

4.54% 2/1/35 (i)

1,200

1,192

4.554% 2/1/35 (i)

815

809

4.577% 2/1/35 (i)

3,593

3,536

4.577% 7/1/35 (i)

5,634

5,588

4.584% 2/1/35 (i)

8,905

8,759

4.609% 11/1/34 (i)

3,856

3,807

4.661% 3/1/35 (i)

6,842

6,804

4.67% 11/1/34 (i)

4,351

4,303

4.716% 7/1/35 (i)

8,909

8,712

4.727% 7/1/34 (i)

3,568

3,536

4.77% 12/1/34 (i)

3,311

3,279

4.778% 12/1/34 (i)

1,318

1,305

4.796% 8/1/35 (i)

19,482

19,221

4.803% 12/1/32 (i)

1,679

1,680

4.809% 6/1/35 (i)

6,422

6,390

4.875% 10/1/34 (i)

11,562

11,481

5% 12/1/17 to 5/1/36

23,822

22,870

5% 9/1/36 (d)

34,000

32,581

5% 9/1/36 (d)

199,321

191,005

5% 9/1/36 (d)

60,000

57,497

5% 9/1/36 (d)

160,000

153,324

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

5% 9/1/36 (d)

$ 128,063

$ 122,720

5.083% 9/1/34 (i)

9,110

9,085

5.091% 5/1/35 (i)

8,171

8,163

5.1% 9/1/34 (i)

1,369

1,366

5.172% 5/1/35 (i)

10,469

10,429

5.196% 6/1/35 (i)

5,675

5,679

5.205% 3/1/35 (i)

739

737

5.215% 5/1/35 (i)

10,524

10,492

5.359% 12/1/34 (i)

2,207

2,211

5.5% 1/1/09 to 7/1/36

419,370

413,358

5.5% 9/1/36 (d)

35,000

34,359

5.5% 9/1/36 (d)

273,365

268,355

5.5% 9/1/36 (d)

163,230

160,239

5.5% 9/1/36 (d)

20,645

20,267

5.502% 2/1/36 (i)

18,364

18,417

5.628% 2/1/36 (i)

21,058

21,146

5.916% 1/1/36 (i)

4,966

5,011

6% 4/1/13 to 9/1/32

39,950

40,186

6% 9/1/21 (d)

313

317

6% 9/1/21 (d)

2,562

2,591

6% 9/1/36 (d)

9,075

9,086

6.5% 3/1/07 to 6/1/36

177,588

181,019

6.5% 9/1/36 (d)

14,391

14,613

6.5% 9/1/36 (d)

163,230

165,744

7% 5/1/13 to 10/1/32

31,672

32,660

7.5% 9/1/25 to 8/1/29

4,645

4,830

9.5% 4/1/17 to 2/1/25

389

432

12.5% 1/1/15 to 7/1/15

10

11

TOTAL FANNIE MAE

2,657,302

Freddie Mac - 1.5%

4.043% 12/1/34 (i)

1,327

1,307

4.097% 12/1/34 (i)

1,910

1,883

4.124% 1/1/35 (i)

1,686

1,663

4.256% 3/1/35 (i)

1,649

1,627

4.298% 5/1/35 (i)

2,945

2,910

4.301% 12/1/34 (i)

1,904

1,858

4.328% 1/1/35 (i)

3,973

3,927

4.351% 3/1/35 (i)

2,807

2,740

4.38% 2/1/35 (i)

3,527

3,445

4.438% 2/1/34 (i)

1,705

1,680

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Freddie Mac - continued

4.443% 3/1/35 (i)

$ 1,771

$ 1,732

4.454% 6/1/35 (i)

2,445

2,416

4.458% 3/1/35 (i)

2,007

1,963

4.471% 3/1/35 (i)

5,079

4,968

4.5% 5/1/19

4,195

4,038

4.546% 2/1/35 (i)

2,903

2,843

5.003% 4/1/35 (i)

6,473

6,445

5.127% 4/1/35 (i)

6,592

6,542

5.247% 2/1/36 (i)

67,865

67,505

5.5% 3/1/25

10,203

10,090

5.504% 8/1/33 (i)

217

219

6% 5/1/33

16,132

16,238

8.5% 1/1/25 to 9/1/27

625

675

TOTAL FREDDIE MAC

148,714

Government National Mortgage Association - 2.2%

5.5% 4/15/29 to 5/15/34

17,292

17,172

6% 10/15/08 to 10/15/30

8,068

8,191

6.5% 3/15/26 to 8/15/36 (e)

131,091

134,257

6.5% 10/1/36 (d)

33,354

34,100

7% 3/15/23 to 12/15/32

29,429

30,495

7.5% 1/15/07 to 8/15/28

1,890

1,982

8% 9/15/24 to 1/15/30

138

147

8.5% 8/15/29 to 1/15/31

86

93

9% 4/15/23

4

4

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

226,441

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $3,036,046)

3,032,457

Asset-Backed Securities - 4.4%

ACE Securities Corp. Series 2004-HE1:

Class M1, 5.8244% 2/25/34 (i)

3,275

3,286

Class M2, 6.4244% 2/25/34 (i)

3,700

3,739

Aircraft Lease Securitization Ltd. Series 2005-1 Class C1, 9.1563% 9/9/30 (c)(i)

2,712

2,759

AmeriCredit Automobile Receivables Trust Series 2005-1 Class E, 5.82% 6/6/12 (c)

2,099

2,097

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Ameriquest Mortgage Securities, Inc. Series 2004-R2:

Class M1, 5.7544% 4/25/34 (i)

$ 1,835

$ 1,835

Class M2, 5.8044% 4/25/34 (i)

1,425

1,425

Asset Backed Securities Corp. Home Equity Loan Trust:

Series 2003-HE7 Class A3, 5.69% 12/15/33 (i)

1,033

1,036

Series 2004-HE2 Class M1, 5.8744% 4/25/34 (i)

9,700

9,777

Bank One Issuance Trust:

Series 2002-C1 Class C1, 6.29% 12/15/09 (i)

11,295

11,345

Series 2004-B2 Class B2, 4.37% 4/15/12

13,800

13,486

Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.7781% 2/28/44 (i)

5,243

5,254

Capital Auto Receivables Asset Trust:

Series 2004-2 Class A2, 3.35% 2/15/08

12,032

11,958

Series 2006-1 Class D, 7.16% 1/15/13 (c)

4,195

4,190

Series 2006-SN1A Class D, 6.15% 4/20/11 (c)

2,730

2,735

Capital One Multi-Asset Execution Trust Series 2004-6 Class B, 4.15% 7/16/12

11,570

11,229

Carrington Mortgage Loan Trust Series 2006-NC3 Class M10, 7.37% 8/25/36 (c)(i)

1,449

1,300

Cendant Timeshare Receivables Funding LLC Series 2005-1A Class A1, 4.67% 5/20/17 (c)

5,540

5,456

Chase Credit Card Owner Trust Series 2004-1 Class B, 5.53% 5/15/09 (i)

6,220

6,220

Citibank Credit Card Issuance Trust Series 2005-B1 Class B1, 4.4% 9/15/10

6,384

6,274

CNH Equipment Trust Series 2006-A Class A4, 5.27% 9/15/11

34,085

34,214

Countrywide Home Loans, Inc.:

Series 2004-2 Class M1, 5.8244% 5/25/34 (i)

11,345

11,389

Series 2004-3 Class M1, 5.8244% 6/25/34 (i)

2,175

2,188

Series 2005-3 Class MV1, 5.7444% 8/25/35 (i)

12,300

12,337

CPS Auto Receivables Trust Series 2006-A Class A4, 5.33% 11/15/12 (c)

6,560

6,490

Crown Castle Towers LLC/Crown Atlantic Holdings Sub LLC/Crown Communication, Inc. Series 2005-1A:

Class B, 4.878% 6/15/35 (c)

7,921

7,792

Class C, 5.074% 6/15/35 (c)

7,190

7,085

DB Master Finance LLC Series 2006-1 Class M1, 8.285% 6/20/31 (c)

5,545

5,645

Fieldstone Mortgage Investment Corp. Series 2003-1 Class M2, 7.0744% 11/25/33 (i)

515

517

First Franklin Mortgage Loan Trust Series 2004-FF2:

Class M3, 5.8744% 3/25/34 (i)

600

601

Class M4, 6.2244% 3/25/34 (i)

450

452

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Ford Credit Auto Owner Trust:

Series 2005-A Class B, 3.88% 1/15/10

$ 5,151

$ 5,024

Series 2006-B Class D, 7.26% 2/15/13 (c)

5,810

5,821

Fremont Home Loan Trust Series 2005-A:

Class M1, 5.7544% 1/25/35 (i)

2,550

2,567

Class M2, 5.7844% 1/25/35 (i)

3,650

3,669

Class M3, 5.8144% 1/25/35 (i)

1,975

1,989

GCO Slims Trust Series 2006-1A, 5.72% 3/1/22 (c)

11,986

11,857

GS Auto Loan Trust Series 2006-1 Class D, 6.25% 1/15/14 (c)

7,046

7,039

GSAMP Trust:

Series 2004-FM2:

Class M1, 5.8244% 1/25/34 (i)

4,994

4,994

Class M2, 6.4244% 1/25/34 (i)

2,300

2,300

Class M3, 6.6244% 1/25/34 (i)

1,357

1,357

Series 2004-OPT Class A1, 5.6644% 11/25/34 (i)

5,119

5,131

Home Equity Asset Trust:

Series 2003-2 Class M1, 6.2044% 8/25/33 (i)

3,739

3,745

Series 2003-4 Class M1, 6.1244% 10/25/33 (i)

3,495

3,504

HSBC Home Equity Loan Trust Series 2005-2:

Class M1, 5.785% 1/20/35 (i)

2,807

2,813

Class M2, 5.815% 1/20/35 (i)

2,107

2,115

Hyundai Auto Receivables Trust Series 2004-1 Class A4, 5.26% 11/15/12

32,795

32,847

Lancer Funding Ltd. Series 2006-1A Class A3, 7.1856% 4/6/46 (c)(i)

2,314

2,320

MBNA Credit Card Master Note Trust Series 2003-B2 Class B2, 5.72% 10/15/10 (i)

2,155

2,166

Meritage Mortgage Loan Trust Series 2004-1:

Class M1, 5.8244% 7/25/34 (i)

2,983

2,989

Class M2, 5.8744% 7/25/34 (i)

575

576

Morgan Stanley ABS Capital I, Inc.:

Series 2002-HE3 Class M1, 6.4244% 12/27/32 (i)

2,830

2,853

Series 2003-NC8 Class M1, 6.0244% 9/25/33 (i)

3,930

3,942

Series 2004-NC2 Class M1, 5.8744% 12/25/33 (i)

4,061

4,086

Morgan Stanley Dean Witter Capital I Trust:

Series 2001-NC4 Class M1, 6.8244% 1/25/32 (i)

3,605

3,609

Series 2002-NC1 Class M1, 6.5244% 2/25/32 (c)(i)

4,363

4,483

Series 2002-NC3 Class M1, 6.0444% 8/25/32 (i)

2,308

2,310

National Collegiate Funding LLC Series 2004-GT1 Class IO1, 7.87% 6/25/10 (c)(i)(k)

12,180

3,287

National Collegiate Student Loan Trust:

Series 2004-2 Class AIO, 9.75% 10/25/14 (k)

12,615

5,284

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

National Collegiate Student Loan Trust: - continued

Series 2005-GT1 Class AIO, 6.75% 12/25/09 (k)

$ 6,500

$ 1,359

NovaStar Home Equity Loan Series 2004-1:

Class M1, 5.7744% 6/25/34 (i)

2,150

2,161

Class M4, 6.2994% 6/25/34 (i)

3,585

3,613

Onyx Acceptance Owner Trust Series 2005-A Class A3, 3.69% 5/15/09

5,521

5,474

Ownit Mortgage Loan Asset-Backed Certificates Series 2005-3 Class A2A, 5.4444% 6/25/36 (i)

9,516

9,517

Saxon Asset Securities Trust Series 2004-1 Class M1, 5.8544% 3/25/35 (i)

6,910

6,918

SLM Private Credit Student Loan Trust Series 2004-A Class C, 6.2794% 6/15/33 (i)

7,301

7,389

Specialty Underwriting & Residential Finance Series 2003-BC4 Class M1, 5.9244% 11/25/34 (i)

2,830

2,845

Structured Asset Securities Corp. Series 2006-BC1 Class B1, 7.8244% 3/25/36 (c)(i)

4,513

3,929

Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 5.78% 3/15/11 (c)(i)

9,340

9,340

Terwin Mortgage Trust Series 2006-9HGA Class A1, 5.451% 10/25/37 (c)(d)(i)

36,642

36,642

WaMu Master Note Trust Series 2006-C2A Class C2, 5.83% 8/15/15 (c)(i)

17,820

17,820

WFS Financial Owner Trust Class 2004-3 Series A3, 3.3% 3/17/09

8,425

8,373

Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (c)(i)

12,445

12,446

TOTAL ASSET-BACKED SECURITIES

(Cost $457,172)

456,614

Collateralized Mortgage Obligations - 10.5%

Private Sponsor - 5.5%

Adjustable Rate Mortgage Trust floater Series 2005-1 Class 5A2, 5.6544% 5/25/35 (i)

6,949

6,934

Bank of America Mortgage Securities, Inc.:

Series 2003-K:

Class 1A1, 3.3704% 12/25/33 (i)

1,475

1,489

Class 2A1, 4.1644% 12/25/33 (i)

6,877

6,762

Series 2003-L Class 2A1, 3.972% 1/25/34 (i)

12,971

12,670

Series 2004-1 Class 2A2, 4.6976% 10/25/34 (i)

11,143

10,977

Series 2004-B:

Class 1A1, 3.4336% 3/25/34 (i)

3,122

3,177

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Bank of America Mortgage Securities, Inc.: - continued

Series 2004-B:

Class 2A2, 4.1038% 3/25/34 (i)

$ 4,913

$ 4,802

Series 2004-C Class 1A1, 3.3338% 4/25/34 (i)

6,807

6,882

Series 2004-D:

Class 1A1, 3.5325% 5/25/34 (i)

9,053

9,020

Class 2A2, 4.1985% 5/25/34 (i)

13,487

13,209

Series 2004-G Class 2A7, 4.5587% 8/25/34 (i)

10,214

10,056

Series 2004-H Class 2A1, 4.4693% 9/25/34 (i)

10,850

10,661

Series 2004-J:

Class 1A2, 4.2847% 11/25/34 (i)

3,448

3,436

Class 2A1, 4.7822% 11/25/34 (i)

18,516

18,304

Series 2005-E Class 2A7, 4.6089% 6/25/35 (i)

11,900

11,587

Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1057% 8/25/35 (i)

14,232

14,198

Bear Stearns Alt-A Trust floater Series 2005-1 Class A1, 5.6044% 1/25/35 (i)

25,056

25,096

CS First Boston Mortgage Securities Corp. floater:

Series 2004-AR3 Class 6A2, 5.6944% 4/25/34 (i)

1,027

1,027

Series 2004-AR6 Class 9A2, 5.6944% 10/25/34 (i)

2,055

2,058

Gracechurch Mortgage Funding PLC floater Series 1A Class DB, 5.4981% 10/11/41 (c)(i)

12,935

12,936

Granite Master Issuer PLC floater:

Series 2005-2 Class M1, 5.6325% 12/20/54 (i)

19,250

19,261

Series 2006-1A Class C2, 5.9925% 12/20/54 (c)(i)

9,100

9,100

Series 2006-2 Class C1, 5.97% 12/20/54 (i)

22,100

22,120

JPMorgan Mortgage Trust Series 2005-A8 Class 2A3, 4.9591% 11/25/35 (i)

3,370

3,337

Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34

1,694

1,678

Master Asset Securitization Trust Series 2004-9 Class 7A1, 6.3247% 5/25/17 (i)

9,550

9,530

Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.2332% 8/25/17 (i)

7,205

7,277

Merrill Lynch Mortgage Investors, Inc. floater:

Series 2004-E Class A2B, 5.4394% 11/25/29 (i)

5,905

5,906

Series 2004-G Class A2, 5.8719% 11/25/29 (i)

3,735

3,738

Series 2005-B Class A2, 5.5475% 7/25/30 (i)

5,786

5,789

Opteum Mortgage Acceptance Corp. Series 2005-3 Class APT, 5.6144% 7/25/35 (i)

15,957

15,975

Residential Asset Mortgage Products, Inc. sequential pay:

Series 2003-SL1 Class A31, 7.125% 4/25/31

3,482

3,517

Series 2004-SL2 Class A1, 6.5% 10/25/16

1,286

1,298

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Residential Finance LP/Residential Finance Development Corp. floater:

Series 2003-B:

Class B3, 6.92% 7/10/35 (c)(i)

$ 13,313

$ 13,569

Class B4, 7.12% 7/10/35 (c)(i)

10,103

10,318

Class B5, 7.72% 7/10/35 (c)(i)

9,536

9,827

Class B6, 8.22% 7/10/35 (c)(i)

4,343

4,444

Series 2003-CB1:

Class B3, 6.82% 6/10/35 (c)(i)

4,616

4,705

Class B4, 7.02% 6/10/35 (c)(i)

4,132

4,219

Class B5, 7.62% 6/10/35 (c)(i)

2,821

2,886

Class B6, 8.12% 6/10/35 (c)(i)

1,674

1,697

Series 2004-A:

Class B4, 6.57% 2/10/36 (c)(i)

5,785

5,871

Class B5, 7.07% 2/10/36 (c)(i)

3,856

3,932

Series 2004-B:

Class B4, 6.47% 2/10/36 (c)(i)

2,124

2,164

Class B5, 6.92% 2/10/36 (c)(i)

1,448

1,464

Class B6, 7.37% 2/10/36 (c)(i)

386

389

Series 2004-C:

Class B4, 6.32% 9/10/36 (i)

2,724

2,752

Class B5, 6.72% 9/10/36 (i)

3,016

3,040

Class B6, 7.12% 9/10/36 (i)

487

490

Sequoia Mortgage Trust floater:

Series 2004-12 Class 1A2, 5.82% 1/20/35 (i)

11,497

11,533

Series 2004-4 Class A, 5.48% 5/20/34 (i)

9,241

9,242

Structured Adjustable Rate Mortgage Loan Trust floater Series 2001-14 Class A1, 5.6344% 7/25/35 (i)

19,515

19,591

Thornburg Mortgage Securities Trust floater Series 2005-3:

Class A2, 5.5644% 10/25/35 (i)

10,231

10,228

Class A4, 5.5944% 10/25/35 (i)

18,840

18,810

Wachovia Mortgage Loan Trust LLC Series 2005-B Class 2A4, 5.1863% 10/20/35 (i)

2,700

2,679

WaMu Mortgage pass thru certificates floater:

Series 2005-AR13 Class A1C1, 5.5144% 10/25/45 (i)

16,994

16,998

Series 2005-AR19 Class A1C1, 5.5144% 12/25/45 (i)

14,047

14,054

WaMu Mortgage Securities Corp. sequential pay:

Series 2003-MS9 Class 2A1, 7.5% 12/25/33

1,355

1,391

Series 2004-RA2 Class 2A, 7% 7/25/33

1,990

2,017

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Wells Fargo Mortgage Backed Securities Trust:

Series 2004-T Class A1, 3.458% 9/25/34 (i)

$ 9,700

$ 9,666

Series 2005-AR10 Class 2A2, 4.1091% 6/25/35 (i)

23,286

22,931

Series 2005-AR2 Class 2A2, 4.57% 3/25/35

24,366

23,913

Series 2005-AR9 Class 2A1, 4.3623% 5/25/35 (i)

10,909

10,699

Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (i)

19,955

19,790

TOTAL PRIVATE SPONSOR

559,116

U.S. Government Agency - 5.0%

Fannie Mae planned amortization class:

Series 2006-45 Class OP, 6/25/36 (l)

11,293

8,454

Series 2006-53 Class PB, 5.5% 1/25/30

20,373

20,287

Series 2006-64:

Class MB, 5.5% 9/25/33

14,041

13,835

Class PB, 5.5% 9/25/33

33,008

32,567

Fannie Mae Grantor Trust floater Series 2005-90 Class FG, 5.5744% 10/25/35 (i)

19,991

19,940

Fannie Mae guaranteed REMIC pass thru certificates:

planned amortization class:

Series 2003-73 Class GA, 3.5% 5/25/31

7,300

6,799

Series 2003-81 Class MX, 3.5% 3/25/24

14,243

13,942

Series 2006-57 Class PC, 5.5% 10/25/32

14,081

13,876

sequential pay:

Series 2003-112 Class AN, 4% 11/25/18

16,358

14,803

Series 2004-3 Class BA, 4% 7/25/17

1,284

1,233

Series 2004-70 Class GB, 4.5% 1/25/32

5,962

5,563

Series 2004-86 Class KC, 4.5% 5/25/19

5,642

5,442

Series 2004-95 Class AN, 5.5% 1/25/25

4,634

4,672

Freddie Mac planned amortization class:

Series 3033 Class UD, 5.5% 10/15/30

8,345

8,335

Series 3178:

Class PB, 5.5% 4/15/30

23,374

23,263

Class PC, 5.5% 12/15/32

7,453

7,355

Freddie Mac Multi-class participation certificates guaranteed:

planned amortization class:

Series 1669 Class H, 6.5% 7/15/23

15,240

15,349

Series 2006-15 Class OP, 3/25/36 (l)

12,893

9,172

Series 2425 Class JH, 6% 3/15/17

8,127

8,237

Series 2498 Class PD, 5.5% 2/15/16

4,067

4,061

Series 2614 Class TD, 3.5% 5/15/16

47,402

44,925

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 2649 Class TQ, 3.5% 12/15/21

$ 17,001

$ 16,723

Series 2665 Class PB, 3.5% 6/15/23

2,358

2,304

Series 2689 Class HC, 3.5% 9/15/26

6,465

6,249

Series 2695 Class GC, 4.5% 11/15/18

11,641

11,250

Series 2760 Class EB, 4.5% 9/15/16

28,779

27,859

Series 2773 Class EG, 4.5% 4/15/19

6,187

5,894

Series 2775:

Class OD, 4.5% 10/15/17

20,875

19,987

Class OE, 4.5% 4/15/19

31,083

29,090

Series 2836 Class EG, 5% 12/15/32

40,221

38,351

Series 3018 Class UD, 5.5% 9/15/30

9,555

9,539

Series 3075 Class PB, 5.5% 7/15/30

18,780

18,749

Series 3078 Class PB, 5.5% 7/15/29

32,145

32,048

Series 3159 Class TC, 5.5% 6/15/32

7,522

7,424

sequential pay Series 2750 Class ZT, 5% 2/15/34

11,221

9,782

TOTAL U.S. GOVERNMENT AGENCY

517,359

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $1,079,273)

1,076,475

Commercial Mortgage Securities - 5.5%

Banc of America Commercial Mortgage, Inc.:

Series 2005-1 Class A3, 4.877% 11/10/42

14,465

14,298

Series 2005-3 Series A3B, 5.09% 7/10/43 (i)

22,475

22,131

Banc of America Large Loan, Inc. Series 2006-ESH:

Class A, 6.19% 7/14/11 (c)(i)

10,873

10,865

Class B, 6.29% 7/14/11 (c)(i)

5,432

5,423

Class C, 6.44% 7/14/11 (c)(i)

10,879

10,871

Class D, 7.07% 7/14/11 (c)(i)

6,275

6,293

Bayview Commercial Asset Trust floater:

Series 2004-1:

Class A, 5.6844% 4/25/34 (c)(i)

7,239

7,252

Class B, 7.2244% 4/25/34 (c)(i)

818

826

Class M1, 5.8844% 4/25/34 (c)(i)

629

631

Class M2, 6.5244% 4/25/34 (c)(i)

629

636

Series 2004-2 Class A, 5.7544% 8/25/34 (c)(i)

7,455

7,483

Series 2004-3:

Class A1, 5.6944% 1/25/35 (c)(i)

8,811

8,839

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Bayview Commercial Asset Trust floater: - continued

Series 2004-3:

Class A2, 5.7444% 1/25/35 (c)(i)

$ 1,270

$ 1,272

Class M1, 5.8244% 1/25/35 (c)(i)

1,508

1,517

Class M2, 6.3244% 1/25/35 (c)(i)

992

1,004

Bear Stearns Commercial Mortgage Securities, Inc.:

sequential pay:

Series 2003-PWR2 Class A3, 4.834% 5/11/39

6,850

6,719

Series 2004-ESA Class A3, 4.741% 5/14/16 (c)

4,785

4,740

Series 2004-ESA:

Class B, 4.888% 5/14/16 (c)

7,720

7,657

Class C, 4.937% 5/14/16 (c)

3,395

3,371

Class D, 4.986% 5/14/16 (c)

1,980

1,969

Class E, 5.064% 5/14/16 (c)

6,160

6,143

Class F, 5.182% 5/14/16 (c)

1,480

1,477

Chase Commercial Mortgage Securities Corp.:

Series 2000-3 Class G 6.887% 10/15/32 (c)

9,742

9,998

Series 2001-245 Class A2, 6.275% 2/12/16 (c)(i)

5,760

6,007

Commercial Mortgage pass thru certificates:

floater Series 2005-F10A:

Class B, 5.56% 4/15/17 (c)(i)

10,865

10,866

Class C, 5.6% 4/15/17 (c)(i)

4,615

4,615

Class D, 5.64% 4/15/17 (c)(i)

3,750

3,751

Class I, 6.18% 4/15/17 (c)(i)

520

520

Class MOA3, 5.63% 3/15/20 (c)(i)

7,035

7,036

sequential pay Series 2006-CN2A Class A2FX, 5.449% 2/5/19 (c)

8,415

8,453

CS First Boston Mortgage Securities Corp.:

floater Series 2005-TFLA:

Class C, 5.57% 2/15/20 (c)(i)

8,630

8,633

Class E, 5.66% 2/15/20 (c)(i)

6,025

6,027

Class F, 5.71% 2/15/20 (c)(i)

2,665

2,666

Class G, 5.85% 2/15/20 (c)(i)

770

770

Class H, 6.08% 2/15/20 (c)(i)

1,095

1,095

sequential pay Series 2000-C1 Class A2, 7.545% 4/15/62

6,800

7,243

Series 1997-C2 Class D, 7.27% 1/17/35

3,840

3,967

Series 1998-C1 Class D, 7.17% 5/17/40

7,455

7,952

Series 1999-C1 Class E, 7.8822% 9/15/41 (i)

10,335

11,138

Series 2004-C1 Class ASP, 0.8785% 1/15/37 (c)(i)(k)

186,936

5,347

Series 2006-OMA:

Class H, 5.805% 5/15/23 (c)(i)

2,825

2,761

Class J, 5.805% 5/15/23 (c)(i)

4,770

4,620

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31

$ 5,730

$ 5,929

DLJ Commercial Mortgage Corp. sequential pay Series 2000-CF1 Class A1B, 7.62% 6/10/33

10,000

10,737

First Union National Bank-Bank of America Commercial Mortgage Trust Series 2001-C1 Class G, 6.936% 3/15/33 (c)

3,135

3,318

First Union-Lehman Brothers Commercial Mortgage Trust sequential pay Series 1997-C2 Class A3, 6.65% 11/18/29

2,092

2,108

GE Commercial Mortgage Corp. Series 2004-C1 Class X2, 1.098% 11/10/38 (i)(k)

102,008

3,497

Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.8831% 10/16/23 (i)

1,645

1,672

Ginnie Mae guaranteed REMIC pass thru securities:

sequential pay:

Series 2003-22 Class B, 3.963% 5/16/32

11,925

11,425

Series 2003-47 Class C, 4.227% 10/16/27

11,084

10,783

Series 2003-59 Class D, 3.654% 10/16/27

18,000

16,798

Series 2003-47 Class XA, 0.1774% 6/16/43 (i)(k)

44,719

2,492

GMAC Commercial Mortgage Securities, Inc. Series 2004-C3 Class X2, 0.7177% 12/10/41 (i)(k)

16,722

390

Greenwich Capital Commercial Funding Corp.:

sequential pay Series 2004-GG1 Class A4, 4.755% 6/10/36

4,940

4,868

Series 2006-GG7 Class A3, 6.1101% 7/10/38

14,490

14,969

GS Mortgage Securities Corp. II:

sequential pay:

Series 2001-LIBA Class A2, 6.615% 2/14/16 (c)

15,710

16,581

Series 2003-C1 Class A2A, 3.59% 1/10/40

9,075

8,881

Series 1998-GLII Class E, 6.9706% 4/13/31 (i)

1,710

1,754

Series 2006-GG6 Class A2, 5.506% 4/10/38 (i)

22,025

22,203

Hilton Hotel Pool Trust Series 2000-HLTA Class D, 7.555% 10/3/15 (c)

9,690

10,287

Host Marriott Pool Trust sequential pay Series 1999-HMTA Class B, 7.3% 8/3/15 (c)

3,485

3,669

JPMorgan Chase Commercial Mortgage Securities Corp. sequential pay Series 2005-LDP2 Class A2, 4.575% 7/15/42

11,425

11,156

LB-UBS Commercial Mortgage Trust:

sequential pay Series 2005-C3 Class A2, 4.553% 7/15/30

5,345

5,230

Series 2001-C3 Class B, 6.512% 6/15/36

8,035

8,454

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (c)

$ 11,400

$ 10,201

Merrill Lynch Mortgage Trust sequential pay:

Series 2005-CIP1 Class A2, 4.96% 7/12/38

3,545

3,507

Series 2005-MCP1 Class A2, 4.556% 6/12/43

6,475

6,318

Merrill Lynch-CFC Commercial Mortgage Trust sequential pay Series 2006-1 CLass A3, 5.671% 2/12/39

10,640

10,698

Morgan Stanley Capital I Trust Series 2006-T23:

Class A1, 5.682% 8/12/41

5,765

5,848

Class A3, 5.98% 8/12/41 (i)

5,105

5,239

Morgan Stanley Capital I, Inc. Series 2006-HQ8 Class A3, 5.4413% 3/12/16 (i)

15,510

15,557

Mortgage Capital Funding, Inc. sequential pay Series 1998-MC2 Class A2, 6.423% 6/18/30

7,140

7,221

Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A2, 6.602% 11/15/07 (c)

9,000

9,120

TrizecHahn Office Properties Trust Series 2001-TZHA Class E3, 7.253% 3/15/13 (c)

5,069

5,180

Wachovia Bank Commercial Mortgage Trust:

sequential pay:

Series 2003-C8 Class A3, 4.445% 11/15/35

17,105

16,599

Series 2006-C24 Class A2, 5.506% 3/15/45

40,465

40,764

Series 2004-C15:

Class 180A, 5.3979% 10/15/41 (c)(i)

6,690

6,509

Class 180B, 5.3979% 10/15/41 (c)(i)

3,000

2,947

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $573,455)

567,791

Municipal Securities - 0.0%

Chicago Board of Ed. Series A, 5.5% 12/1/30 (AMBAC Insured)
(Cost $5,889)

5,000

5,864

Foreign Government and Government Agency Obligations - 0.3%

Israeli State 4.625% 6/15/13

12,555

11,864

United Mexican States 5.875% 1/15/14

16,280

16,565

TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $28,976)

28,429

Supranational Obligations - 0.1%

Principal Amount (000s)

Value (Note 1) (000s)

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $6,514)

$ 6,585

$ 6,953

Fixed-Income Funds - 20.0%

Shares

Fidelity Specialized High Income Central Investment Portfolio (j)

1,000,451

98,514

Fidelity Ultra-Short Central Fund (j)

19,702,539

1,960,403

TOTAL FIXED-INCOME FUNDS

(Cost $2,060,952)

2,058,917

Preferred Securities - 0.1%

Principal Amount (000s)

FINANCIALS - 0.1%

Diversified Financial Services - 0.1%

MUFG Capital Finance 1 Ltd. 6.346% (i)

$ 15,235

15,348

TOTAL PREFERRED SECURITIES

(Cost $15,235)

15,348

Cash Equivalents - 2.6%

Maturity Amount (000s)

Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at:

5.29%, dated 8/31/06 due 9/1/06

$ 235,316

235,281

5.29%, dated 8/31/06 due 9/1/06 (a)

29,298

29,294

TOTAL CASH EQUIVALENTS

(Cost $264,575)

264,575

TOTAL INVESTMENT PORTFOLIO - 114.6%

(Cost $11,814,051)

11,794,363

NET OTHER ASSETS - (14.6)%

(1,500,600)

NET ASSETS - 100%

$ 10,293,763

Swap Agreements

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps

Receive monthly notional amount multiplied by 3.05% and pay Merrill Lynch upon default event of Morgan Stanley ABS Capital I, Inc., par value of the proportional notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8, Class B3, 7.2913% 9/25/34

Oct. 2034

$ 3,200

$ 51

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, 7.6913% 11/25/34

Dec. 2034

3,380

49

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 8.8244% 8/25/34

Sept. 2034

2,971

35

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7, Class B3, 7.6913% 7/25/34

August 2034

2,971

37

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34

Oct. 2034

2,971

44

Receive from Merrill Lynch, Inc., upon default event of R.R. Donnelley & Sons Co., par value of the notional amount of R.R. Donnelley & Sons Co. 5.5% 5/15/15, and pay quarterly notional amount multiplied by 2.12%

Sept. 2013

5,085

(97)

Receive monthly notional amount multiplied by .55% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2004-WCW1 Class M4, 6.835% 9/25/34

Sept. 2034

9,300

(2)

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by .8% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WCH1 Class M6, 6.365% 1/25/35

Feb. 2035

$ 3,200

$ 2

Receive monthly notional amount multiplied by .82% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34

August 2034

2,971

11

Receive monthly notional amount multiplied by .85% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. 6.105% Series 2005-WHQ2 Class M6 5/25/35

June 2035

3,200

6

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34

Nov. 2034

2,971

11

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34

Oct. 2034

2,971

22

Receive monthly notional amount multiplied by 1.6% 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 M7, 5.4413% 5/25/35

June 2035

2,730

4

Receive monthly notional amount multiplied by 1.66% 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 M7, 5.4413% 5/25/35

June 2035

2,971

8

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon default event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32

April 2032

$ 374

$ 3

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.3913% 2/25/34

March 2034

730

2

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.0413% 1/25/34

Feb. 2034

581

1

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

10,445

(7)

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

7,465

79

Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon default event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33

May 2033

2,971

35

Receive quarterly notional amount multiplied by .20% and pay Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 5 Index, par value of the proportional notional amount (g)

Dec. 2007

74,500

134

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

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

$ 17,065

$ 42

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

12,540

31

Receive quarterly notional amount multiplied by .31% and pay Deutsche Bank upon default of Altria Group, Inc., par value of the notional amount of Altria Group 7% 11/4/13

June 2008

61,000

184

Receive quarterly notional amount multiplied by .34% and pay Goldman Sachs upon default event of Duke Energy Corp. par value of the notional amount of Duke Energy Corp. 6.25% 1/15/12

March 2011

17,600

78

Receive quarterly notional amount multiplied by .35% and pay Goldman Sachs upon default event of Southern California Edison Co., par value of the notional amount of Southern California Edison Co. 7.625% 1/15/10

Sept. 2010

11,200

41

Receive quarterly notional amount multiplied by .38% and pay Bank of America upon default event of Pacific Gas & Electric Co., par value of the notional amount of Pacific Gas & Electric Co. 4.8% 3/1/14

March 2011

17,600

90

Receive quarterly notional amount multiplied by .40% and pay Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 6 Index, par value of the proportional notional amount (h)

June 2011

96,800

150

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

35,000

164

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive semi-annually notional amount multiplied by .5% 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 2008

$ 22,335

$ 91

Receive semi-annually notional amount multiplied by .5% and pay Deutsche Bank upon default event of Russian Federation, par value of the notional amount of Russian Federation 5% 3/31/30

June 2008

14,815

59

Receive semi-annually notional amount multiplied by .53% 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 2008

12,150

57

Receive semi-annually notional amount multiplied by .625% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

63,135

544

Receive semi-annually notional amount multiplied by .665% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

20,000

207

Receive semi-annually notional amount multiplied by .735% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

13,100

176

TOTAL CREDIT DEFAULT SWAPS

562,298

2,342

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Interest Rate Swaps

Receive quarterly a fixed rate equal to 4.4771% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

August 2010

$ 140,000

$ (3,361)

Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

July 2014

32,550

(689)

Receive semi-annually a fixed rate equal to 4.745% and pay quarterly a floating rate based on 3-month LIBOR with UBS

Jan. 2011

70,000

(1,244)

Receive semi-annually a fixed rate equal to 4.921% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

Dec. 2008

315,000

(2,085)

Receive semi-annually a fixed rate equal to 5.13% and pay quarterly a floating rate based on 3-month LIBOR with Citibank

March 2009

280,030

3,228

Receive semi-annually a fixed rate equal to 5.3135% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.

August 2009

302,645

1,201

TOTAL INTEREST RATE SWAPS

1,140,225

(2,950)

Total Return Swaps

Receive monthly a return equal to Lehman Brothers CMBS AAA 8.5+ Index and pay monthly a floating rate based on 1-month LIBOR minus 25 basis points with Citibank

Oct. 2006

105,000

1,829

$ 1,807,523

$ 1,221

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 end of the period, the value of these securities amounted to $798,807,000 or 7.8% of net assets.

(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

(e) A portion of the security is subject to a forward commitment to sell.

(f) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $2,264,000.

(g) Dow Jones CDX N.A. Investment Grade 5 is a tradable index of credit default swaps on investment grade debt of U.S. companies.

(h) Dow Jones CDX N.A. Investment Grade 6 is a tradable index of credit default swaps on investment grade debt of U.S. companies.

(i) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

(j) 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.

(k) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool.

(l) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans.

(m) Non-income producing - Issuer is in default.

Affiliated Central Funds

Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows:

Fund

Four months ended
August 31, 2006
Income earned
(Amounts in thousands)

Year ended
April 30, 2006
Income earned
(Amounts in thousands)

Fidelity Specialized High Income Central Investment Portfolio

$ 1,773

$ 2,729

Fidelity Ultra-Short Central Fund

30,450

47,063

Total

$ 32,223

$ 49,792

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
(Amounts in thousands)

Value at
April 30, 2006

Purchases

Sales Proceeds

Value at
August 31, 2006

% ownership, end of period

Fidelity Specialized High Income Central Investment Portfolio

$ 69,107

$ 29,167*

$ -

$ 98,514

47.6%

Fidelity Ultra-Short Central Fund

1,560,165

400,040

-

1,960,403

23.4%

Total

$ 1,629,272

$ 429,207

$ -

$ 2,058,917

* Represents the value of shares received through in-kind contributions.

Other Information

Distribution of investments by country of issue, as a percentage of total net assets, is as follows:

United States of America

89.9%

United Kingdom

2.8%

Cayman Islands

1.4%

Others (individually less than 1%)

5.9%

100.0%

Income Tax Information

At August 31, 2006, the fund had a capital loss carryforward of approximately $125,558,000 of which $731,000 expires on August 31, 2013 and the remainder expires on August 31, 2014. Of the loss carryforwards expiring on August 31, 2013, $731,000 was acquired in the merger and is available to offset future capital gains of the fund to the extent provided by regulations.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amounts)

August 31, 2006

Assets

Investment in securities, at value (including securities loaned of $28,720 and repurchase agreements of $264,575) - See accompanying schedule:

Unaffiliated issuers (cost $9,753,099)

$ 9,735,446

Affiliated Central Funds (cost $2,060,952)

2,058,917

Total Investments (cost $11,814,051)

$ 11,794,363

Commitment to sell securities on a delayed delivery basis

(34,123)

Receivable for securities sold on a delayed delivery basis

34,095

(28)

Receivable for investments sold, regular delivery

52,957

Cash

2

Receivable for swap agreements

130

Receivable for fund shares sold

7,918

Interest receivable

79,899

Swap agreements, at value

1,221

Other receivables

67

Total assets

11,936,529

Liabilities

Payable for investments purchased
Regular delivery

$ 83,115

Delayed delivery

1,519,698

Payable for fund shares redeemed

5,633

Distributions payable

1,073

Accrued management fee

2,707

Distribution fees payable

33

Other affiliated payables

1,180

Other payables and accrued expenses

33

Collateral on securities loaned, at value

29,294

Total liabilities

1,642,766

Net Assets

$ 10,293,763

Net Assets consist of:

Paid in capital

$ 10,414,269

Undistributed net investment income

11,929

Accumulated undistributed net realized gain (loss) on investments

(113,941)

Net unrealized appreciation (depreciation) on investments

(18,494)

Net Assets

$ 10,293,763

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Assets and Liabilities - continued

Amounts in thousands (except per-share amounts)

August 31, 2006

Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share
($45,580 ÷ 6,201 shares)

$ 7.35

Maximum offering price per share (100/95.25 of $7.35)

$ 7.72

Class T:
Net Asset Value and redemption price per share ($58,716 ÷ 7,985 shares)

$ 7.35

Maximum offering price per share (100/96.50 of $7.35)

$ 7.62

Class B:
Net Asset Value and offering price per share
($9,462 ÷ 1,286 shares)A

$ 7.36

Class C:
Net Asset Value and offering price per share
($9,993 ÷ 1,358 shares)A

$ 7.36

Investment Grade Bond:
Net Asset Value, offering price and redemption price per share ($10,140,626 ÷ 1,378,852 shares)

$ 7.35

Institutional Class:
Net Asset Value, offering price and redemption price per share ($29,386 ÷ 3,992 shares)

$ 7.36

A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Operations

Amounts in thousands

Four months ended
August 31, 2006

Year ended
April 30, 2006

Investment Income

Dividends

$ 344

$ -

Interest

129,776

305,454

Income from affiliated Central Funds

32,223

49,792

Total income

162,343

355,246

Expenses

Management fee

$ 9,241

$ 24,689

Transfer agent fees

2,941

7,988

Distribution fees

128

351

Accounting and security lending fees

-

110

Fund wide operations fee

850

1,909

Independent trustees' compensation

11

31

Appreciation in deferred trustee compensation account

-

2

Custodian fees and expenses

-

14

Registration fees

-

12

Audit

-

8

Legal

-

2

Miscellaneous

5

19

Total expenses before reductions

13,176

35,135

Expense reductions

(231)

(465)

Total expenses

12,945

34,670

Net investment income

149,398

320,576

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

Unaffiliated issuers

(17,205)

(28,344)

Swap agreements

(120)

(9,904)

Total net realized gain (loss)

(17,325)

(38,248)

Change in net unrealized appreciation (depreciation) on:

Investment securities

136,790

(175,529)

Swap agreements

9,322

(9,287)

Delayed delivery commitments

(28)

(13)

Total change in net unrealized appreciation (depreciation)

146,084

(184,829)

Net gain (loss)

128,759

(223,077)

Net increase (decrease) in net assets resulting from operations

$ 278,157

$ 97,499

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Changes in Net Assets

Amounts in thousands

Four months ended
August 31,
2006

Year ended
April 30,
2006

Year ended
April 30,
2005

Increase (Decrease) in Net Assets

Operations

Net investment income

$ 149,398

$ 320,576

$ 210,849

Net realized gain (loss)

(17,325)

(38,248)

99,455

Change in net unrealized appreciation (depreciation)

146,084

(184,829)

7,281

Net increase (decrease) in net assets resulting
from operations

278,157

97,499

317,585

Distributions to shareholders from net investment income

(127,262)

(304,745)

(211,677)

Distributions to shareholders from net realized gain

-

(66,460)

(80,651)

Total distributions

(127,262)

(371,205)

(292,328)

Share transactions - net increase (decrease)

1,985,853

1,599,350

1,000,708

Total increase (decrease) in net assets

2,136,748

1,325,644

1,025,965

Net Assets

Beginning of period

8,157,015

6,831,371

5,805,406

End of period (including undistributed net investment income of $11,929, $289, and $4,438, respectively)

$ 10,293,763

$ 8,157,015

$ 6,831,371

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class A

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.118

.298

.237

.224

.186

Net realized and unrealized gain (loss)

.092

(.206)

.131

(.095)

.326

Total from investment operations

.210

.092

.368

.129

.512

Distributions from net investment income

(.100)

(.282)

(.238)

(.229)

(.172)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.100)

(.352)

(.338)

(.359)

(.292)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.50

$ 7.47

$ 7.70

Total Return B, C, D

2.92%

1.23%

5.03%

1.68%

6.98%

Ratios to Average Net Assets F, I

Expenses before reductions

.71% A

.71%

.83%

.83%

.79% A

Expenses net of fee waivers, if any

.71% A

.71%

.83%

.83%

.79% A

Expenses net of all reductions

.71% A

.71%

.83%

.83%

.79% A

Net investment income

4.86% A

4.04%

3.17%

2.96%

3.73% A

Supplemental Data

Net assets, end of period
(in millions)

$ 46

$ 37

$ 31

$ 22

$ 8

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

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 funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class T

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.116

.290

.230

.214

.180

Net realized and unrealized gain (loss)

.091

(.216)

.141

(.094)

.324

Total from investment operations

.207

.074

.371

.120

.504

Distributions from net investment income

(.097)

(.274)

(.231)

(.220)

(.164)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.097)

(.344)

(.331)

(.350)

(.284)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.89%

.98%

5.07%

1.56%

6.87%

Ratios to Average Net Assets F, I

Expenses before reductions

.82% A

.83%

.93%

.96%

.97% A

Expenses net of fee waivers, if any

.82% A

.83%

.93%

.95%

.95% A

Expenses net of all reductions

.81% A

.83%

.93%

.95%

.95% A

Net investment income

4.76% A

3.92%

3.07%

2.84%

3.57% A

Supplemental Data

Net assets, end of period
(in millions)

$ 59

$ 57

$ 48

$ 30

$ 10

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

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 funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class B

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.099

.239

.180

.166

.147

Net realized and unrealized gain (loss)

.102

(.216)

.140

(.095)

.322

Total from investment operations

.201

.023

.320

.071

.469

Distributions from net investment income

(.081)

(.223)

(.180)

(.171)

(.129)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.081)

(.293)

(.280)

(.301)

(.249)

Net asset value,
end of period

$ 7.36

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.79%

.28%

4.37%

.90%

6.39%

Ratios to Average Net Assets F, I

Expenses before reductions

1.50% A

1.51%

1.64%

1.63%

1.60% A

Expenses net of fee waivers, if any

1.50% A

1.51%

1.60%

1.60%

1.60% A

Expenses net of all reductions

1.50% A

1.51%

1.59%

1.60%

1.60% A

Net investment income

4.07% A

3.24%

2.40%

2.19%

2.92% A

Supplemental Data

Net assets, end of period
(in millions)

$ 9

$ 9

$ 9

$ 9

$ 8

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Total returns do not include the effect of the contingent deferred sales charge.

E Calculated based on average shares outstanding during the period.

F Amounts do not include the activity of the affiliated central funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class C

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.097

.233

.176

.161

.145

Net realized and unrealized gain (loss)

.102

(.216)

.140

(.095)

.322

Total from investment operations

.199

.017

.316

.066

.467

Distributions from net investment income

(.079)

(.217)

(.176)

(.166)

(.127)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.079)

(.287)

(.276)

(.296)

(.247)

Net asset value,
end of period

$ 7.36

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.76%

.20%

4.30%

.84%

6.35%

Ratios to Average Net Assets F, I

Expenses before reductions

1.58% A

1.60%

1.67%

1.66%

1.64% A

Expenses net of fee waivers, if any

1.58% A

1.60%

1.66%

1.66%

1.64% A

Expenses net of all reductions

1.58% A

1.60%

1.66%

1.66%

1.64% A

Net investment income

3.99% A

3.15%

2.34%

2.13%

2.88% A

Supplemental Data

Net assets, end of period
(in millions)

$ 10

$ 9

$ 7

$ 7

$ 6

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Total returns do not include the effect of the contingent deferred sales charge.

E Calculated based on average shares outstanding during the period.

F Amounts do not include the activity of the affiliated central funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Investment Grade Bond

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003

2002

Selected Per-Share Data

Net asset value, beginning of period

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.33

$ 7.18

Income from Investment Operations

Net investment income D

.124

.317

.254

.240

.290

.379

Net realized and unrealized gain (loss)

.092

(.206)

.130

(.095)

.483

.158

Total from investment operations

.216

.111

.384

.145

.773

.537

Distributions from net investment income

(.106)

(.301)

(.254)

(.245)

(.283)

(.377)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

(.010)

Total distributions

(.106)

(.371)

(.354)

(.375)

(.403)

(.387)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.33

Total Return B, C

3.01%

1.48%

5.26%

1.89%

10.82%

7.61%

Ratios to Average Net Assets E, G

Expenses before reductions

.45% A

.46%

.61%

.63%

.66%

.66%

Expenses net of fee waivers,
if any

.45% A

.46%

.61%

.63%

.66%

.66%

Expenses net of all reductions

.45% A

.46%

.61%

.63%

.66%

.66%

Net investment income

5.12% A

4.29%

3.39%

3.16%

3.86%

5.18%

Supplemental Data

Net assets,
end of period
(in millions)

$ 10,141

$ 8,018

$ 6,721

$ 5,735

$ 5,274

$ 4,056

Portfolio turnover rate F

206% A, H

145%

227%

238%

276%

230%

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 funds.

F Amounts do not include the portfolio activity of the affiliated central funds.

G 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.

H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Institutional Class

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 G

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.25

$ 7.51

$ 7.48

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income D

.124

.313

.254

.233

.202

Net realized and unrealized gain (loss)

.091

(.205)

.129

(.078)

.321

Total from investment operations

.215

.108

.383

.155

.523

Distributions from net investment income

(.105)

(.298)

(.253)

(.245)

(.183)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.105)

(.368)

(.353)

(.375)

(.303)

Net asset value,
end of period

$ 7.36

$ 7.25

$ 7.51

$ 7.48

$ 7.70

Total Return B, C

2.99%

1.44%

5.24%

2.04%

7.14%

Ratios to Average Net Assets E, H

Expenses before reductions

.49% A

.50%

.59%

.64%

.56% A

Expenses net of fee waivers, if any

.49% A

.50%

.59%

.64%

.56% A

Expenses net of all reductions

.49% A

.50%

.59%

.64%

.56% A

Net investment income

5.07% A

4.25%

3.40%

3.15%

3.96% A

Supplemental Data

Net assets,
end of period
(000 omitted)

$ 29,386

$ 25,776

$ 16,084

$ 2,840

$ 275

Portfolio turnover rate F

206% A, I

145%

227%

238%

276%

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 funds.

F Amounts do not include the portfolio activity of the affiliated central funds.

G For the period August 27, 2002 (commencement of sale of shares) to April 30, 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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Notes to Financial Statements

For the period ended August 31, 2006

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Fidelity Investment Grade Bond Fund (the Fund) is a fund of Fidelity Fixed-Income Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.

The Fund offers Class A, Class T, Class B, Class C, Investment Grade Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

The Fund may invest in Fidelity Ultra-Short Central Fund (Ultra-Short Central Fund) and fixed-income Central Investment Portfolios (CIPs), collectively referred to as the Central Funds, which are open-end investment companies 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 Funds:

On July 20, 2006, the Board of Trustees approved a change in the fiscal year end of the Fund from April 30 to August 31. Accordingly, the Fund's financial statements and related notes include information as of the four month period ended August 31, 2006 and the one year period ended April 30, 2006.

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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Security Valuation - continued

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 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, including the Fund's investment activity in the Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income and distributions from the Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity.

Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.

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.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), 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.

Annual Report

1. Significant Accounting Policies - continued

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 swap agreements, prior period premium and discount on debt securities, market discount, partnerships (including allocations from CIP), 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:

Unrealized appreciation

$ 93,937

Unrealized depreciation

(114,338)

Net unrealized appreciation (depreciation)

(20,401)

Undistributed ordinary income

25,527

Capital loss carryforward

(125,558)

Cost for federal income tax purposes

$ 11,814,764

The tax character of distributions paid was as follows:

Four months ended
August 31, 2006

April 30, 2006

April 30, 2005

Ordinary Income

$ 127,262

$ 323,808

$ 248,105

Long-term Capital Gains

-

47,397

44,223

Total

$ 127,262

$ 371,205

$ 292,328

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

New Accounting Pronouncements. 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, results of operations and financial statement disclosures.

In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.

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 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

Annual Report

2. Operating Policies - continued

Delayed Delivery Transactions and When-Issued Securities - continued

Investments. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.

Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.

Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.

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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Operating Policies - continued

Swap Agreements - continued

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 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 $1,231,454 and $411,323, respectively for the four month period ended August 31, 2006.

Annual Report

4. Fees and Other Transactions with Affiliates.

Management Fee and Expense Contract. 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% (.30% prior to June 1, 2005) 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 periods ended August 31, 2006 and April 30, 2006, the management fee was equivalent to an annualized rate of .32% and an annual rate of .33%, respectively, of the Fund's average net assets.

Effective upon the completion of the reorganization with Spartan Investment Grade Bond Fund, the Fund entered into a new expense contract with FMR which will not allow expenses for the Investment Grade Bond share class to be increased above the current limit of .45% of the class' average net assets without shareholder approval.

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 periods ended August 31, 2006 and April 30, 2006, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

Four months ended
August 31, 2006

April 30, 2006

Distribution
Fee

Service
Fee

Paid to
FDC

Retained
by FDC

Paid to
FDC

Retained
by FDC

Class A

0%

.15%

$ 20

$ 2

$ 49

$ -

Class T

0%

.25%

48

1

136

2

Class B

.65%

.25%

28

21

86

63

Class C

.75%

.25%

32

10

80

23

$ 128

$ 34

$ 351

$ 88

Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Sales Load - continued

depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C,.75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.

For the four month period ended August 31, 2006, sales charge amounts retained by FDC were as follows:

Retained
by FDC

Class A

$ 7

Class T

2

Class B*

6

Class C*

2

$ 17

* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the
sales are made.

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 Investment Grade Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Investment Grade 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 Investment Grade Bond's average net assets. Prior to June 1, 2005, FSC also received account fees in addition to the asset-based fee. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the periods ended August 31, 2006 and April 30, 2006, the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:

Four months ended
August 31, 2006

April 30, 2006

Amount

% of
Average
Net Assets*

Amount

% of
Average
Net Assets

Class A

$ 28

.21

$ 66

.21

Class T

42

.22

122

.22

Class B

8

.25

24

.25

Class C

8

.23

19

.24

Investment Grade Bond

2,842

.10

7,726

.11

Institutional Class

13

.14

31

.14

$ 2,941

$ 7,988

* Annualized

Annual Report

4. Fees and Other Transactions with Affiliates - continued

Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. Under a separate contract, FSC administers the security lending program. Effective June 1, 2005, FMR pays for these fees. Prior to June 1, 2005, the accounting fee was based on the level of average net assets for the month and the security lending fee was based on the number and duration of lending transactions.

Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), which became effective on June 1, 2005, FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, 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. Effective upon the completion of the reorganization with Spartan Investment Grade Bond Fund, the .35% fee can not be increased without shareholder approval. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the periods ended August 31, 2006 and April 30, 2006, the FWOE fee was equivalent to an annualized rate of .03% of the Fund's average net assets.

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 may also invest in CIPs managed by FIMM, or Fidelity Management & Research Company Inc. (FMRC), each an affiliate of FMR.

The Specialized High Income Central Investment Portfolio seeks a high level of current income by normally investing in income-producing debt securities, with an emphasis on lower-quality debt securities.

The Fund's Schedule of Investments lists the Central Funds as an investment of the Fund but does not include the underlying holdings of the Central Funds. Based on their investment objectives, the Central Funds may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the Central Funds may also participate in loans and other direct debt instruments and derivatives. 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 Funds and the Fund.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Affiliated Central Funds - continued

A complete unaudited list of holdings for the Central Funds, 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 Funds 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 for the periods ended August 31, 2006 and April 30, 2006, amounted to $5 and $14, respectively, and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities for the period ended August 31, 2006 and April 30, 2006, amounted to $163 and $128, respectively.

Annual Report

7. 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 ended August 31, 2006, these credits reduced the management fee by $7. During the period ended April 30, 2006, these credits reduced the Fund's custody expenses by $14. During the period, credits reduced each class' transfer agent expense as noted in the table below.

Four months ended
August 31, 2006

April 30, 2006

Transfer Agent
expense reduction

Transfer Agent
expense reduction

Class A

$ 1

$ 1

Class T

2

3

Investment Grade Bond

221

447

$ 224

$451

8. 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.

Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.

At the end of the period, FMR or its affiliates were the owners of record of 41% of the total outstanding shares of the fund.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

From net investment income

Class A

$ 557

$ 1,232

$ 869

Class T

768

2,022

1,202

Class B

105

289

205

Class C

104

234

169

Investment Grade Bond

125,340

300,091

208,879

Institutional Class

388

877

353

Total

$ 127,262

$ 304,745

$ 211,677

From net realized gain

Class A

$ -

$ 293

$ 318

Class T

-

479

496

Class B

-

86

112

Class C

-

71

96

Investment Grade Bond

-

65,359

79,525

Institutional Class

-

172

104

Total

$ -

$ 66,460

$ 80,651

10. Share Transactions.

Transactions for each class of shares were as follows:

Shares

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class A

Shares sold

1,787

5,817

3,493

Reinvestment of distributions

74

170

65

Shares redeemed

(775)

(4,972)

(2,416)

Net increase (decrease)

1,086

1,015

1,142

Class T

Shares sold

1,019

3,807

3,871

Reinvestment of distributions

104

334

225

Shares redeemed

(1,054)

(2,644)

(1,686)

Net increase (decrease)

69

1,497

2,410

Annual Report

10. Share Transactions - continued

Shares

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class B

Shares sold

115

488

306

Reinvestment of distributions

11

41

35

Shares redeemed

(151)

(388)

(335)

Net increase (decrease)

(25)

141

6

Class C

Shares sold

183

850

397

Reinvestment of distributions

12

35

31

Shares redeemed

(126)

(474)

(443)

Net increase (decrease)

69

411

(15)

Investment Grade Bond

Shares sold

69,585

296,083

201,524

Issued in exchange for shares of Spartan Investment Grade Bond Fund

250,883

-

-

Reinvestment of distributions

16,933

48,523

37,730

Shares redeemed

(66,028)

(132,782)

(111,431)

Net increase (decrease)

271,373

211,824

127,823

Institutional Class

Shares sold

907

1,805

1,969

Reinvestment of distributions

46

125

58

Shares redeemed

(517)

(515)

(266)

Net increase (decrease)

436

1,415

1,761

Dollars

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class A

Shares sold

$ 12,921

$ 42,930

$ 26,275

Reinvestment of distributions

536

1,256

490

Shares redeemed

(5,603)

(36,700)

(18,200)

Net increase (decrease)

$ 7,854

$ 7,486

$ 8,565

Class T

Shares sold

$ 7,370

$ 28,191

$ 29,055

Reinvestment of distributions

757

2,473

1,687

Shares redeemed

(7,604)

(19,510)

(12,629)

Net increase (decrease)

$ 523

$ 11,154

$ 18,113

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

10. Share Transactions - continued

Dollars

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class B

Shares sold

$ 830

$ 3,626

$ 2,293

Reinvestment of distributions

82

301

262

Shares redeemed

(1,094)

(2,863)

(2,511)

Net increase (decrease)

$ (182)

$ 1,064

$ 44

Class C

Shares sold

$ 1,328

$ 6,307

$ 2,982

Reinvestment of distributions

89

261

234

Shares redeemed

(914)

(3,511)

(3,318)

Net increase (decrease)

$ 503

$ 3,057

$ (102)

Investment Grade Bond

Shares sold

$ 506,029

$ 2,186,923

$ 1,513,409

Issued in exchange for shares of Spartan Investment Grade Bond Fund

1,823,921

-

-

Reinvestment of distributions

122,970

359,152

282,446

Shares redeemed

(478,951)

(979,977)

(835,079)

Net increase (decrease)

$ 1,973,969

$ 1,566,098

$ 960,776

Institutional Class

Shares sold

$ 6,594

$ 13,369

$ 14,872

Reinvestment of distributions

334

926

438

Shares redeemed

(3,742)

(3,804)

(1,998)

Net increase (decrease)

$ 3,186

$ 10,491

$ 13,312

11. Reorganization.

On July 28, 2006, the Fund acquired all of the assets and assumed all of the liabilities of Spartan Investment Grade Bond Fund pursuant to an agreement and plan of reorganization approved by the Board of Trustees on April 20, 2006. The acquisition was accomplished by an exchange of 250,883 shares of Investment Grade Bond class for the 178,345 shares then outstanding (valued at $10.23) of Spartan Investment Grade Bond Fund. Based on the opinion of Fund counsel, the reorganization qualified as a tax-free transaction for federal income tax purposes with no gain or loss recognized by the funds or their shareholders. Spartan Investment Grade Bond Fund's net assets, including $(19,309) of unrealized depreciation, were combined with the Fund's net assets of $8,190,101 for total net assets after the acquisition of $10,014,022.

Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of Fidelity Investment Grade 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 Investment Grade Bond Fund (a fund of Fidelity Fixed-Income Trust) at August 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Investment Grade Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 24, 2006

Annual Report

Trustees and Officers

The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 346 funds advised by FMR or an affiliate. Mr. McCoy oversees 348 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 fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (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 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 Investment Grade 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 Vice Chairman (2006- present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd.

* 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, and a member of the Consumer Electronics Hall of Fame.

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 Sony Corporation (2006-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 Fixed-Income Trust. 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), 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).

Peter S. Lynch (62)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity Fixed-Income Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund.

Boyce I. Greer (50)

Year of Election or Appointment: 2006

Vice President of Investment Grade 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 Investment Grade 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 Investment Grade 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).

Jeffrey Moore (40)

Year of Election or Appointment: 2004

Vice President of Investment Grade Bond. Mr. Moore also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Moore worked as a research analyst and portfolio manager.

Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of Investment Grade 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 of Fidelity Distributors Corporation (FDC) (1998-2005).

Stuart Fross (47)

Year of Election or Appointment: 2003

Assistant Secretary of Investment Grade 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 Investment Grade 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 Investment Grade 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 Investment Grade 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 Investment Grade 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 Investment Grade 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 Investment Grade 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 (37)

Year of Election or Appointment: 2005

Deputy Treasurer of Investment Grade 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 Investment Grade 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 (60)

Year of Election or Appointment: 1986

Assistant Treasurer of Investment Grade 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 Investment Grade 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 Investment Grade Bond. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

Gary W. Ryan (48)

Year of Election or Appointment: 2005

Assistant Treasurer of Investment Grade 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 Investment Grade 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

A total of 8.62% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

The fund designates $127,261,654 of distributions paid during the fiscal year ended August 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

Board Approval of Investment Advisory Contracts and Management Fees

Fidelity Investment Grade 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. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, as applicable, the cumulative total returns of Class C and Fidelity Investment Grade 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 C and Fidelity Investment Grade 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 Investment Grade Bond Fund



The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Fidelity Investment Grade Bond (retail class) was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board also stated that the relative investment performance of Fidelity Investment Grade Bond (retail class) compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.

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 periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.

Fidelity Investment Grade 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 Investment Grade Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Investment Grade 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 had been 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

Managing Your Investments

Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.

By Phone

Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.

(phone_graphic)Fidelity Automated
Service Telephone (FAST®)
1-800-544-5555

Press

1   For mutual fund and brokerage trading.

2   For quotes.*

3   For account balances and holdings.

4   To review orders and mutual
fund activity.

5   To change your PIN.

*0   To speak to a Fidelity representative.

By PC

Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.

(computer_graphic)Fidelity's Web Site
www.fidelity.com

* When you call the quotes line, please remember that a fund's yield and return will vary and, except for money market funds, share price will also vary. This means that you may have a gain or loss when you sell your shares. There is no assurance that money market funds will be able to maintain a stable $1 share price; an investment in a money market fund is not insured or guaranteed by the U.S. government. Total returns are historical and include changes in share price, reinvestment of dividends and capital gains, and the effects of any sales charges.

Annual Report

To Visit Fidelity

For directions and hours,
please call 1-800-544-9797.

Arizona

7001 West Ray Road
Chandler, AZ

15445 N. Scottsdale Road
Scottsdale, AZ

California

815 East Birch Street
Brea, CA

1411 Chapin Avenue
Burlingame, CA

851 East Hamilton Avenue
Campbell, CA

19200 Von Karman Avenue
Irvine, CA

601 Larkspur Landing Circle
Larkspur, CA

10100 Santa Monica Blvd.
Los Angeles, CA

27101 Puerta Real
Mission Viejo, CA

73-575 El Paseo
Palm Desert, CA

251 University Avenue
Palo Alto, CA

123 South Lake Avenue
Pasadena, CA

16995 Bernardo Ctr. Drive
Rancho Bernardo, CA

1220 Roseville Parkway
Roseville, CA

1740 Arden Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

11943 El Camino Real
San Diego, CA

8 Montgomery Street
San Francisco, CA

3793 State Street
Santa Barbara, CA

1200 Wilshire Boulevard
Santa Monica, CA

21701 Hawthorne Boulevard
Torrance, CA

2001 North Main Street
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

Colorado

1625 Broadway
Denver, CO

9185 Westview Road
Lone Tree, CO

Connecticut

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

Delaware

400 Delaware Avenue
Wilmington, DE

Florida

4400 N. Federal Highway
Boca Raton, FL

121 Alhambra Plaza
Coral Gables, FL

2948 N. Federal Highway
Ft. Lauderdale, FL

4671 Town Center Parkway
Jacksonville, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

3501 PGA Boulevard
Palm Beach Gardens, FL

3550 Tamiami Trail, South
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

2465 State Road 7
Wellington, FL

Georgia

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

Illinois

One North LaSalle Street
Chicago, IL

875 North Michigan Ave.
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1572 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

Indiana

4729 East 82nd Street
Indianapolis, IN

Kansas

5400 College Boulevard
Overland Park, KS

Maine

Three Canal Plaza
Portland, ME

Maryland

7315 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

Massachusetts

801 Boylston Street
Boston, MA

155 Congress Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

238 Main Street
Cambridge, MA

405 Cochituate Road
Framingham, MA

416 Belmont Street
Worcester, MA

Annual Report

Michigan

500 E. Eisenhower Pkwy.
Ann Arbor, MI

280 Old N. Woodward Ave.
Birmingham, MI

43420 Grand River Avenue
Novi, MI

29155 Northwestern Hwy.
Southfield, MI

Minnesota

7600 France Avenue South
Edina, MN

Missouri

1524 South Lindbergh Blvd.
St. Louis, MO

Nevada

2225 Village Walk Drive
Henderson, NV

New Jersey

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

396 Route 17, North
Paramus, NJ

3518 Route 1 North
Princeton, NJ

530 Broad Street
Shrewsbury, NJ

New York

1055 Franklin Avenue
Garden City, NY

37 West Jericho Turnpike
Huntington Station, NY

1271 Avenue of the Americas
New York, NY

980 Madison Avenue
New York, NY

61 Broadway
New York, NY

350 Park Avenue
New York, NY

200 Fifth Avenue
New York, NY

733 Third Avenue
New York, NY

11 Penn Plaza
New York, NY

2070 Broadway
New York, NY

1075 Northern Blvd.
Roslyn, NY

799 Central Park Avenue
Scarsdale, NY

North Carolina

4611 Sharon Road
Charlotte, NC

7011 Fayetteville Road
Durham, NC

Ohio

3805 Edwards Road
Cincinnati, OH

1324 Polaris Parkway
Columbus, OH

28699 Chagrin Boulevard
Woodmere Village, OH

Oregon

7493 SW Bridgeport Road
Tigard, OR

Pennsylvania

600 West DeKalb Pike
King of Prussia, PA

1735 Market Street
Philadelphia, PA

12001 Perry Highway
Wexford, PA

Rhode Island

47 Providence Place
Providence, RI

Tennessee

6150 Poplar Avenue
Memphis, TN

Texas

10000 Research Boulevard
Austin, TX

4001 Northwest Parkway
Dallas, TX

12532 Memorial Drive
Houston, TX

2701 Drexel Drive
Houston, TX

6560 Fannin Street
Houston, TX

6500 N. MacArthur Blvd.
Irving, TX

6005 West Park Boulevard
Plano, TX

14100 San Pedro
San Antonio, TX

1576 East Southlake Blvd.
Southlake, TX

19740 IH 45 North
Spring, TX

Utah

279 West South Temple
Salt Lake City, UT

Virginia

1861 International Drive
McLean, VA

Washington

411 108th Avenue, N.E.
Bellevue, WA

1518 6th Avenue
Seattle, WA

Washington, DC

1900 K Street, N.W.
Washington, DC

Wisconsin

595 North Barker Road
Brookfield, WI

Fidelity Brokerage Services, Inc., 100 Summer St., Boston, MA 02110 Member NYSE/SIPC

Annual Report

To Write Fidelity

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General Correspondence

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Annual Report

Annual Report

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IGB-UANN-1006
1.784722.104

(Fidelity Investment logo)(registered trademark)

Fidelity Advisor

Investment Grade Bond

Fund - Class A, Class T, Class B
and Class C

Annual Report

August 31, 2006

(2_fidelity_logos) (Registered_Trademark)

Class A, Class T, Class B, and Class C are classes of Fidelity® Investment Grade Bond Fund

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders.

Performance

<Click Here>

How the fund has done over time.

Management's Discussion

<Click Here>

The manager's review of fund performance, strategy and outlook.

Shareholder Expense Example

<Click Here>

An example of shareholder expenses.

Investment Changes

<Click Here>

A summary of major shifts in the fund's investments over the past four months.

Investments

<Click Here>

A complete list of the fund's investments with their market values.

Financial Statements

<Click Here>

Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.

Notes

<Click Here>

Notes to the financial statements.

Report of Independent Registered Public Accounting Firm

<Click Here>

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Board Approval of Investment Advisory Contracts and Management Fees

<Click Here>

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 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.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:

Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.

One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.

You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).

A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.

We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Fidelity Advisor Investment Grade Bond Fund - Class A, T, B and C

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.

Note to Shareholders: The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Performance data reflects returns for periods ended August 31, 2006.

Average Annual Total Returns

Periods ended August 31, 2006

Past 1
year

Past 5
years

Past 10
years

Class A (incl. 4.75% sales charge) A

-2.78%

3.84%

5.71%

Class T (incl. 3.50% sales charge) B

-1.61%

4.01%

5.80%

Class B (incl. contingent deferred
sales charge) C

-3.63%

3.88%

5.90%

Class C (incl. contingent deferred
sales charge) D

0.19%

4.17%

5.87%

A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on August 27, 2002. Returns prior to August 27, 2002 are those of Investment Grade Bond, the original class of the fund, which has no 12b-1 fee. Had Class A shares' 12b-1 fee been reflected, returns prior to August 27, 2002 would have been lower.

B Class T shares bear a 0.25% 12b-1 fee. The initial offering of Class T shares took place on August 27, 2002. Returns prior to August 27, 2002 are those of Investment Grade Bond, the original class of the fund, which has no 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to August 27, 2002 would have been lower.

C Class B shares bear a 0.90% 12b-1 fee. The initial offering of Class B shares took place on August 27, 2002. Returns prior to August 27, 2002 are those of Investment Grade Bond, the original class of the fund, which has no 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to August 27, 2002 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five year, and past 10 year total return figures are 5%, 2%, and 0%, respectively.

D Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on August 27, 2002. Returns prior to August 27, 2002 are those of Investment Grade Bond, the original ,class of the fund, which has no 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to August 27, 2002 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five year, and past 10 year total return figures are 1%, 0%, and 0%, respectively.

Annual Report

Fidelity Advisor Investment Grade Bond Fund - Class A, T, B, and C
Performance - continued

$10,000 Over Past 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity Advisor Investment Grade Bond Fund - Class T on August 31, 1996, and the current 3.50% sales charge was paid. The chart shows how the value of the investment would have changed, and also shows how the Lehman Brothers® Aggregate Bond Index performed over the same period.



Annual Report

Management's Discussion of Fund Performance

Comments from Jeffrey Moore, Portfolio Manager of Fidelity Advisor Investment Grade Bond Fund

A weak start, a strong finish and a modestly positive overall return highlighted investment-grade bond performance for the year ending August 31, 2006. Bonds sank in the first two months of the period after Gulf Coast hurricanes sent energy prices soaring, prompting fears of a corresponding leap in inflation. However, core inflation readings - which strip out volatile food and energy prices - remained relatively benign. That, combined with an easing of oil prices, helped bonds rally between November and February. But the asset class fell again from March through May, partly as a result of continued interest rate hikes by the Federal Reserve Board. In all, the Fed raised interest rates seven times during the past year. Bonds rose again in July and August, though, after Fed Chairman Ben Bernanke hinted at a pause in its rate hike campaign, which was soon realized when the central bank left rates unchanged at its August meeting. The late rally helped the debt market gain 1.71% for the year overall according to the Lehman Brothers® Aggregate Bond Index.

For the 12 months ending August 31, 2006 - the fund's new fiscal year end - the fund's Class A, Class T, Class B and Class C shares returned 2.07%, 1.96%, 1.26% and 1.17%, respectively (excluding sales charges), compared with 1.71% for the Lehman Brothers index. For the four months ending August 31, 2006 - the period since I last reported to you - the fund's Class A, Class T, Class B and Class C shares gained 2.92%, 2.89%, 2.79% and 2.76%, respectively (excluding sales charges), while the index rose 3.01%. As the 12 months began, I maintained a "barbell" strategy - meaning concentrated in shorter- and longer-maturity investments. This yield-curve positioning helped greatly during the fourth quarter of 2005. Early in 2006, I removed the barbell and switched to a "bulleted" strategy - reducing exposure to short-term instruments and longer-dated bonds while buying two- and five-year maturities, which had been underperforming. The bulleted structure likely had a modest negative impact during the period's second half. Sector and security selection within the corporate bond segment were pluses, as was an emphasis on securitized products - including collateralized mortgage obligations and asset-backed securities. The fund also was helped by its allocation to the Fidelity® Ultra-Short Central Fund, a diversified pool of short-term assets designed to outperform cash-like investments with similar characteristics. Curbing gains somewhat was a lack of exposure to strong performing government agency securities.

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

The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Expenses are based on the past six months of activity for the period ended August 31, 2006.

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2006 to August 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 funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Annual Report

Beginning
Account Value
March 1, 2006

Ending
Account Value
August 31, 2006

Expenses Paid
During Period*
March 1, 2006
to August 31, 2006

Class A

Actual

$ 1,000.00

$ 1,020.20

$ 3.56

Hypothetical A

$ 1,000.00

$ 1,021.68

$ 3.57

Class T

Actual

$ 1,000.00

$ 1,018.30

$ 4.12

Hypothetical A

$ 1,000.00

$ 1,021.12

$ 4.13

Class B

Actual

$ 1,000.00

$ 1,016.20

$ 7.57

Hypothetical A

$ 1,000.00

$ 1,017.69

$ 7.58

Class C

Actual

$ 1,000.00

$ 1,015.70

$ 8.03

Hypothetical A

$ 1,000.00

$ 1,017.24

$ 8.03

Investment Grade Bond

Actual

$ 1,000.00

$ 1,021.50

$ 2.29

Hypothetical A

$ 1,000.00

$ 1,022.94

$ 2.29

Institutional Class

Actual

$ 1,000.00

$ 1,021.30

$ 2.50

Hypothetical A

$ 1,000.00

$ 1,022.74

$ 2.50

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central funds in which the fund invests are not included in the fund's annualized expense ratio.

Annualized
Expense Ratio

Class A

.70%

Class T

.81%

Class B

1.49%

Class C

1.58%

Investment Grade Bond

.45%

Institutional Class

.49%

Annual Report

Investment Changes

The current period information is as of the Fund's new fiscal year end. The comparative information is as of the Fund's most recently published annual report.

Quality Diversification (% of fund's net assets)

As of August 31, 2006

As of April 30, 2006

U.S. Government and
U.S. Government
Agency Obligations 52.9%

U.S. Government and
U.S. Government
Agency Obligations 55.4%

AAA 14.6%

AAA 15.2%

AA 4.0%

AA 4.2%

A 8.0%

A 7.8%

BBB 20.3%

BBB 15.9%

BB and Below 4.2%

BB and Below 3.4%

Not Rated 1.8%

Not Rated 1.9%

Short-Term
Investments and
Net Other Assets (dagger) (5.8)%

Short-Term
Investments and
Net Other Assets (dagger) (3.8)%



We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings.

Average Years to Maturity as of August 31, 2006

4 months ago

Years

6.1

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 August 31, 2006

4 months ago

Years

4.5

4.4

Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example.

Asset Allocation (% of fund's net assets)

As of August 31, 2006 *

As of April 30, 2006 **

Corporate Bonds 27.5%

Corporate Bonds 21.9%

U.S. Government
and U.S. Government Agency Obligations 52.9%

U.S. Government and
U.S. Government
Agency Obligations 55.4%

Asset-Backed
Securities 10.9%

Asset-Backed
Securities 11.0%

CMOs and Other Mortgage Related Securities 14.0%

CMOs and Other Mortgage Related Securities 13.8%

Other Investments 0.5%

Other Investments 1.7%

Short-Term
Investments and
Net Other Assets (dagger) (5.8)%

Short-Term
Investments and
Net Other Assets (dagger) (3.8)%

* Foreign investments

10.1%

** Foreign investments

9.2%

* Futures and Swaps

18.4%

** Futures and Swaps

17.5%



(dagger) Short-term Investments and Net Other Assets are not included in the pie chart.

The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.

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 August 31, 2006

Showing Percentage of Net Assets

Nonconvertible Bonds - 25.2%

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER DISCRETIONARY - 2.9%

Auto Components - 0.2%

DaimlerChrysler NA Holding Corp. 5.875% 3/15/11

$ 20,050

$ 20,132

Automobiles - 0.5%

Ford Motor Co.:

6.375% 2/1/29

11,350

8,427

6.625% 10/1/28

6,365

4,774

7.45% 7/16/31

40,245

31,592

General Motors Corp. 8.375% 7/15/33 (b)

13,140

10,972

55,765

Household Durables - 0.2%

Fortune Brands, Inc. 5.125% 1/15/11

17,520

17,174

Media - 2.0%

Comcast Corp.:

4.95% 6/15/16

23,509

21,683

5.5% 3/15/11

5,890

5,880

5.85% 1/15/10

6,275

6,342

6.45% 3/15/37

17,500

17,161

Cox Communications, Inc.:

4.625% 1/15/10

9,500

9,203

7.125% 10/1/12

17,915

18,953

Liberty Media Corp.:

5.7% 5/15/13

8,500

7,926

8.25% 2/1/30

19,105

19,008

News America Holdings, Inc. 7.75% 12/1/45

8,175

8,976

News America, Inc. 6.2% 12/15/34

11,825

11,050

TCI Communications, Inc. 9.8% 2/1/12

19,400

22,850

Time Warner Entertainment Co. LP:

8.875% 10/1/12

750

851

10.15% 5/1/12

500

591

Time Warner, Inc. 6.625% 5/15/29

22,900

22,442

Univision Communications, Inc. 3.875% 10/15/08

9,840

9,387

Viacom, Inc. 5.75% 4/30/11 (c)

18,040

17,892

200,195

TOTAL CONSUMER DISCRETIONARY

293,266

CONSUMER STAPLES - 0.3%

Beverages - 0.1%

FBG Finance Ltd. 5.125% 6/15/15 (c)

11,020

10,425

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER STAPLES - continued

Food Products - 0.1%

H.J. Heinz Co. 6.428% 12/1/08 (c)(i)

$ 12,360

$ 12,594

Tobacco - 0.1%

Altria Group, Inc. 7% 11/4/13

5,910

6,429

TOTAL CONSUMER STAPLES

29,448

ENERGY - 1.8%

Energy Equipment & Services - 0.2%

Cooper Cameron Corp. 2.65% 4/15/07

9,550

9,382

Kinder Morgan, Inc. 6.5% 9/1/12

7,185

7,046

16,428

Oil, Gas & Consumable Fuels - 1.6%

Canadian Oil Sands Ltd. 4.8% 8/10/09 (c)

12,390

12,123

Duke Capital LLC 6.75% 2/15/32

4,835

4,975

Kerr-McGee Corp. 6.95% 7/1/24

19,000

19,831

Kinder Morgan Finance Co. ULC 5.35% 1/5/11

26,853

25,737

Louis Dreyfus Natural Gas Corp. 6.875% 12/1/07

7,700

7,821

National Gas Co. of Trinidad & Tobago Ltd. 6.05% 1/15/36 (c)

5,985

5,687

Pemex Project Funding Master Trust:

5.75% 12/15/15 (c)

15,330

14,916

5.75% 12/15/15

22,600

21,990

6.625% 6/15/35 (c)

12,586

12,359

6.625% 6/15/35

65

64

7.375% 12/15/14

33,610

36,416

Transcontinental Gas Pipe Line Corp. 6.4% 4/15/16 (c)

9,120

8,846

170,765

TOTAL ENERGY

187,193

FINANCIALS - 10.7%

Capital Markets - 1.4%

Bank of New York Co., Inc.:

3.4% 3/15/13 (i)

7,500

7,288

4.25% 9/4/12 (i)

8,565

8,484

Goldman Sachs Group, Inc.:

5.25% 10/15/13

19,220

18,837

6.45% 5/1/36

21,260

21,521

JP Morgan Chase Capital XVIII 6.95% 8/17/36

16,165

17,012

Lazard Group LLC 7.125% 5/15/15

16,430

17,179

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Capital Markets - continued

Merrill Lynch & Co., Inc. 4.25% 2/8/10

$ 21,840

$ 21,137

Morgan Stanley 6.6% 4/1/12

17,435

18,390

Nuveen Investments, Inc. 5% 9/15/10

11,055

10,803

140,651

Commercial Banks - 1.7%

Bank One Corp. 5.25% 1/30/13

13,775

13,621

Corporacion Andina de Fomento 5.2% 5/21/13

3,910

3,808

Export-Import Bank of Korea:

4.125% 2/10/09 (c)

4,240

4,123

5.125% 2/14/11

23,860

23,517

5.25% 2/10/14 (c)

7,225

7,085

HSBC Holdings PLC 6.5% 5/2/36

11,470

12,078

KeyCorp Capital Trust VII 5.7% 6/15/35

18,660

17,046

Korea Development Bank:

3.875% 3/2/09

18,270

17,667

4.75% 7/20/09

8,155

8,035

5.75% 9/10/13

14,578

14,744

PNC Funding Corp. 4.2% 3/10/08

2,280

2,239

Santander Issuances SA Unipersonal 5.805% 6/20/16 (c)(i)

9,620

9,716

Wachovia Bank NA 4.875% 2/1/15

20,250

19,328

Wachovia Corp. 4.875% 2/15/14

1,791

1,717

Wells Fargo Bank NA, San Francisco 7.55% 6/21/10

5,100

5,503

Wells Fargo Bank National Association 5.95% 8/26/36

11,564

11,645

171,872

Consumer Finance - 0.9%

General Electric Capital Corp.:

5.5% 4/28/11

36,350

36,721

6.75% 3/15/32

17,695

19,971

Household Finance Corp. 4.125% 11/16/09

20,856

20,126

HSBC Finance Corp. 5.7% 6/1/11

14,410

14,619

MBNA America Bank NA 4.625% 8/3/09

5,000

4,921

96,358

Diversified Financial Services - 1.3%

BAC Capital Trust XI 6.625% 5/23/36

24,475

25,541

Citigroup, Inc. 6% 2/21/12

5,960

6,151

ILFC E-Capital Trust II 6.25% 12/21/65 (c)(i)

4,325

4,264

JPMorgan Chase & Co.:

4.875% 3/15/14

10,460

10,033

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Diversified Financial Services - continued

JPMorgan Chase & Co.: - continued

4.891% 9/1/15 (i)

$ 5,380

$ 5,264

5.6% 6/1/11

21,015

21,241

5.75% 1/2/13

2,935

2,968

JPMorgan Chase Capital XVII 5.85% 8/1/35

3,865

3,650

Mizuho Financial Group Cayman Ltd. 5.79% 4/15/14 (c)

15,505

15,571

Prime Property Funding, Inc. 5.125% 6/1/15 (c)

13,035

12,309

ZFS Finance USA Trust I 6.15% 12/15/65 (c)(i)

17,990

17,728

ZFS Finance USA Trust II 6.45% 12/15/65 (c)(i)

7,500

7,261

131,981

Insurance - 0.8%

Assurant, Inc. 5.625% 2/15/14

6,095

6,021

Axis Capital Holdings Ltd. 5.75% 12/1/14

21,815

21,172

Liberty Mutual Group, Inc.:

6.7% 8/15/16 (c)

7,305

7,305

7.5% 8/15/36 (c)

3,975

3,898

Lincoln National Corp. 7% 5/17/66 (i)

8,870

9,190

QBE Insurance Group Ltd. 5.647% 7/1/23 (c)(i)

18,775

18,171

Symetra Financial Corp. 6.125% 4/1/16 (c)

10,405

10,401

Travelers Property Casualty Corp. 6.375% 3/15/33

6,275

6,303

82,461

Real Estate Investment Trusts - 2.4%

AMB Property LP 5.9% 8/15/13

9,635

9,724

Archstone-Smith Operating Trust:

5.25% 12/1/10

5,185

5,141

5.25% 5/1/15

12,430

12,054

Boston Properties, Inc. 6.25% 1/15/13

7,487

7,722

Brandywine Operating Partnership LP:

5.625% 12/15/10

10,855

10,855

5.75% 4/1/12

9,625

9,634

Camden Property Trust:

5.875% 6/1/07

6,320

6,336

5.875% 11/30/12

6,435

6,491

Colonial Properties Trust:

4.75% 2/1/10

12,060

11,708

5.5% 10/1/15

12,730

12,307

6.875% 8/15/12

5,000

5,262

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Real Estate Investment Trusts - continued

Developers Diversified Realty Corp.:

4.625% 8/1/10

$ 975

$ 942

5% 5/3/10

6,840

6,729

5.25% 4/15/11

5,400

5,327

5.375% 10/15/12

5,485

5,392

Duke Realty LP 5.95% 2/15/17

4,085

4,112

Equity One, Inc. 6.25% 1/15/17

4,535

4,612

Equity Residential 5.125% 3/15/16

10,765

10,294

Federal Realty Investment Trust:

6% 7/15/12

3,355

3,420

6.2% 1/15/17

2,215

2,277

Healthcare Realty Trust, Inc. 5.125% 4/1/14

4,130

3,906

HRPT Properties Trust 5.75% 11/1/15

2,925

2,879

iStar Financial, Inc.:

5.65% 9/15/11

15,495

15,442

5.8% 3/15/11

10,095

10,120

Liberty Property LP 6.375% 8/15/12

4,617

4,800

Mack-Cali Realty LP 5.05% 4/15/10

1,270

1,244

Simon Property Group LP:

4.6% 6/15/10

8,400

8,169

5.1% 6/15/15

16,415

15,692

5.45% 3/15/13

8,720

8,627

5.75% 12/1/15

10,655

10,660

Tanger Properties LP 6.15% 11/15/15

17,300

17,443

United Dominion Realty Trust 5.25% 1/15/15

1,950

1,869

Washington (REIT) 5.95% 6/15/11

10,660

10,814

252,004

Real Estate Management & Development - 1.1%

Colonial Realty LP 6.05% 9/1/16

11,060

11,072

EOP Operating LP:

4.65% 10/1/10

19,625

18,965

4.75% 3/15/14

14,345

13,416

5.875% 1/15/13

7,592

7,618

6.75% 2/15/12

9,295

9,761

7.5% 4/19/29

13,025

14,407

7.75% 11/15/07

12,245

12,551

Post Apartment Homes LP 6.3% 6/1/13

11,550

11,786

Regency Centers LP 6.75% 1/15/12

12,435

13,118

112,694

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Thrifts & Mortgage Finance - 1.1%

Independence Community Bank Corp.:

3.75% 4/1/14 (i)

$ 7,640

$ 7,319

4.9% 9/23/10

33,700

32,852

Residential Capital Corp.:

6.375% 6/30/10

19,180

19,346

6.5% 4/17/13

8,915

8,994

6.875% 6/30/15

10,955

11,345

Washington Mutual, Inc.:

4.625% 4/1/14

18,130

16,801

5.7956% 9/17/12 (i)

19,000

19,027

115,684

TOTAL FINANCIALS

1,103,705

INDUSTRIALS - 2.2%

Aerospace & Defense - 0.1%

Bombardier, Inc.:

6.3% 5/1/14 (c)

6,000

5,340

7.45% 5/1/34 (c)

12,035

10,410

15,750

Airlines - 1.5%

American Airlines, Inc. pass thru trust certificates:

6.855% 10/15/10

1,222

1,238

6.978% 10/1/12

3,162

3,245

7.024% 4/15/11

4,465

4,582

7.324% 4/15/11

13,531

13,260

7.858% 4/1/13

26,059

27,834

Continental Airlines, Inc. pass thru trust certificates:

6.32% 11/1/08

7,178

7,217

6.545% 8/2/20

4,398

4,426

6.648% 3/15/19

7,281

7,248

6.795% 2/2/20

2,369

2,244

7.056% 3/15/11

705

727

Delta Air Lines, Inc. pass thru trust certificates:

7.111% 3/18/13

16,260

16,260

7.57% 11/18/10

8,108

8,138

U.S. Airways pass thru trust certificates 6.85% 7/30/19

7,408

7,464

United Airlines pass thru certificates:

6.071% 9/1/14

5,825

5,825

6.201% 3/1/10

3,383

3,387

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

INDUSTRIALS - continued

Airlines - continued

United Airlines pass thru certificates: - continued

6.602% 9/1/13

$ 10,243

$ 10,241

7.032% 4/1/12

6,912

7,124

7.186% 10/1/12

17,099

17,441

7.811% 10/1/09 (m)

4,909

5,194

153,095

Commercial Services & Supplies - 0.0%

R.R. Donnelley & Sons Co. 5.5% 5/15/15

5,085

4,539

Industrial Conglomerates - 0.1%

Hutchison Whampoa International 03/33 Ltd. 7.45% 11/24/33 (c)

9,550

10,689

Road & Rail - 0.1%

CSX Corp. 6.75% 3/15/11

9,000

9,471

Transportation Infrastructure - 0.4%

BNSF Funding Trust I 6.613% 12/15/55 (i)

38,188

37,909

TOTAL INDUSTRIALS

231,453

INFORMATION TECHNOLOGY - 0.4%

Electronic Equipment & Instruments - 0.2%

Avnet, Inc. 6% 9/1/15

14,850

14,224

Semiconductors & Semiconductor Equipment - 0.2%

Chartered Semiconductor Manufacturing Ltd.:

5.75% 8/3/10

9,825

9,742

6.375% 8/3/15

13,495

13,291

23,033

Software - 0.0%

Oracle Corp./Ozark Holding, Inc. 5% 1/15/11

2,500

2,461

TOTAL INFORMATION TECHNOLOGY

39,718

MATERIALS - 0.3%

Chemicals - 0.1%

Agrium, Inc. 7.125% 5/23/36

11,735

12,267

Metals & Mining - 0.1%

Corporacion Nacional del Cobre (Codelco) 6.375% 11/30/12 (c)

3,460

3,591

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

MATERIALS - continued

Paper & Forest Products - 0.1%

International Paper Co. 4.25% 1/15/09

$ 11,580

$ 11,299

TOTAL MATERIALS

27,157

TELECOMMUNICATION SERVICES - 3.0%

Diversified Telecommunication Services - 2.6%

Ameritech Capital Funding Corp. 6.25% 5/18/09

6,440

6,529

AT&T, Inc. 6.8% 5/15/36

5,985

6,189

BellSouth Capital Funding Corp. 7.875% 2/15/30

9,250

10,350

British Telecommunications PLC 8.375% 12/15/10

1,779

1,972

Deutsche Telekom International Finance BV 5.25% 7/22/13

11,230

10,815

Embarq Corp.:

7.082% 6/1/16

17,205

17,555

7.995% 6/1/36

12,817

13,396

KT Corp. 5.875% 6/24/14 (c)

7,455

7,526

Sprint Capital Corp.:

6.875% 11/15/28

14,975

15,121

7.625% 1/30/11

11,500

12,339

Telecom Italia Capital SA:

4% 1/15/10

14,810

14,072

4.875% 10/1/10

18,035

17,499

4.95% 9/30/14

11,250

10,372

6.375% 11/15/33

19,850

18,743

Telefonica Emisiones SAU 7.045% 6/20/36

45,800

47,894

TELUS Corp. yankee 7.5% 6/1/07

18,550

18,808

Verizon Global Funding Corp.:

5.85% 9/15/35

7,208

6,636

7.75% 12/1/30

15,467

17,382

Verizon New York, Inc. 6.875% 4/1/12

10,520

10,923

264,121

Wireless Telecommunication Services - 0.4%

America Movil SA de CV 6.375% 3/1/35

13,585

12,924

Nextel Communications, Inc. 5.95% 3/15/14

10,170

9,941

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Vodafone Group PLC:

5% 12/16/13

$ 7,380

$ 7,028

5.5% 6/15/11

15,385

15,298

45,191

TOTAL TELECOMMUNICATION SERVICES

309,312

UTILITIES - 3.6%

Electric Utilities - 1.5%

Cleveland Electric Illuminating Co. 5.65% 12/15/13

11,490

11,421

Entergy Corp. 7.75% 12/15/09 (c)

12,500

13,271

Exelon Corp. 4.9% 6/15/15

27,100

25,366

FirstEnergy Corp. 6.45% 11/15/11

5,815

6,031

Nevada Power Co. 6.5% 5/15/18 (c)

24,160

24,663

Oncor Electric Delivery Co. 6.375% 5/1/12

10,150

10,430

Pacific Gas & Electric Co.:

4.2% 3/1/11

2,855

2,723

4.8% 3/1/14

2,670

2,553

Pepco Holdings, Inc. 4% 5/15/10

9,275

8,785

Progress Energy, Inc.:

7% 10/30/31

6,000

6,536

7.1% 3/1/11

12,875

13,735

Public Service Co. of Colorado:

5.5% 4/1/14

7,500

7,508

7.875% 10/1/12

5,630

6,332

Southern California Edison Co.:

4.65% 4/1/15

990

930

5% 1/15/14

585

567

Southwestern Public Service Co. 5.125% 11/1/06

5,000

4,997

TXU Energy Co. LLC 7% 3/15/13

10,903

11,376

157,224

Gas Utilities - 0.1%

Consolidated Natural Gas Co. 6.85% 4/15/11

2,735

2,866

Texas Eastern Transmission Corp. 7.3% 12/1/10

7,915

8,431

11,297

Independent Power Producers & Energy Traders - 0.8%

Constellation Energy Group, Inc. 7% 4/1/12

8,730

9,255

Duke Capital LLC:

4.331% 11/16/06

3,435

3,425

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

UTILITIES - continued

Independent Power Producers & Energy Traders - continued

Duke Capital LLC: - continued

5.668% 8/15/14

$ 13,400

$ 13,096

Exelon Generation Co. LLC 5.35% 1/15/14

26,963

26,320

PPL Energy Supply LLC 6.2% 5/15/16

11,895

12,171

PSEG Power LLC 7.75% 4/15/11

11,000

11,900

TXU Corp. 5.55% 11/15/14

7,555

6,999

83,166

Multi-Utilities - 1.2%

Dominion Resources, Inc.:

4.75% 12/15/10

13,875

13,455

5.95% 6/15/35

15,955

15,118

7.5% 6/30/66 (i)

12,110

12,506

DTE Energy Co. 7.05% 6/1/11

6,255

6,589

Duke Energy Corp. 5.625% 11/30/12

12,290

12,406

MidAmerican Energy Holdings, Inc. 6.125% 4/1/36 (c)

23,640

23,343

National Grid PLC 6.3% 8/1/16

26,485

27,084

TECO Energy, Inc. 7% 5/1/12

11,415

11,743

122,244

TOTAL UTILITIES

373,931

TOTAL NONCONVERTIBLE BONDS

(Cost $2,602,173)

2,595,183

U.S. Government and Government Agency Obligations - 16.4%

U.S. Government Agency Obligations - 2.5%

Fannie Mae:

4.375% 7/17/13

24,005

22,954

6.25% 2/1/11

115,475

120,226

Freddie Mac:

5.25% 11/5/12

8,420

8,291

5.875% 3/21/11

90,065

92,443

Tennessee Valley Authority 5.375% 4/1/56

15,097

15,141

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

259,055

U.S. Treasury Inflation Protected Obligations - 5.3%

U.S. Treasury Inflation-Indexed Notes 2% 1/15/14 (f)

549,831

539,957

U.S. Government and Government Agency Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

U.S. Treasury Obligations - 8.6%

U.S. Treasury Bond - principal STRIPS:

2/15/15

$ 289,357

$ 194,395

5/15/30

108,558

34,190

U.S. Treasury Bonds 8% 11/15/21

61,152

80,964

U.S. Treasury Notes:

4.25% 8/15/13 (b)

18,280

17,774

4.75% 5/15/14 (d)

199,025

199,323

U.S. Treasury Notes - principal STRIPS:

2/15/10

100,000

85,140

8/15/10

52,255

43,584

2/15/12

241,630

187,935

8/15/12

57,120

43,440

TOTAL U.S. TREASURY OBLIGATIONS

886,745

TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $1,683,791)

1,685,757

U.S. Government Agency - Mortgage Securities - 29.5%

Fannie Mae - 25.8%

3.744% 1/1/35 (i)

516

508

3.748% 12/1/34 (i)

955

939

3.757% 10/1/33 (i)

1,254

1,228

3.788% 6/1/34 (i)

5,593

5,445

3.796% 12/1/34 (i)

78

77

3.81% 6/1/33 (i)

269

265

3.834% 1/1/35 (i)

3,399

3,341

3.839% 11/1/34 (i)

6,914

6,860

3.846% 1/1/35 (i)

310

304

3.847% 5/1/34 (i)

31,173

30,409

3.88% 6/1/33 (i)

4,823

4,746

3.898% 10/1/34 (i)

382

379

3.905% 12/1/34 (i)

314

310

3.938% 11/1/34 (i)

2,251

2,231

3.941% 5/1/34 (i)

364

366

3.952% 1/1/35 (i)

401

397

3.954% 12/1/34 (i)

315

312

3.955% 12/1/34 (i)

7,601

7,522

3.957% 5/1/33 (i)

420

414

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

3.992% 1/1/35 (i)

$ 255

$ 253

3.996% 12/1/34 (i)

211

209

3.996% 12/1/34 (i)

380

375

3.998% 2/1/35 (i)

1,078

1,065

4% 7/1/18 to 9/1/18

16,434

15,511

4.022% 1/1/35 (i)

2,067

2,046

4.029% 1/1/35 (i)

151

149

4.034% 10/1/18 (i)

1,048

1,031

4.037% 1/1/35 (i)

241

238

4.041% 2/1/35 (i)

975

963

4.052% 12/1/34 (i)

574

571

4.058% 1/1/35 (i)

546

539

4.079% 2/1/35 (i)

1,892

1,870

4.082% 4/1/33 (i)

417

413

4.083% 2/1/35 (i)

646

639

4.086% 2/1/35 (i)

706

698

4.094% 11/1/34 (i)

437

433

4.102% 2/1/35 (i)

3,524

3,493

4.108% 1/1/35 (i)

2,136

2,111

4.114% 1/1/35 (i)

572

567

4.116% 2/1/35 (i)

2,406

2,379

4.126% 1/1/35 (i)

3,539

3,501

4.143% 2/1/35 (i)

1,867

1,847

4.156% 1/1/35 (i)

1,043

1,038

4.171% 1/1/35 (i)

2,585

2,523

4.181% 11/1/34 (i)

131

130

4.187% 1/1/35 (i)

1,801

1,787

4.202% 1/1/35 (i)

1,134

1,126

4.214% 1/1/34 (i)

5,652

5,567

4.249% 1/1/34 (i)

3,596

3,543

4.25% 2/1/35 (i)

1,293

1,264

4.272% 3/1/35 (i)

1,179

1,167

4.274% 2/1/35 (i)

681

677

4.275% 8/1/33 (i)

2,401

2,376

4.287% 12/1/34 (i)

189

187

4.306% 5/1/35 (i)

1,632

1,617

4.313% 3/1/33 (i)

659

644

4.337% 9/1/34 (i)

4,251

4,214

4.35% 1/1/35 (i)

1,353

1,325

4.351% 9/1/34 (i)

1,756

1,754

4.356% 4/1/35 (i)

756

749

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

4.362% 2/1/34 (i)

$ 2,807

$ 2,770

4.39% 11/1/34 (i)

11,040

11,044

4.393% 10/1/34 (i)

7,455

7,336

4.394% 5/1/35 (i)

3,699

3,672

4.396% 2/1/35 (i)

1,952

1,913

4.423% 10/1/34 (i)

5,679

5,668

4.426% 1/1/35 (i)

1,512

1,500

4.438% 3/1/35 (i)

1,775

1,741

4.456% 8/1/34 (i)

3,737

3,691

4.464% 5/1/35 (i)

1,269

1,258

4.489% 3/1/35 (i)

4,110

4,034

4.494% 1/1/35 (i)

1,674

1,659

4.497% 8/1/34 (i)

691

697

4.5% 12/1/17 to 4/1/35

322,091

308,654

4.5% 9/1/21 (d)

4,810

4,625

4.5% 9/1/21 (d)

16,044

15,427

4.516% 3/1/35 (i)

3,899

3,829

4.527% 2/1/35 (i)

15,939

15,772

4.532% 2/1/35 (i)

7,655

7,603

4.539% 7/1/35 (i)

4,604

4,565

4.54% 2/1/35 (i)

1,200

1,192

4.554% 2/1/35 (i)

815

809

4.577% 2/1/35 (i)

3,593

3,536

4.577% 7/1/35 (i)

5,634

5,588

4.584% 2/1/35 (i)

8,905

8,759

4.609% 11/1/34 (i)

3,856

3,807

4.661% 3/1/35 (i)

6,842

6,804

4.67% 11/1/34 (i)

4,351

4,303

4.716% 7/1/35 (i)

8,909

8,712

4.727% 7/1/34 (i)

3,568

3,536

4.77% 12/1/34 (i)

3,311

3,279

4.778% 12/1/34 (i)

1,318

1,305

4.796% 8/1/35 (i)

19,482

19,221

4.803% 12/1/32 (i)

1,679

1,680

4.809% 6/1/35 (i)

6,422

6,390

4.875% 10/1/34 (i)

11,562

11,481

5% 12/1/17 to 5/1/36

23,822

22,870

5% 9/1/36 (d)

34,000

32,581

5% 9/1/36 (d)

199,321

191,005

5% 9/1/36 (d)

60,000

57,497

5% 9/1/36 (d)

160,000

153,324

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

5% 9/1/36 (d)

$ 128,063

$ 122,720

5.083% 9/1/34 (i)

9,110

9,085

5.091% 5/1/35 (i)

8,171

8,163

5.1% 9/1/34 (i)

1,369

1,366

5.172% 5/1/35 (i)

10,469

10,429

5.196% 6/1/35 (i)

5,675

5,679

5.205% 3/1/35 (i)

739

737

5.215% 5/1/35 (i)

10,524

10,492

5.359% 12/1/34 (i)

2,207

2,211

5.5% 1/1/09 to 7/1/36

419,370

413,358

5.5% 9/1/36 (d)

35,000

34,359

5.5% 9/1/36 (d)

273,365

268,355

5.5% 9/1/36 (d)

163,230

160,239

5.5% 9/1/36 (d)

20,645

20,267

5.502% 2/1/36 (i)

18,364

18,417

5.628% 2/1/36 (i)

21,058

21,146

5.916% 1/1/36 (i)

4,966

5,011

6% 4/1/13 to 9/1/32

39,950

40,186

6% 9/1/21 (d)

313

317

6% 9/1/21 (d)

2,562

2,591

6% 9/1/36 (d)

9,075

9,086

6.5% 3/1/07 to 6/1/36

177,588

181,019

6.5% 9/1/36 (d)

14,391

14,613

6.5% 9/1/36 (d)

163,230

165,744

7% 5/1/13 to 10/1/32

31,672

32,660

7.5% 9/1/25 to 8/1/29

4,645

4,830

9.5% 4/1/17 to 2/1/25

389

432

12.5% 1/1/15 to 7/1/15

10

11

TOTAL FANNIE MAE

2,657,302

Freddie Mac - 1.5%

4.043% 12/1/34 (i)

1,327

1,307

4.097% 12/1/34 (i)

1,910

1,883

4.124% 1/1/35 (i)

1,686

1,663

4.256% 3/1/35 (i)

1,649

1,627

4.298% 5/1/35 (i)

2,945

2,910

4.301% 12/1/34 (i)

1,904

1,858

4.328% 1/1/35 (i)

3,973

3,927

4.351% 3/1/35 (i)

2,807

2,740

4.38% 2/1/35 (i)

3,527

3,445

4.438% 2/1/34 (i)

1,705

1,680

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Freddie Mac - continued

4.443% 3/1/35 (i)

$ 1,771

$ 1,732

4.454% 6/1/35 (i)

2,445

2,416

4.458% 3/1/35 (i)

2,007

1,963

4.471% 3/1/35 (i)

5,079

4,968

4.5% 5/1/19

4,195

4,038

4.546% 2/1/35 (i)

2,903

2,843

5.003% 4/1/35 (i)

6,473

6,445

5.127% 4/1/35 (i)

6,592

6,542

5.247% 2/1/36 (i)

67,865

67,505

5.5% 3/1/25

10,203

10,090

5.504% 8/1/33 (i)

217

219

6% 5/1/33

16,132

16,238

8.5% 1/1/25 to 9/1/27

625

675

TOTAL FREDDIE MAC

148,714

Government National Mortgage Association - 2.2%

5.5% 4/15/29 to 5/15/34

17,292

17,172

6% 10/15/08 to 10/15/30

8,068

8,191

6.5% 3/15/26 to 8/15/36 (e)

131,091

134,257

6.5% 10/1/36 (d)

33,354

34,100

7% 3/15/23 to 12/15/32

29,429

30,495

7.5% 1/15/07 to 8/15/28

1,890

1,982

8% 9/15/24 to 1/15/30

138

147

8.5% 8/15/29 to 1/15/31

86

93

9% 4/15/23

4

4

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

226,441

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $3,036,046)

3,032,457

Asset-Backed Securities - 4.4%

ACE Securities Corp. Series 2004-HE1:

Class M1, 5.8244% 2/25/34 (i)

3,275

3,286

Class M2, 6.4244% 2/25/34 (i)

3,700

3,739

Aircraft Lease Securitization Ltd. Series 2005-1 Class C1, 9.1563% 9/9/30 (c)(i)

2,712

2,759

AmeriCredit Automobile Receivables Trust Series 2005-1 Class E, 5.82% 6/6/12 (c)

2,099

2,097

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Ameriquest Mortgage Securities, Inc. Series 2004-R2:

Class M1, 5.7544% 4/25/34 (i)

$ 1,835

$ 1,835

Class M2, 5.8044% 4/25/34 (i)

1,425

1,425

Asset Backed Securities Corp. Home Equity Loan Trust:

Series 2003-HE7 Class A3, 5.69% 12/15/33 (i)

1,033

1,036

Series 2004-HE2 Class M1, 5.8744% 4/25/34 (i)

9,700

9,777

Bank One Issuance Trust:

Series 2002-C1 Class C1, 6.29% 12/15/09 (i)

11,295

11,345

Series 2004-B2 Class B2, 4.37% 4/15/12

13,800

13,486

Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.7781% 2/28/44 (i)

5,243

5,254

Capital Auto Receivables Asset Trust:

Series 2004-2 Class A2, 3.35% 2/15/08

12,032

11,958

Series 2006-1 Class D, 7.16% 1/15/13 (c)

4,195

4,190

Series 2006-SN1A Class D, 6.15% 4/20/11 (c)

2,730

2,735

Capital One Multi-Asset Execution Trust Series 2004-6 Class B, 4.15% 7/16/12

11,570

11,229

Carrington Mortgage Loan Trust Series 2006-NC3 Class M10, 7.37% 8/25/36 (c)(i)

1,449

1,300

Cendant Timeshare Receivables Funding LLC Series 2005-1A Class A1, 4.67% 5/20/17 (c)

5,540

5,456

Chase Credit Card Owner Trust Series 2004-1 Class B, 5.53% 5/15/09 (i)

6,220

6,220

Citibank Credit Card Issuance Trust Series 2005-B1 Class B1, 4.4% 9/15/10

6,384

6,274

CNH Equipment Trust Series 2006-A Class A4, 5.27% 9/15/11

34,085

34,214

Countrywide Home Loans, Inc.:

Series 2004-2 Class M1, 5.8244% 5/25/34 (i)

11,345

11,389

Series 2004-3 Class M1, 5.8244% 6/25/34 (i)

2,175

2,188

Series 2005-3 Class MV1, 5.7444% 8/25/35 (i)

12,300

12,337

CPS Auto Receivables Trust Series 2006-A Class A4, 5.33% 11/15/12 (c)

6,560

6,490

Crown Castle Towers LLC/Crown Atlantic Holdings Sub LLC/Crown Communication, Inc. Series 2005-1A:

Class B, 4.878% 6/15/35 (c)

7,921

7,792

Class C, 5.074% 6/15/35 (c)

7,190

7,085

DB Master Finance LLC Series 2006-1 Class M1, 8.285% 6/20/31 (c)

5,545

5,645

Fieldstone Mortgage Investment Corp. Series 2003-1 Class M2, 7.0744% 11/25/33 (i)

515

517

First Franklin Mortgage Loan Trust Series 2004-FF2:

Class M3, 5.8744% 3/25/34 (i)

600

601

Class M4, 6.2244% 3/25/34 (i)

450

452

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Ford Credit Auto Owner Trust:

Series 2005-A Class B, 3.88% 1/15/10

$ 5,151

$ 5,024

Series 2006-B Class D, 7.26% 2/15/13 (c)

5,810

5,821

Fremont Home Loan Trust Series 2005-A:

Class M1, 5.7544% 1/25/35 (i)

2,550

2,567

Class M2, 5.7844% 1/25/35 (i)

3,650

3,669

Class M3, 5.8144% 1/25/35 (i)

1,975

1,989

GCO Slims Trust Series 2006-1A, 5.72% 3/1/22 (c)

11,986

11,857

GS Auto Loan Trust Series 2006-1 Class D, 6.25% 1/15/14 (c)

7,046

7,039

GSAMP Trust:

Series 2004-FM2:

Class M1, 5.8244% 1/25/34 (i)

4,994

4,994

Class M2, 6.4244% 1/25/34 (i)

2,300

2,300

Class M3, 6.6244% 1/25/34 (i)

1,357

1,357

Series 2004-OPT Class A1, 5.6644% 11/25/34 (i)

5,119

5,131

Home Equity Asset Trust:

Series 2003-2 Class M1, 6.2044% 8/25/33 (i)

3,739

3,745

Series 2003-4 Class M1, 6.1244% 10/25/33 (i)

3,495

3,504

HSBC Home Equity Loan Trust Series 2005-2:

Class M1, 5.785% 1/20/35 (i)

2,807

2,813

Class M2, 5.815% 1/20/35 (i)

2,107

2,115

Hyundai Auto Receivables Trust Series 2004-1 Class A4, 5.26% 11/15/12

32,795

32,847

Lancer Funding Ltd. Series 2006-1A Class A3, 7.1856% 4/6/46 (c)(i)

2,314

2,320

MBNA Credit Card Master Note Trust Series 2003-B2 Class B2, 5.72% 10/15/10 (i)

2,155

2,166

Meritage Mortgage Loan Trust Series 2004-1:

Class M1, 5.8244% 7/25/34 (i)

2,983

2,989

Class M2, 5.8744% 7/25/34 (i)

575

576

Morgan Stanley ABS Capital I, Inc.:

Series 2002-HE3 Class M1, 6.4244% 12/27/32 (i)

2,830

2,853

Series 2003-NC8 Class M1, 6.0244% 9/25/33 (i)

3,930

3,942

Series 2004-NC2 Class M1, 5.8744% 12/25/33 (i)

4,061

4,086

Morgan Stanley Dean Witter Capital I Trust:

Series 2001-NC4 Class M1, 6.8244% 1/25/32 (i)

3,605

3,609

Series 2002-NC1 Class M1, 6.5244% 2/25/32 (c)(i)

4,363

4,483

Series 2002-NC3 Class M1, 6.0444% 8/25/32 (i)

2,308

2,310

National Collegiate Funding LLC Series 2004-GT1 Class IO1, 7.87% 6/25/10 (c)(i)(k)

12,180

3,287

National Collegiate Student Loan Trust:

Series 2004-2 Class AIO, 9.75% 10/25/14 (k)

12,615

5,284

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

National Collegiate Student Loan Trust: - continued

Series 2005-GT1 Class AIO, 6.75% 12/25/09 (k)

$ 6,500

$ 1,359

NovaStar Home Equity Loan Series 2004-1:

Class M1, 5.7744% 6/25/34 (i)

2,150

2,161

Class M4, 6.2994% 6/25/34 (i)

3,585

3,613

Onyx Acceptance Owner Trust Series 2005-A Class A3, 3.69% 5/15/09

5,521

5,474

Ownit Mortgage Loan Asset-Backed Certificates Series 2005-3 Class A2A, 5.4444% 6/25/36 (i)

9,516

9,517

Saxon Asset Securities Trust Series 2004-1 Class M1, 5.8544% 3/25/35 (i)

6,910

6,918

SLM Private Credit Student Loan Trust Series 2004-A Class C, 6.2794% 6/15/33 (i)

7,301

7,389

Specialty Underwriting & Residential Finance Series 2003-BC4 Class M1, 5.9244% 11/25/34 (i)

2,830

2,845

Structured Asset Securities Corp. Series 2006-BC1 Class B1, 7.8244% 3/25/36 (c)(i)

4,513

3,929

Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 5.78% 3/15/11 (c)(i)

9,340

9,340

Terwin Mortgage Trust Series 2006-9HGA Class A1, 5.451% 10/25/37 (c)(d)(i)

36,642

36,642

WaMu Master Note Trust Series 2006-C2A Class C2, 5.83% 8/15/15 (c)(i)

17,820

17,820

WFS Financial Owner Trust Class 2004-3 Series A3, 3.3% 3/17/09

8,425

8,373

Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (c)(i)

12,445

12,446

TOTAL ASSET-BACKED SECURITIES

(Cost $457,172)

456,614

Collateralized Mortgage Obligations - 10.5%

Private Sponsor - 5.5%

Adjustable Rate Mortgage Trust floater Series 2005-1 Class 5A2, 5.6544% 5/25/35 (i)

6,949

6,934

Bank of America Mortgage Securities, Inc.:

Series 2003-K:

Class 1A1, 3.3704% 12/25/33 (i)

1,475

1,489

Class 2A1, 4.1644% 12/25/33 (i)

6,877

6,762

Series 2003-L Class 2A1, 3.972% 1/25/34 (i)

12,971

12,670

Series 2004-1 Class 2A2, 4.6976% 10/25/34 (i)

11,143

10,977

Series 2004-B:

Class 1A1, 3.4336% 3/25/34 (i)

3,122

3,177

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Bank of America Mortgage Securities, Inc.: - continued

Series 2004-B:

Class 2A2, 4.1038% 3/25/34 (i)

$ 4,913

$ 4,802

Series 2004-C Class 1A1, 3.3338% 4/25/34 (i)

6,807

6,882

Series 2004-D:

Class 1A1, 3.5325% 5/25/34 (i)

9,053

9,020

Class 2A2, 4.1985% 5/25/34 (i)

13,487

13,209

Series 2004-G Class 2A7, 4.5587% 8/25/34 (i)

10,214

10,056

Series 2004-H Class 2A1, 4.4693% 9/25/34 (i)

10,850

10,661

Series 2004-J:

Class 1A2, 4.2847% 11/25/34 (i)

3,448

3,436

Class 2A1, 4.7822% 11/25/34 (i)

18,516

18,304

Series 2005-E Class 2A7, 4.6089% 6/25/35 (i)

11,900

11,587

Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1057% 8/25/35 (i)

14,232

14,198

Bear Stearns Alt-A Trust floater Series 2005-1 Class A1, 5.6044% 1/25/35 (i)

25,056

25,096

CS First Boston Mortgage Securities Corp. floater:

Series 2004-AR3 Class 6A2, 5.6944% 4/25/34 (i)

1,027

1,027

Series 2004-AR6 Class 9A2, 5.6944% 10/25/34 (i)

2,055

2,058

Gracechurch Mortgage Funding PLC floater Series 1A Class DB, 5.4981% 10/11/41 (c)(i)

12,935

12,936

Granite Master Issuer PLC floater:

Series 2005-2 Class M1, 5.6325% 12/20/54 (i)

19,250

19,261

Series 2006-1A Class C2, 5.9925% 12/20/54 (c)(i)

9,100

9,100

Series 2006-2 Class C1, 5.97% 12/20/54 (i)

22,100

22,120

JPMorgan Mortgage Trust Series 2005-A8 Class 2A3, 4.9591% 11/25/35 (i)

3,370

3,337

Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34

1,694

1,678

Master Asset Securitization Trust Series 2004-9 Class 7A1, 6.3247% 5/25/17 (i)

9,550

9,530

Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.2332% 8/25/17 (i)

7,205

7,277

Merrill Lynch Mortgage Investors, Inc. floater:

Series 2004-E Class A2B, 5.4394% 11/25/29 (i)

5,905

5,906

Series 2004-G Class A2, 5.8719% 11/25/29 (i)

3,735

3,738

Series 2005-B Class A2, 5.5475% 7/25/30 (i)

5,786

5,789

Opteum Mortgage Acceptance Corp. Series 2005-3 Class APT, 5.6144% 7/25/35 (i)

15,957

15,975

Residential Asset Mortgage Products, Inc. sequential pay:

Series 2003-SL1 Class A31, 7.125% 4/25/31

3,482

3,517

Series 2004-SL2 Class A1, 6.5% 10/25/16

1,286

1,298

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Residential Finance LP/Residential Finance Development Corp. floater:

Series 2003-B:

Class B3, 6.92% 7/10/35 (c)(i)

$ 13,313

$ 13,569

Class B4, 7.12% 7/10/35 (c)(i)

10,103

10,318

Class B5, 7.72% 7/10/35 (c)(i)

9,536

9,827

Class B6, 8.22% 7/10/35 (c)(i)

4,343

4,444

Series 2003-CB1:

Class B3, 6.82% 6/10/35 (c)(i)

4,616

4,705

Class B4, 7.02% 6/10/35 (c)(i)

4,132

4,219

Class B5, 7.62% 6/10/35 (c)(i)

2,821

2,886

Class B6, 8.12% 6/10/35 (c)(i)

1,674

1,697

Series 2004-A:

Class B4, 6.57% 2/10/36 (c)(i)

5,785

5,871

Class B5, 7.07% 2/10/36 (c)(i)

3,856

3,932

Series 2004-B:

Class B4, 6.47% 2/10/36 (c)(i)

2,124

2,164

Class B5, 6.92% 2/10/36 (c)(i)

1,448

1,464

Class B6, 7.37% 2/10/36 (c)(i)

386

389

Series 2004-C:

Class B4, 6.32% 9/10/36 (i)

2,724

2,752

Class B5, 6.72% 9/10/36 (i)

3,016

3,040

Class B6, 7.12% 9/10/36 (i)

487

490

Sequoia Mortgage Trust floater:

Series 2004-12 Class 1A2, 5.82% 1/20/35 (i)

11,497

11,533

Series 2004-4 Class A, 5.48% 5/20/34 (i)

9,241

9,242

Structured Adjustable Rate Mortgage Loan Trust floater Series 2001-14 Class A1, 5.6344% 7/25/35 (i)

19,515

19,591

Thornburg Mortgage Securities Trust floater Series 2005-3:

Class A2, 5.5644% 10/25/35 (i)

10,231

10,228

Class A4, 5.5944% 10/25/35 (i)

18,840

18,810

Wachovia Mortgage Loan Trust LLC Series 2005-B Class 2A4, 5.1863% 10/20/35 (i)

2,700

2,679

WaMu Mortgage pass thru certificates floater:

Series 2005-AR13 Class A1C1, 5.5144% 10/25/45 (i)

16,994

16,998

Series 2005-AR19 Class A1C1, 5.5144% 12/25/45 (i)

14,047

14,054

WaMu Mortgage Securities Corp. sequential pay:

Series 2003-MS9 Class 2A1, 7.5% 12/25/33

1,355

1,391

Series 2004-RA2 Class 2A, 7% 7/25/33

1,990

2,017

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Wells Fargo Mortgage Backed Securities Trust:

Series 2004-T Class A1, 3.458% 9/25/34 (i)

$ 9,700

$ 9,666

Series 2005-AR10 Class 2A2, 4.1091% 6/25/35 (i)

23,286

22,931

Series 2005-AR2 Class 2A2, 4.57% 3/25/35

24,366

23,913

Series 2005-AR9 Class 2A1, 4.3623% 5/25/35 (i)

10,909

10,699

Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (i)

19,955

19,790

TOTAL PRIVATE SPONSOR

559,116

U.S. Government Agency - 5.0%

Fannie Mae planned amortization class:

Series 2006-45 Class OP, 6/25/36 (l)

11,293

8,454

Series 2006-53 Class PB, 5.5% 1/25/30

20,373

20,287

Series 2006-64:

Class MB, 5.5% 9/25/33

14,041

13,835

Class PB, 5.5% 9/25/33

33,008

32,567

Fannie Mae Grantor Trust floater Series 2005-90 Class FG, 5.5744% 10/25/35 (i)

19,991

19,940

Fannie Mae guaranteed REMIC pass thru certificates:

planned amortization class:

Series 2003-73 Class GA, 3.5% 5/25/31

7,300

6,799

Series 2003-81 Class MX, 3.5% 3/25/24

14,243

13,942

Series 2006-57 Class PC, 5.5% 10/25/32

14,081

13,876

sequential pay:

Series 2003-112 Class AN, 4% 11/25/18

16,358

14,803

Series 2004-3 Class BA, 4% 7/25/17

1,284

1,233

Series 2004-70 Class GB, 4.5% 1/25/32

5,962

5,563

Series 2004-86 Class KC, 4.5% 5/25/19

5,642

5,442

Series 2004-95 Class AN, 5.5% 1/25/25

4,634

4,672

Freddie Mac planned amortization class:

Series 3033 Class UD, 5.5% 10/15/30

8,345

8,335

Series 3178:

Class PB, 5.5% 4/15/30

23,374

23,263

Class PC, 5.5% 12/15/32

7,453

7,355

Freddie Mac Multi-class participation certificates guaranteed:

planned amortization class:

Series 1669 Class H, 6.5% 7/15/23

15,240

15,349

Series 2006-15 Class OP, 3/25/36 (l)

12,893

9,172

Series 2425 Class JH, 6% 3/15/17

8,127

8,237

Series 2498 Class PD, 5.5% 2/15/16

4,067

4,061

Series 2614 Class TD, 3.5% 5/15/16

47,402

44,925

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 2649 Class TQ, 3.5% 12/15/21

$ 17,001

$ 16,723

Series 2665 Class PB, 3.5% 6/15/23

2,358

2,304

Series 2689 Class HC, 3.5% 9/15/26

6,465

6,249

Series 2695 Class GC, 4.5% 11/15/18

11,641

11,250

Series 2760 Class EB, 4.5% 9/15/16

28,779

27,859

Series 2773 Class EG, 4.5% 4/15/19

6,187

5,894

Series 2775:

Class OD, 4.5% 10/15/17

20,875

19,987

Class OE, 4.5% 4/15/19

31,083

29,090

Series 2836 Class EG, 5% 12/15/32

40,221

38,351

Series 3018 Class UD, 5.5% 9/15/30

9,555

9,539

Series 3075 Class PB, 5.5% 7/15/30

18,780

18,749

Series 3078 Class PB, 5.5% 7/15/29

32,145

32,048

Series 3159 Class TC, 5.5% 6/15/32

7,522

7,424

sequential pay Series 2750 Class ZT, 5% 2/15/34

11,221

9,782

TOTAL U.S. GOVERNMENT AGENCY

517,359

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $1,079,273)

1,076,475

Commercial Mortgage Securities - 5.5%

Banc of America Commercial Mortgage, Inc.:

Series 2005-1 Class A3, 4.877% 11/10/42

14,465

14,298

Series 2005-3 Series A3B, 5.09% 7/10/43 (i)

22,475

22,131

Banc of America Large Loan, Inc. Series 2006-ESH:

Class A, 6.19% 7/14/11 (c)(i)

10,873

10,865

Class B, 6.29% 7/14/11 (c)(i)

5,432

5,423

Class C, 6.44% 7/14/11 (c)(i)

10,879

10,871

Class D, 7.07% 7/14/11 (c)(i)

6,275

6,293

Bayview Commercial Asset Trust floater:

Series 2004-1:

Class A, 5.6844% 4/25/34 (c)(i)

7,239

7,252

Class B, 7.2244% 4/25/34 (c)(i)

818

826

Class M1, 5.8844% 4/25/34 (c)(i)

629

631

Class M2, 6.5244% 4/25/34 (c)(i)

629

636

Series 2004-2 Class A, 5.7544% 8/25/34 (c)(i)

7,455

7,483

Series 2004-3:

Class A1, 5.6944% 1/25/35 (c)(i)

8,811

8,839

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Bayview Commercial Asset Trust floater: - continued

Series 2004-3:

Class A2, 5.7444% 1/25/35 (c)(i)

$ 1,270

$ 1,272

Class M1, 5.8244% 1/25/35 (c)(i)

1,508

1,517

Class M2, 6.3244% 1/25/35 (c)(i)

992

1,004

Bear Stearns Commercial Mortgage Securities, Inc.:

sequential pay:

Series 2003-PWR2 Class A3, 4.834% 5/11/39

6,850

6,719

Series 2004-ESA Class A3, 4.741% 5/14/16 (c)

4,785

4,740

Series 2004-ESA:

Class B, 4.888% 5/14/16 (c)

7,720

7,657

Class C, 4.937% 5/14/16 (c)

3,395

3,371

Class D, 4.986% 5/14/16 (c)

1,980

1,969

Class E, 5.064% 5/14/16 (c)

6,160

6,143

Class F, 5.182% 5/14/16 (c)

1,480

1,477

Chase Commercial Mortgage Securities Corp.:

Series 2000-3 Class G 6.887% 10/15/32 (c)

9,742

9,998

Series 2001-245 Class A2, 6.275% 2/12/16 (c)(i)

5,760

6,007

Commercial Mortgage pass thru certificates:

floater Series 2005-F10A:

Class B, 5.56% 4/15/17 (c)(i)

10,865

10,866

Class C, 5.6% 4/15/17 (c)(i)

4,615

4,615

Class D, 5.64% 4/15/17 (c)(i)

3,750

3,751

Class I, 6.18% 4/15/17 (c)(i)

520

520

Class MOA3, 5.63% 3/15/20 (c)(i)

7,035

7,036

sequential pay Series 2006-CN2A Class A2FX, 5.449% 2/5/19 (c)

8,415

8,453

CS First Boston Mortgage Securities Corp.:

floater Series 2005-TFLA:

Class C, 5.57% 2/15/20 (c)(i)

8,630

8,633

Class E, 5.66% 2/15/20 (c)(i)

6,025

6,027

Class F, 5.71% 2/15/20 (c)(i)

2,665

2,666

Class G, 5.85% 2/15/20 (c)(i)

770

770

Class H, 6.08% 2/15/20 (c)(i)

1,095

1,095

sequential pay Series 2000-C1 Class A2, 7.545% 4/15/62

6,800

7,243

Series 1997-C2 Class D, 7.27% 1/17/35

3,840

3,967

Series 1998-C1 Class D, 7.17% 5/17/40

7,455

7,952

Series 1999-C1 Class E, 7.8822% 9/15/41 (i)

10,335

11,138

Series 2004-C1 Class ASP, 0.8785% 1/15/37 (c)(i)(k)

186,936

5,347

Series 2006-OMA:

Class H, 5.805% 5/15/23 (c)(i)

2,825

2,761

Class J, 5.805% 5/15/23 (c)(i)

4,770

4,620

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31

$ 5,730

$ 5,929

DLJ Commercial Mortgage Corp. sequential pay Series 2000-CF1 Class A1B, 7.62% 6/10/33

10,000

10,737

First Union National Bank-Bank of America Commercial Mortgage Trust Series 2001-C1 Class G, 6.936% 3/15/33 (c)

3,135

3,318

First Union-Lehman Brothers Commercial Mortgage Trust sequential pay Series 1997-C2 Class A3, 6.65% 11/18/29

2,092

2,108

GE Commercial Mortgage Corp. Series 2004-C1 Class X2, 1.098% 11/10/38 (i)(k)

102,008

3,497

Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.8831% 10/16/23 (i)

1,645

1,672

Ginnie Mae guaranteed REMIC pass thru securities:

sequential pay:

Series 2003-22 Class B, 3.963% 5/16/32

11,925

11,425

Series 2003-47 Class C, 4.227% 10/16/27

11,084

10,783

Series 2003-59 Class D, 3.654% 10/16/27

18,000

16,798

Series 2003-47 Class XA, 0.1774% 6/16/43 (i)(k)

44,719

2,492

GMAC Commercial Mortgage Securities, Inc. Series 2004-C3 Class X2, 0.7177% 12/10/41 (i)(k)

16,722

390

Greenwich Capital Commercial Funding Corp.:

sequential pay Series 2004-GG1 Class A4, 4.755% 6/10/36

4,940

4,868

Series 2006-GG7 Class A3, 6.1101% 7/10/38

14,490

14,969

GS Mortgage Securities Corp. II:

sequential pay:

Series 2001-LIBA Class A2, 6.615% 2/14/16 (c)

15,710

16,581

Series 2003-C1 Class A2A, 3.59% 1/10/40

9,075

8,881

Series 1998-GLII Class E, 6.9706% 4/13/31 (i)

1,710

1,754

Series 2006-GG6 Class A2, 5.506% 4/10/38 (i)

22,025

22,203

Hilton Hotel Pool Trust Series 2000-HLTA Class D, 7.555% 10/3/15 (c)

9,690

10,287

Host Marriott Pool Trust sequential pay Series 1999-HMTA Class B, 7.3% 8/3/15 (c)

3,485

3,669

JPMorgan Chase Commercial Mortgage Securities Corp. sequential pay Series 2005-LDP2 Class A2, 4.575% 7/15/42

11,425

11,156

LB-UBS Commercial Mortgage Trust:

sequential pay Series 2005-C3 Class A2, 4.553% 7/15/30

5,345

5,230

Series 2001-C3 Class B, 6.512% 6/15/36

8,035

8,454

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (c)

$ 11,400

$ 10,201

Merrill Lynch Mortgage Trust sequential pay:

Series 2005-CIP1 Class A2, 4.96% 7/12/38

3,545

3,507

Series 2005-MCP1 Class A2, 4.556% 6/12/43

6,475

6,318

Merrill Lynch-CFC Commercial Mortgage Trust sequential pay Series 2006-1 CLass A3, 5.671% 2/12/39

10,640

10,698

Morgan Stanley Capital I Trust Series 2006-T23:

Class A1, 5.682% 8/12/41

5,765

5,848

Class A3, 5.98% 8/12/41 (i)

5,105

5,239

Morgan Stanley Capital I, Inc. Series 2006-HQ8 Class A3, 5.4413% 3/12/16 (i)

15,510

15,557

Mortgage Capital Funding, Inc. sequential pay Series 1998-MC2 Class A2, 6.423% 6/18/30

7,140

7,221

Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A2, 6.602% 11/15/07 (c)

9,000

9,120

TrizecHahn Office Properties Trust Series 2001-TZHA Class E3, 7.253% 3/15/13 (c)

5,069

5,180

Wachovia Bank Commercial Mortgage Trust:

sequential pay:

Series 2003-C8 Class A3, 4.445% 11/15/35

17,105

16,599

Series 2006-C24 Class A2, 5.506% 3/15/45

40,465

40,764

Series 2004-C15:

Class 180A, 5.3979% 10/15/41 (c)(i)

6,690

6,509

Class 180B, 5.3979% 10/15/41 (c)(i)

3,000

2,947

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $573,455)

567,791

Municipal Securities - 0.0%

Chicago Board of Ed. Series A, 5.5% 12/1/30 (AMBAC Insured)
(Cost $5,889)

5,000

5,864

Foreign Government and Government Agency Obligations - 0.3%

Israeli State 4.625% 6/15/13

12,555

11,864

United Mexican States 5.875% 1/15/14

16,280

16,565

TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $28,976)

28,429

Supranational Obligations - 0.1%

Principal Amount (000s)

Value (Note 1) (000s)

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $6,514)

$ 6,585

$ 6,953

Fixed-Income Funds - 20.0%

Shares

Fidelity Specialized High Income Central Investment Portfolio (j)

1,000,451

98,514

Fidelity Ultra-Short Central Fund (j)

19,702,539

1,960,403

TOTAL FIXED-INCOME FUNDS

(Cost $2,060,952)

2,058,917

Preferred Securities - 0.1%

Principal Amount (000s)

FINANCIALS - 0.1%

Diversified Financial Services - 0.1%

MUFG Capital Finance 1 Ltd. 6.346% (i)

$ 15,235

15,348

TOTAL PREFERRED SECURITIES

(Cost $15,235)

15,348

Cash Equivalents - 2.6%

Maturity Amount (000s)

Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at:

5.29%, dated 8/31/06 due 9/1/06

$ 235,316

235,281

5.29%, dated 8/31/06 due 9/1/06 (a)

29,298

29,294

TOTAL CASH EQUIVALENTS

(Cost $264,575)

264,575

TOTAL INVESTMENT PORTFOLIO - 114.6%

(Cost $11,814,051)

11,794,363

NET OTHER ASSETS - (14.6)%

(1,500,600)

NET ASSETS - 100%

$ 10,293,763

Swap Agreements

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps

Receive monthly notional amount multiplied by 3.05% and pay Merrill Lynch upon default event of Morgan Stanley ABS Capital I, Inc., par value of the proportional notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8, Class B3, 7.2913% 9/25/34

Oct. 2034

$ 3,200

$ 51

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, 7.6913% 11/25/34

Dec. 2034

3,380

49

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 8.8244% 8/25/34

Sept. 2034

2,971

35

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7, Class B3, 7.6913% 7/25/34

August 2034

2,971

37

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34

Oct. 2034

2,971

44

Receive from Merrill Lynch, Inc., upon default event of R.R. Donnelley & Sons Co., par value of the notional amount of R.R. Donnelley & Sons Co. 5.5% 5/15/15, and pay quarterly notional amount multiplied by 2.12%

Sept. 2013

5,085

(97)

Receive monthly notional amount multiplied by .55% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2004-WCW1 Class M4, 6.835% 9/25/34

Sept. 2034

9,300

(2)

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by .8% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WCH1 Class M6, 6.365% 1/25/35

Feb. 2035

$ 3,200

$ 2

Receive monthly notional amount multiplied by .82% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34

August 2034

2,971

11

Receive monthly notional amount multiplied by .85% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. 6.105% Series 2005-WHQ2 Class M6 5/25/35

June 2035

3,200

6

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34

Nov. 2034

2,971

11

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34

Oct. 2034

2,971

22

Receive monthly notional amount multiplied by 1.6% 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 M7, 5.4413% 5/25/35

June 2035

2,730

4

Receive monthly notional amount multiplied by 1.66% 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 M7, 5.4413% 5/25/35

June 2035

2,971

8

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon default event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32

April 2032

$ 374

$ 3

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.3913% 2/25/34

March 2034

730

2

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.0413% 1/25/34

Feb. 2034

581

1

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

10,445

(7)

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

7,465

79

Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon default event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33

May 2033

2,971

35

Receive quarterly notional amount multiplied by .20% and pay Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 5 Index, par value of the proportional notional amount (g)

Dec. 2007

74,500

134

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

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

$ 17,065

$ 42

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

12,540

31

Receive quarterly notional amount multiplied by .31% and pay Deutsche Bank upon default of Altria Group, Inc., par value of the notional amount of Altria Group 7% 11/4/13

June 2008

61,000

184

Receive quarterly notional amount multiplied by .34% and pay Goldman Sachs upon default event of Duke Energy Corp. par value of the notional amount of Duke Energy Corp. 6.25% 1/15/12

March 2011

17,600

78

Receive quarterly notional amount multiplied by .35% and pay Goldman Sachs upon default event of Southern California Edison Co., par value of the notional amount of Southern California Edison Co. 7.625% 1/15/10

Sept. 2010

11,200

41

Receive quarterly notional amount multiplied by .38% and pay Bank of America upon default event of Pacific Gas & Electric Co., par value of the notional amount of Pacific Gas & Electric Co. 4.8% 3/1/14

March 2011

17,600

90

Receive quarterly notional amount multiplied by .40% and pay Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 6 Index, par value of the proportional notional amount (h)

June 2011

96,800

150

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

35,000

164

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive semi-annually notional amount multiplied by .5% 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 2008

$ 22,335

$ 91

Receive semi-annually notional amount multiplied by .5% and pay Deutsche Bank upon default event of Russian Federation, par value of the notional amount of Russian Federation 5% 3/31/30

June 2008

14,815

59

Receive semi-annually notional amount multiplied by .53% 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 2008

12,150

57

Receive semi-annually notional amount multiplied by .625% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

63,135

544

Receive semi-annually notional amount multiplied by .665% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

20,000

207

Receive semi-annually notional amount multiplied by .735% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

13,100

176

TOTAL CREDIT DEFAULT SWAPS

562,298

2,342

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Interest Rate Swaps

Receive quarterly a fixed rate equal to 4.4771% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

August 2010

$ 140,000

$ (3,361)

Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

July 2014

32,550

(689)

Receive semi-annually a fixed rate equal to 4.745% and pay quarterly a floating rate based on 3-month LIBOR with UBS

Jan. 2011

70,000

(1,244)

Receive semi-annually a fixed rate equal to 4.921% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

Dec. 2008

315,000

(2,085)

Receive semi-annually a fixed rate equal to 5.13% and pay quarterly a floating rate based on 3-month LIBOR with Citibank

March 2009

280,030

3,228

Receive semi-annually a fixed rate equal to 5.3135% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.

August 2009

302,645

1,201

TOTAL INTEREST RATE SWAPS

1,140,225

(2,950)

Total Return Swaps

Receive monthly a return equal to Lehman Brothers CMBS AAA 8.5+ Index and pay monthly a floating rate based on 1-month LIBOR minus 25 basis points with Citibank

Oct. 2006

105,000

1,829

$ 1,807,523

$ 1,221

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 end of the period, the value of these securities amounted to $798,807,000 or 7.8% of net assets.

(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

(e) A portion of the security is subject to a forward commitment to sell.

(f) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $2,264,000.

(g) Dow Jones CDX N.A. Investment Grade 5 is a tradable index of credit default swaps on investment grade debt of U.S. companies.

(h) Dow Jones CDX N.A. Investment Grade 6 is a tradable index of credit default swaps on investment grade debt of U.S. companies.

(i) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

(j) 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.

(k) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool.

(l) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans.

(m) Non-income producing - Issuer is in default.

Affiliated Central Funds

Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows:

Fund

Four months ended
August 31, 2006
Income earned
(Amounts in thousands)

Year ended
April 30, 2006
Income earned
(Amounts in thousands)

Fidelity Specialized High Income Central Investment Portfolio

$ 1,773

$ 2,729

Fidelity Ultra-Short Central Fund

30,450

47,063

Total

$ 32,223

$ 49,792

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
(Amounts in thousands)

Value at
April 30, 2006

Purchases

Sales Proceeds

Value at
August 31, 2006

% ownership, end of period

Fidelity Specialized High Income Central Investment Portfolio

$ 69,107

$ 29,167*

$ -

$ 98,514

47.6%

Fidelity Ultra-Short Central Fund

1,560,165

400,040

-

1,960,403

23.4%

Total

$ 1,629,272

$ 429,207

$ -

$ 2,058,917

* Represents the value of shares received through in-kind contributions.

Other Information

Distribution of investments by country of issue, as a percentage of total net assets, is as follows:

United States of America

89.9%

United Kingdom

2.8%

Cayman Islands

1.4%

Others (individually less than 1%)

5.9%

100.0%

Income Tax Information

At August 31, 2006, the fund had a capital loss carryforward of approximately $125,558,000 of which $731,000 expires on August 31, 2013 and the remainder expires on August 31, 2014. Of the loss carryforwards expiring on August 31, 2013, $731,000 was acquired in the merger and is available to offset future capital gains of the fund to the extent provided by regulations.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amounts)

August 31, 2006

Assets

Investment in securities, at value (including securities loaned of $28,720 and repurchase agreements of $264,575) - See accompanying schedule:

Unaffiliated issuers (cost $9,753,099)

$ 9,735,446

Affiliated Central Funds (cost $2,060,952)

2,058,917

Total Investments (cost $11,814,051)

$ 11,794,363

Commitment to sell securities on a delayed delivery basis

(34,123)

Receivable for securities sold on a delayed delivery basis

34,095

(28)

Receivable for investments sold, regular delivery

52,957

Cash

2

Receivable for swap agreements

130

Receivable for fund shares sold

7,918

Interest receivable

79,899

Swap agreements, at value

1,221

Other receivables

67

Total assets

11,936,529

Liabilities

Payable for investments purchased
Regular delivery

$ 83,115

Delayed delivery

1,519,698

Payable for fund shares redeemed

5,633

Distributions payable

1,073

Accrued management fee

2,707

Distribution fees payable

33

Other affiliated payables

1,180

Other payables and accrued expenses

33

Collateral on securities loaned, at value

29,294

Total liabilities

1,642,766

Net Assets

$ 10,293,763

Net Assets consist of:

Paid in capital

$ 10,414,269

Undistributed net investment income

11,929

Accumulated undistributed net realized gain (loss) on investments

(113,941)

Net unrealized appreciation (depreciation) on investments

(18,494)

Net Assets

$ 10,293,763

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Assets and Liabilities - continued

Amounts in thousands (except per-share amounts)

August 31, 2006

Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share
($45,580 ÷ 6,201 shares)

$ 7.35

Maximum offering price per share (100/95.25 of $7.35)

$ 7.72

Class T:
Net Asset Value and redemption price per share ($58,716 ÷ 7,985 shares)

$ 7.35

Maximum offering price per share (100/96.50 of $7.35)

$ 7.62

Class B:
Net Asset Value and offering price per share
($9,462 ÷ 1,286 shares)A

$ 7.36

Class C:
Net Asset Value and offering price per share
($9,993 ÷ 1,358 shares)A

$ 7.36

Investment Grade Bond:
Net Asset Value, offering price and redemption price per share ($10,140,626 ÷ 1,378,852 shares)

$ 7.35

Institutional Class:
Net Asset Value, offering price and redemption price per share ($29,386 ÷ 3,992 shares)

$ 7.36

A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Operations

Amounts in thousands

Four months ended
August 31, 2006

Year ended
April 30, 2006

Investment Income

Dividends

$ 344

$ -

Interest

129,776

305,454

Income from affiliated Central Funds

32,223

49,792

Total income

162,343

355,246

Expenses

Management fee

$ 9,241

$ 24,689

Transfer agent fees

2,941

7,988

Distribution fees

128

351

Accounting and security lending fees

-

110

Fund wide operations fee

850

1,909

Independent trustees' compensation

11

31

Appreciation in deferred trustee compensation account

-

2

Custodian fees and expenses

-

14

Registration fees

-

12

Audit

-

8

Legal

-

2

Miscellaneous

5

19

Total expenses before reductions

13,176

35,135

Expense reductions

(231)

(465)

Total expenses

12,945

34,670

Net investment income

149,398

320,576

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

Unaffiliated issuers

(17,205)

(28,344)

Swap agreements

(120)

(9,904)

Total net realized gain (loss)

(17,325)

(38,248)

Change in net unrealized appreciation (depreciation) on:

Investment securities

136,790

(175,529)

Swap agreements

9,322

(9,287)

Delayed delivery commitments

(28)

(13)

Total change in net unrealized appreciation (depreciation)

146,084

(184,829)

Net gain (loss)

128,759

(223,077)

Net increase (decrease) in net assets resulting from operations

$ 278,157

$ 97,499

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Changes in Net Assets

Amounts in thousands

Four months ended
August 31,
2006

Year ended
April 30,
2006

Year ended
April 30,
2005

Increase (Decrease) in Net Assets

Operations

Net investment income

$ 149,398

$ 320,576

$ 210,849

Net realized gain (loss)

(17,325)

(38,248)

99,455

Change in net unrealized appreciation (depreciation)

146,084

(184,829)

7,281

Net increase (decrease) in net assets resulting
from operations

278,157

97,499

317,585

Distributions to shareholders from net investment income

(127,262)

(304,745)

(211,677)

Distributions to shareholders from net realized gain

-

(66,460)

(80,651)

Total distributions

(127,262)

(371,205)

(292,328)

Share transactions - net increase (decrease)

1,985,853

1,599,350

1,000,708

Total increase (decrease) in net assets

2,136,748

1,325,644

1,025,965

Net Assets

Beginning of period

8,157,015

6,831,371

5,805,406

End of period (including undistributed net investment income of $11,929, $289, and $4,438, respectively)

$ 10,293,763

$ 8,157,015

$ 6,831,371

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class A

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.118

.298

.237

.224

.186

Net realized and unrealized gain (loss)

.092

(.206)

.131

(.095)

.326

Total from investment operations

.210

.092

.368

.129

.512

Distributions from net investment income

(.100)

(.282)

(.238)

(.229)

(.172)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.100)

(.352)

(.338)

(.359)

(.292)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.50

$ 7.47

$ 7.70

Total Return B, C, D

2.92%

1.23%

5.03%

1.68%

6.98%

Ratios to Average Net Assets F, I

Expenses before reductions

.71% A

.71%

.83%

.83%

.79% A

Expenses net of fee waivers, if any

.71% A

.71%

.83%

.83%

.79% A

Expenses net of all reductions

.71% A

.71%

.83%

.83%

.79% A

Net investment income

4.86% A

4.04%

3.17%

2.96%

3.73% A

Supplemental Data

Net assets, end of period
(in millions)

$ 46

$ 37

$ 31

$ 22

$ 8

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

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 funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class T

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.116

.290

.230

.214

.180

Net realized and unrealized gain (loss)

.091

(.216)

.141

(.094)

.324

Total from investment operations

.207

.074

.371

.120

.504

Distributions from net investment income

(.097)

(.274)

(.231)

(.220)

(.164)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.097)

(.344)

(.331)

(.350)

(.284)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.89%

.98%

5.07%

1.56%

6.87%

Ratios to Average Net Assets F, I

Expenses before reductions

.82% A

.83%

.93%

.96%

.97% A

Expenses net of fee waivers, if any

.82% A

.83%

.93%

.95%

.95% A

Expenses net of all reductions

.81% A

.83%

.93%

.95%

.95% A

Net investment income

4.76% A

3.92%

3.07%

2.84%

3.57% A

Supplemental Data

Net assets, end of period
(in millions)

$ 59

$ 57

$ 48

$ 30

$ 10

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

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 funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class B

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.099

.239

.180

.166

.147

Net realized and unrealized gain (loss)

.102

(.216)

.140

(.095)

.322

Total from investment operations

.201

.023

.320

.071

.469

Distributions from net investment income

(.081)

(.223)

(.180)

(.171)

(.129)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.081)

(.293)

(.280)

(.301)

(.249)

Net asset value,
end of period

$ 7.36

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.79%

.28%

4.37%

.90%

6.39%

Ratios to Average Net Assets F, I

Expenses before reductions

1.50% A

1.51%

1.64%

1.63%

1.60% A

Expenses net of fee waivers, if any

1.50% A

1.51%

1.60%

1.60%

1.60% A

Expenses net of all reductions

1.50% A

1.51%

1.59%

1.60%

1.60% A

Net investment income

4.07% A

3.24%

2.40%

2.19%

2.92% A

Supplemental Data

Net assets, end of period
(in millions)

$ 9

$ 9

$ 9

$ 9

$ 8

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Total returns do not include the effect of the contingent deferred sales charge.

E Calculated based on average shares outstanding during the period.

F Amounts do not include the activity of the affiliated central funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class C

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.097

.233

.176

.161

.145

Net realized and unrealized gain (loss)

.102

(.216)

.140

(.095)

.322

Total from investment operations

.199

.017

.316

.066

.467

Distributions from net investment income

(.079)

(.217)

(.176)

(.166)

(.127)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.079)

(.287)

(.276)

(.296)

(.247)

Net asset value,
end of period

$ 7.36

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.76%

.20%

4.30%

.84%

6.35%

Ratios to Average Net Assets F, I

Expenses before reductions

1.58% A

1.60%

1.67%

1.66%

1.64% A

Expenses net of fee waivers, if any

1.58% A

1.60%

1.66%

1.66%

1.64% A

Expenses net of all reductions

1.58% A

1.60%

1.66%

1.66%

1.64% A

Net investment income

3.99% A

3.15%

2.34%

2.13%

2.88% A

Supplemental Data

Net assets, end of period
(in millions)

$ 10

$ 9

$ 7

$ 7

$ 6

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Total returns do not include the effect of the contingent deferred sales charge.

E Calculated based on average shares outstanding during the period.

F Amounts do not include the activity of the affiliated central funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Investment Grade Bond

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003

2002

Selected Per-Share Data

Net asset value, beginning of period

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.33

$ 7.18

Income from Investment Operations

Net investment income D

.124

.317

.254

.240

.290

.379

Net realized and unrealized gain (loss)

.092

(.206)

.130

(.095)

.483

.158

Total from investment operations

.216

.111

.384

.145

.773

.537

Distributions from net investment income

(.106)

(.301)

(.254)

(.245)

(.283)

(.377)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

(.010)

Total distributions

(.106)

(.371)

(.354)

(.375)

(.403)

(.387)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.33

Total Return B, C

3.01%

1.48%

5.26%

1.89%

10.82%

7.61%

Ratios to Average Net Assets E, G

Expenses before reductions

.45% A

.46%

.61%

.63%

.66%

.66%

Expenses net of fee waivers,
if any

.45% A

.46%

.61%

.63%

.66%

.66%

Expenses net of all reductions

.45% A

.46%

.61%

.63%

.66%

.66%

Net investment income

5.12% A

4.29%

3.39%

3.16%

3.86%

5.18%

Supplemental Data

Net assets,
end of period
(in millions)

$ 10,141

$ 8,018

$ 6,721

$ 5,735

$ 5,274

$ 4,056

Portfolio turnover rate F

206% A, H

145%

227%

238%

276%

230%

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 funds.

F Amounts do not include the portfolio activity of the affiliated central funds.

G 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.

H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Institutional Class

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 G

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.25

$ 7.51

$ 7.48

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income D

.124

.313

.254

.233

.202

Net realized and unrealized gain (loss)

.091

(.205)

.129

(.078)

.321

Total from investment operations

.215

.108

.383

.155

.523

Distributions from net investment income

(.105)

(.298)

(.253)

(.245)

(.183)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.105)

(.368)

(.353)

(.375)

(.303)

Net asset value,
end of period

$ 7.36

$ 7.25

$ 7.51

$ 7.48

$ 7.70

Total Return B, C

2.99%

1.44%

5.24%

2.04%

7.14%

Ratios to Average Net Assets E, H

Expenses before reductions

.49% A

.50%

.59%

.64%

.56% A

Expenses net of fee waivers, if any

.49% A

.50%

.59%

.64%

.56% A

Expenses net of all reductions

.49% A

.50%

.59%

.64%

.56% A

Net investment income

5.07% A

4.25%

3.40%

3.15%

3.96% A

Supplemental Data

Net assets,
end of period
(000 omitted)

$ 29,386

$ 25,776

$ 16,084

$ 2,840

$ 275

Portfolio turnover rate F

206% A, I

145%

227%

238%

276%

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 funds.

F Amounts do not include the portfolio activity of the affiliated central funds.

G For the period August 27, 2002 (commencement of sale of shares) to April 30, 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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Notes to Financial Statements

For the period ended August 31, 2006

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Fidelity Investment Grade Bond Fund (the Fund) is a fund of Fidelity Fixed-Income Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.

The Fund offers Class A, Class T, Class B, Class C, Investment Grade Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

The Fund may invest in Fidelity Ultra-Short Central Fund (Ultra-Short Central Fund) and fixed-income Central Investment Portfolios (CIPs), collectively referred to as the Central Funds, which are open-end investment companies 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 Funds:

On July 20, 2006, the Board of Trustees approved a change in the fiscal year end of the Fund from April 30 to August 31. Accordingly, the Fund's financial statements and related notes include information as of the four month period ended August 31, 2006 and the one year period ended April 30, 2006.

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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Security Valuation - continued

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 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, including the Fund's investment activity in the Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income and distributions from the Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity.

Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.

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.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), 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.

Annual Report

1. Significant Accounting Policies - continued

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 swap agreements, prior period premium and discount on debt securities, market discount, partnerships (including allocations from CIP), 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:

Unrealized appreciation

$ 93,937

Unrealized depreciation

(114,338)

Net unrealized appreciation (depreciation)

(20,401)

Undistributed ordinary income

25,527

Capital loss carryforward

(125,558)

Cost for federal income tax purposes

$ 11,814,764

The tax character of distributions paid was as follows:

Four months ended
August 31, 2006

April 30, 2006

April 30, 2005

Ordinary Income

$ 127,262

$ 323,808

$ 248,105

Long-term Capital Gains

-

47,397

44,223

Total

$ 127,262

$ 371,205

$ 292,328

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

New Accounting Pronouncements. 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, results of operations and financial statement disclosures.

In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.

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 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

Annual Report

2. Operating Policies - continued

Delayed Delivery Transactions and When-Issued Securities - continued

Investments. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.

Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.

Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.

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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Operating Policies - continued

Swap Agreements - continued

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 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 $1,231,454 and $411,323, respectively for the four month period ended August 31, 2006.

Annual Report

4. Fees and Other Transactions with Affiliates.

Management Fee and Expense Contract. 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% (.30% prior to June 1, 2005) 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 periods ended August 31, 2006 and April 30, 2006, the management fee was equivalent to an annualized rate of .32% and an annual rate of .33%, respectively, of the Fund's average net assets.

Effective upon the completion of the reorganization with Spartan Investment Grade Bond Fund, the Fund entered into a new expense contract with FMR which will not allow expenses for the Investment Grade Bond share class to be increased above the current limit of .45% of the class' average net assets without shareholder approval.

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 periods ended August 31, 2006 and April 30, 2006, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

Four months ended
August 31, 2006

April 30, 2006

Distribution
Fee

Service
Fee

Paid to
FDC

Retained
by FDC

Paid to
FDC

Retained
by FDC

Class A

0%

.15%

$ 20

$ 2

$ 49

$ -

Class T

0%

.25%

48

1

136

2

Class B

.65%

.25%

28

21

86

63

Class C

.75%

.25%

32

10

80

23

$ 128

$ 34

$ 351

$ 88

Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Sales Load - continued

depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C,.75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.

For the four month period ended August 31, 2006, sales charge amounts retained by FDC were as follows:

Retained
by FDC

Class A

$ 7

Class T

2

Class B*

6

Class C*

2

$ 17

* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the
sales are made.

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 Investment Grade Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Investment Grade 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 Investment Grade Bond's average net assets. Prior to June 1, 2005, FSC also received account fees in addition to the asset-based fee. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the periods ended August 31, 2006 and April 30, 2006, the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:

Four months ended
August 31, 2006

April 30, 2006

Amount

% of
Average
Net Assets*

Amount

% of
Average
Net Assets

Class A

$ 28

.21

$ 66

.21

Class T

42

.22

122

.22

Class B

8

.25

24

.25

Class C

8

.23

19

.24

Investment Grade Bond

2,842

.10

7,726

.11

Institutional Class

13

.14

31

.14

$ 2,941

$ 7,988

* Annualized

Annual Report

4. Fees and Other Transactions with Affiliates - continued

Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. Under a separate contract, FSC administers the security lending program. Effective June 1, 2005, FMR pays for these fees. Prior to June 1, 2005, the accounting fee was based on the level of average net assets for the month and the security lending fee was based on the number and duration of lending transactions.

Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), which became effective on June 1, 2005, FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, 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. Effective upon the completion of the reorganization with Spartan Investment Grade Bond Fund, the .35% fee can not be increased without shareholder approval. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the periods ended August 31, 2006 and April 30, 2006, the FWOE fee was equivalent to an annualized rate of .03% of the Fund's average net assets.

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 may also invest in CIPs managed by FIMM, or Fidelity Management & Research Company Inc. (FMRC), each an affiliate of FMR.

The Specialized High Income Central Investment Portfolio seeks a high level of current income by normally investing in income-producing debt securities, with an emphasis on lower-quality debt securities.

The Fund's Schedule of Investments lists the Central Funds as an investment of the Fund but does not include the underlying holdings of the Central Funds. Based on their investment objectives, the Central Funds may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the Central Funds may also participate in loans and other direct debt instruments and derivatives. 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 Funds and the Fund.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Affiliated Central Funds - continued

A complete unaudited list of holdings for the Central Funds, 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 Funds 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 for the periods ended August 31, 2006 and April 30, 2006, amounted to $5 and $14, respectively, and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities for the period ended August 31, 2006 and April 30, 2006, amounted to $163 and $128, respectively.

Annual Report

7. 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 ended August 31, 2006, these credits reduced the management fee by $7. During the period ended April 30, 2006, these credits reduced the Fund's custody expenses by $14. During the period, credits reduced each class' transfer agent expense as noted in the table below.

Four months ended
August 31, 2006

April 30, 2006

Transfer Agent
expense reduction

Transfer Agent
expense reduction

Class A

$ 1

$ 1

Class T

2

3

Investment Grade Bond

221

447

$ 224

$451

8. 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.

Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.

At the end of the period, FMR or its affiliates were the owners of record of 41% of the total outstanding shares of the fund.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

From net investment income

Class A

$ 557

$ 1,232

$ 869

Class T

768

2,022

1,202

Class B

105

289

205

Class C

104

234

169

Investment Grade Bond

125,340

300,091

208,879

Institutional Class

388

877

353

Total

$ 127,262

$ 304,745

$ 211,677

From net realized gain

Class A

$ -

$ 293

$ 318

Class T

-

479

496

Class B

-

86

112

Class C

-

71

96

Investment Grade Bond

-

65,359

79,525

Institutional Class

-

172

104

Total

$ -

$ 66,460

$ 80,651

10. Share Transactions.

Transactions for each class of shares were as follows:

Shares

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class A

Shares sold

1,787

5,817

3,493

Reinvestment of distributions

74

170

65

Shares redeemed

(775)

(4,972)

(2,416)

Net increase (decrease)

1,086

1,015

1,142

Class T

Shares sold

1,019

3,807

3,871

Reinvestment of distributions

104

334

225

Shares redeemed

(1,054)

(2,644)

(1,686)

Net increase (decrease)

69

1,497

2,410

Annual Report

10. Share Transactions - continued

Shares

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class B

Shares sold

115

488

306

Reinvestment of distributions

11

41

35

Shares redeemed

(151)

(388)

(335)

Net increase (decrease)

(25)

141

6

Class C

Shares sold

183

850

397

Reinvestment of distributions

12

35

31

Shares redeemed

(126)

(474)

(443)

Net increase (decrease)

69

411

(15)

Investment Grade Bond

Shares sold

69,585

296,083

201,524

Issued in exchange for shares of Spartan Investment Grade Bond Fund

250,883

-

-

Reinvestment of distributions

16,933

48,523

37,730

Shares redeemed

(66,028)

(132,782)

(111,431)

Net increase (decrease)

271,373

211,824

127,823

Institutional Class

Shares sold

907

1,805

1,969

Reinvestment of distributions

46

125

58

Shares redeemed

(517)

(515)

(266)

Net increase (decrease)

436

1,415

1,761

Dollars

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class A

Shares sold

$ 12,921

$ 42,930

$ 26,275

Reinvestment of distributions

536

1,256

490

Shares redeemed

(5,603)

(36,700)

(18,200)

Net increase (decrease)

$ 7,854

$ 7,486

$ 8,565

Class T

Shares sold

$ 7,370

$ 28,191

$ 29,055

Reinvestment of distributions

757

2,473

1,687

Shares redeemed

(7,604)

(19,510)

(12,629)

Net increase (decrease)

$ 523

$ 11,154

$ 18,113

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

10. Share Transactions - continued

Dollars

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class B

Shares sold

$ 830

$ 3,626

$ 2,293

Reinvestment of distributions

82

301

262

Shares redeemed

(1,094)

(2,863)

(2,511)

Net increase (decrease)

$ (182)

$ 1,064

$ 44

Class C

Shares sold

$ 1,328

$ 6,307

$ 2,982

Reinvestment of distributions

89

261

234

Shares redeemed

(914)

(3,511)

(3,318)

Net increase (decrease)

$ 503

$ 3,057

$ (102)

Investment Grade Bond

Shares sold

$ 506,029

$ 2,186,923

$ 1,513,409

Issued in exchange for shares of Spartan Investment Grade Bond Fund

1,823,921

-

-

Reinvestment of distributions

122,970

359,152

282,446

Shares redeemed

(478,951)

(979,977)

(835,079)

Net increase (decrease)

$ 1,973,969

$ 1,566,098

$ 960,776

Institutional Class

Shares sold

$ 6,594

$ 13,369

$ 14,872

Reinvestment of distributions

334

926

438

Shares redeemed

(3,742)

(3,804)

(1,998)

Net increase (decrease)

$ 3,186

$ 10,491

$ 13,312

11. Reorganization.

On July 28, 2006, the Fund acquired all of the assets and assumed all of the liabilities of Spartan Investment Grade Bond Fund pursuant to an agreement and plan of reorganization approved by the Board of Trustees on April 20, 2006. The acquisition was accomplished by an exchange of 250,883 shares of Investment Grade Bond class for the 178,345 shares then outstanding (valued at $10.23) of Spartan Investment Grade Bond Fund. Based on the opinion of Fund counsel, the reorganization qualified as a tax-free transaction for federal income tax purposes with no gain or loss recognized by the funds or their shareholders. Spartan Investment Grade Bond Fund's net assets, including $(19,309) of unrealized depreciation, were combined with the Fund's net assets of $8,190,101 for total net assets after the acquisition of $10,014,022.

Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of Fidelity Investment Grade 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 Investment Grade Bond Fund (a fund of Fidelity Fixed-Income Trust) at August 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Investment Grade Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 24, 2006

Annual Report

Trustees and Officers

The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 346 funds advised by FMR or an affiliate. Mr. McCoy oversees 348 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 fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (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 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 Vice Chairman (2006-present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd.

* 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, and a member of the Consumer Electronics Hall of Fame.

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 Sony Corporation (2006-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 Fixed-Income Trust. 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), 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).

Peter S. Lynch (62)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity Fixed-Income Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund.

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).

Jeffrey Moore (40)

Year of Election or Appointment: 2004

Vice President of Investment Grade Bond. Mr. Moore also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Moore worked as a research analyst and portfolio manager.

Eric D. Roiter (57)

Year of Election or Appointment: 1998

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 (47)

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 (37)

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 (60)

Year of Election or Appointment: 1986

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 (48)

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

A total of 8.62% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

The fund designates $127,261,654 of distributions paid during the fiscal year ended August 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

Board Approval of Investment Advisory Contracts and Management Fees

Fidelity Investment Grade 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. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, as applicable, the cumulative total returns of Class C and Fidelity Investment Grade 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 C and Fidelity Investment Grade 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 Investment Grade Bond Fund



The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Fidelity Investment Grade Bond (retail class) was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board also stated that the relative investment performance of Fidelity Investment Grade Bond (retail class) compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.

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 periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.

Fidelity Investment Grade 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 Investment Grade Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Investment Grade 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 had been 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

Annual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)

Fidelity Investments Money
Management, Inc.

Fidelity Investments Japan Limited

Fidelity International Investment Advisors

Fidelity International Investment Advisors
(U.K.) Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Service Agents

Fidelity Investments Institutional Operations Company, Inc.

Boston, MA

Fidelity Service Company, Inc.

Boston, MA

Custodian

JPMorgan Chase Bank

New York, NY

(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

AIGB-UANN-1006
1.784723.104

(Fidelity Investment logo)(registered trademark)

Fidelity Advisor

Investment Grade Bond

Fund - Institutional Class

Annual Report

August 31, 2006

(2_fidelity_logos) (Registered_Trademark)

Institutional Class is a
class of Fidelity® Investment
Grade Bond Fund

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders.

Performance

<Click Here>

How the fund has done over time.

Management's Discussion

<Click Here>

The manager's review of fund performance, strategy and outlook.

Shareholder Expense Example

<Click Here>

An example of shareholder expenses.

Investment Changes

<Click Here>

A summary of major shifts in the fund's investments over the past four months.

Investments

<Click Here>

A complete list of the fund's investments with their market values.

Financial Statements

<Click Here>

Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.

Notes

<Click Here>

Notes to the financial statements.

Report of Independent Registered Public Accounting Firm

<Click Here>

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Board Approval of Investment Advisory Contracts and Management Fees

<Click Here>

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 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.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:

Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.

One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.

You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).

A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.

We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Fidelity Advisor Investment Grade Bond Fund - Institutional Class

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.

Note to Shareholders: The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Performance data reflects returns for periods ended August 31, 2006.

Average Annual Total Returns

Periods ended August 31, 2006

Past 1
year

Past 5
years

Past 10
years

Institutional Class A

2.28%

5.06%

6.33%

A The initial offering of Institutional Class shares took place on August 27, 2002. Returns prior to August 27, 2002 are those of Investment Grade Bond, the original class of the fund.

$10,000 Over Past 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity Advisor Investment Grade Bond Fund - Institutional Class on August 31, 1996. The chart shows how the value of the investment would have changed, and also shows how the Lehman Brothers® Aggregate Bond Index performed over the same period.



Annual Report

Management's Discussion of Fund Performance

Comments from Jeffrey Moore, Portfolio Manager of Fidelity Advisor Investment Grade Bond Fund

A weak start, a strong finish and a modestly positive overall return highlighted investment-grade bond performance for the year ending August 31, 2006. Bonds sank in the first two months of the period after Gulf Coast hurricanes sent energy prices soaring, prompting fears of a corresponding leap in inflation. However, core inflation readings - which strip out volatile food and energy prices - remained relatively benign. That, combined with an easing of oil prices, helped bonds rally between November and February. But the asset class fell again from March through May, partly as a result of continued interest rate hikes by the Federal Reserve Board. In all, the Fed raised interest rates seven times during the past year. Bonds rose again in July and August, though, after Fed Chairman Ben Bernanke hinted at a pause in its rate hike campaign, which was soon realized when the central bank left rates unchanged at its August meeting. The late rally helped the debt market gain 1.71% for the year overall according to the Lehman Brothers® Aggregate Bond Index.

For the 12-month period ending August 31, 2006 - the fund's new fiscal year end - the fund's Institutional Class shares returned 2.28%, compared with 1.71% for the Lehman Brothers index. For the four months ending August 31, 2006 - the period since I last reported to you - the fund's Institutional Class shares gained 2.99%, while the Lehman Brothers index rose 3.01%. As the 12 months began, I maintained a "barbell" strategy - meaning concentrated in shorter- and longer-maturity investments. This yield-curve positioning helped greatly during the fourth quarter of 2005. Early in 2006, I removed the barbell and switched to a "bulleted" strategy - reducing exposure to short-term instruments and longer-dated bonds while buying two- and five-year maturities, which had been underperforming. The bulleted structure likely had a modest negative impact during the period's second half. Sector and security selection within the corporate bond segment were pluses, as was an emphasis on securitized products - including collateralized mortgage obligations and asset-backed securities. The fund also was helped by its allocation to the Fidelity® Ultra-Short Central Fund, a diversified pool of short-term assets designed to outperform cash-like investments with similar characteristics. Curbing gains somewhat was a lack of exposure to strong performing government agency securities.

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

The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Expenses are based on the past six months of activity for the period ended August 31, 2006.

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2006 to August 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 funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central funds, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central funds. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Annual Report

Beginning
Account Value
March 1, 2006

Ending
Account Value
August 31, 2006

Expenses Paid
During Period*
March 1, 2006
to August 31, 2006

Class A

Actual

$ 1,000.00

$ 1,020.20

$ 3.56

Hypothetical A

$ 1,000.00

$ 1,021.68

$ 3.57

Class T

Actual

$ 1,000.00

$ 1,018.30

$ 4.12

Hypothetical A

$ 1,000.00

$ 1,021.12

$ 4.13

Class B

Actual

$ 1,000.00

$ 1,016.20

$ 7.57

Hypothetical A

$ 1,000.00

$ 1,017.69

$ 7.58

Class C

Actual

$ 1,000.00

$ 1,015.70

$ 8.03

Hypothetical A

$ 1,000.00

$ 1,017.24

$ 8.03

Investment Grade Bond

Actual

$ 1,000.00

$ 1,021.50

$ 2.29

Hypothetical A

$ 1,000.00

$ 1,022.94

$ 2.29

Institutional Class

Actual

$ 1,000.00

$ 1,021.30

$ 2.50

Hypothetical A

$ 1,000.00

$ 1,022.74

$ 2.50

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central funds in which the fund invests are not included in the fund's annualized expense ratio.

Annualized
Expense Ratio

Class A

.70%

Class T

.81%

Class B

1.49%

Class C

1.58%

Investment Grade Bond

.45%

Institutional Class

.49%

Annual Report

Investment Changes

The current period information is as of the Fund's new fiscal year end. The comparative information is as of the Fund's most recently published annual report.

Quality Diversification (% of fund's net assets)

As of August 31, 2006

As of April 30, 2006

U.S. Government and
U.S. Government
Agency Obligations 52.9%

U.S. Government and
U.S. Government
Agency Obligations 55.4%

AAA 14.6%

AAA 15.2%

AA 4.0%

AA 4.2%

A 8.0%

A 7.8%

BBB 20.3%

BBB 15.9%

BB and Below 4.2%

BB and Below 3.4%

Not Rated 1.8%

Not Rated 1.9%

Short-Term
Investments and
Net Other Assets (dagger) (5.8)%

Short-Term
Investments and
Net Other Assets (dagger) (3.8)%



We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings.

Average Years to Maturity as of August 31, 2006

4 months ago

Years

6.1

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 August 31, 2006

4 months ago

Years

4.5

4.4

Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example.

Asset Allocation (% of fund's net assets)

As of August 31, 2006 *

As of April 30, 2006 **

Corporate Bonds 27.5%

Corporate Bonds 21.9%

U.S. Government
and U.S. Government Agency Obligations 52.9%

U.S. Government and
U.S. Government
Agency Obligations 55.4%

Asset-Backed
Securities 10.9%

Asset-Backed
Securities 11.0%

CMOs and Other Mortgage Related Securities 14.0%

CMOs and Other Mortgage Related Securities 13.8%

Other Investments 0.5%

Other Investments 1.7%

Short-Term
Investments and
Net Other Assets (dagger) (5.8)%

Short-Term
Investments and
Net Other Assets (dagger) (3.8)%

* Foreign investments

10.1%

** Foreign investments

9.2%

* Futures and Swaps

18.4%

** Futures and Swaps

17.5%



(dagger) Short-term Investments and Net Other Assets are not included in the pie chart.

The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.

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 August 31, 2006

Showing Percentage of Net Assets

Nonconvertible Bonds - 25.2%

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER DISCRETIONARY - 2.9%

Auto Components - 0.2%

DaimlerChrysler NA Holding Corp. 5.875% 3/15/11

$ 20,050

$ 20,132

Automobiles - 0.5%

Ford Motor Co.:

6.375% 2/1/29

11,350

8,427

6.625% 10/1/28

6,365

4,774

7.45% 7/16/31

40,245

31,592

General Motors Corp. 8.375% 7/15/33 (b)

13,140

10,972

55,765

Household Durables - 0.2%

Fortune Brands, Inc. 5.125% 1/15/11

17,520

17,174

Media - 2.0%

Comcast Corp.:

4.95% 6/15/16

23,509

21,683

5.5% 3/15/11

5,890

5,880

5.85% 1/15/10

6,275

6,342

6.45% 3/15/37

17,500

17,161

Cox Communications, Inc.:

4.625% 1/15/10

9,500

9,203

7.125% 10/1/12

17,915

18,953

Liberty Media Corp.:

5.7% 5/15/13

8,500

7,926

8.25% 2/1/30

19,105

19,008

News America Holdings, Inc. 7.75% 12/1/45

8,175

8,976

News America, Inc. 6.2% 12/15/34

11,825

11,050

TCI Communications, Inc. 9.8% 2/1/12

19,400

22,850

Time Warner Entertainment Co. LP:

8.875% 10/1/12

750

851

10.15% 5/1/12

500

591

Time Warner, Inc. 6.625% 5/15/29

22,900

22,442

Univision Communications, Inc. 3.875% 10/15/08

9,840

9,387

Viacom, Inc. 5.75% 4/30/11 (c)

18,040

17,892

200,195

TOTAL CONSUMER DISCRETIONARY

293,266

CONSUMER STAPLES - 0.3%

Beverages - 0.1%

FBG Finance Ltd. 5.125% 6/15/15 (c)

11,020

10,425

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER STAPLES - continued

Food Products - 0.1%

H.J. Heinz Co. 6.428% 12/1/08 (c)(i)

$ 12,360

$ 12,594

Tobacco - 0.1%

Altria Group, Inc. 7% 11/4/13

5,910

6,429

TOTAL CONSUMER STAPLES

29,448

ENERGY - 1.8%

Energy Equipment & Services - 0.2%

Cooper Cameron Corp. 2.65% 4/15/07

9,550

9,382

Kinder Morgan, Inc. 6.5% 9/1/12

7,185

7,046

16,428

Oil, Gas & Consumable Fuels - 1.6%

Canadian Oil Sands Ltd. 4.8% 8/10/09 (c)

12,390

12,123

Duke Capital LLC 6.75% 2/15/32

4,835

4,975

Kerr-McGee Corp. 6.95% 7/1/24

19,000

19,831

Kinder Morgan Finance Co. ULC 5.35% 1/5/11

26,853

25,737

Louis Dreyfus Natural Gas Corp. 6.875% 12/1/07

7,700

7,821

National Gas Co. of Trinidad & Tobago Ltd. 6.05% 1/15/36 (c)

5,985

5,687

Pemex Project Funding Master Trust:

5.75% 12/15/15 (c)

15,330

14,916

5.75% 12/15/15

22,600

21,990

6.625% 6/15/35 (c)

12,586

12,359

6.625% 6/15/35

65

64

7.375% 12/15/14

33,610

36,416

Transcontinental Gas Pipe Line Corp. 6.4% 4/15/16 (c)

9,120

8,846

170,765

TOTAL ENERGY

187,193

FINANCIALS - 10.7%

Capital Markets - 1.4%

Bank of New York Co., Inc.:

3.4% 3/15/13 (i)

7,500

7,288

4.25% 9/4/12 (i)

8,565

8,484

Goldman Sachs Group, Inc.:

5.25% 10/15/13

19,220

18,837

6.45% 5/1/36

21,260

21,521

JP Morgan Chase Capital XVIII 6.95% 8/17/36

16,165

17,012

Lazard Group LLC 7.125% 5/15/15

16,430

17,179

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Capital Markets - continued

Merrill Lynch & Co., Inc. 4.25% 2/8/10

$ 21,840

$ 21,137

Morgan Stanley 6.6% 4/1/12

17,435

18,390

Nuveen Investments, Inc. 5% 9/15/10

11,055

10,803

140,651

Commercial Banks - 1.7%

Bank One Corp. 5.25% 1/30/13

13,775

13,621

Corporacion Andina de Fomento 5.2% 5/21/13

3,910

3,808

Export-Import Bank of Korea:

4.125% 2/10/09 (c)

4,240

4,123

5.125% 2/14/11

23,860

23,517

5.25% 2/10/14 (c)

7,225

7,085

HSBC Holdings PLC 6.5% 5/2/36

11,470

12,078

KeyCorp Capital Trust VII 5.7% 6/15/35

18,660

17,046

Korea Development Bank:

3.875% 3/2/09

18,270

17,667

4.75% 7/20/09

8,155

8,035

5.75% 9/10/13

14,578

14,744

PNC Funding Corp. 4.2% 3/10/08

2,280

2,239

Santander Issuances SA Unipersonal 5.805% 6/20/16 (c)(i)

9,620

9,716

Wachovia Bank NA 4.875% 2/1/15

20,250

19,328

Wachovia Corp. 4.875% 2/15/14

1,791

1,717

Wells Fargo Bank NA, San Francisco 7.55% 6/21/10

5,100

5,503

Wells Fargo Bank National Association 5.95% 8/26/36

11,564

11,645

171,872

Consumer Finance - 0.9%

General Electric Capital Corp.:

5.5% 4/28/11

36,350

36,721

6.75% 3/15/32

17,695

19,971

Household Finance Corp. 4.125% 11/16/09

20,856

20,126

HSBC Finance Corp. 5.7% 6/1/11

14,410

14,619

MBNA America Bank NA 4.625% 8/3/09

5,000

4,921

96,358

Diversified Financial Services - 1.3%

BAC Capital Trust XI 6.625% 5/23/36

24,475

25,541

Citigroup, Inc. 6% 2/21/12

5,960

6,151

ILFC E-Capital Trust II 6.25% 12/21/65 (c)(i)

4,325

4,264

JPMorgan Chase & Co.:

4.875% 3/15/14

10,460

10,033

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Diversified Financial Services - continued

JPMorgan Chase & Co.: - continued

4.891% 9/1/15 (i)

$ 5,380

$ 5,264

5.6% 6/1/11

21,015

21,241

5.75% 1/2/13

2,935

2,968

JPMorgan Chase Capital XVII 5.85% 8/1/35

3,865

3,650

Mizuho Financial Group Cayman Ltd. 5.79% 4/15/14 (c)

15,505

15,571

Prime Property Funding, Inc. 5.125% 6/1/15 (c)

13,035

12,309

ZFS Finance USA Trust I 6.15% 12/15/65 (c)(i)

17,990

17,728

ZFS Finance USA Trust II 6.45% 12/15/65 (c)(i)

7,500

7,261

131,981

Insurance - 0.8%

Assurant, Inc. 5.625% 2/15/14

6,095

6,021

Axis Capital Holdings Ltd. 5.75% 12/1/14

21,815

21,172

Liberty Mutual Group, Inc.:

6.7% 8/15/16 (c)

7,305

7,305

7.5% 8/15/36 (c)

3,975

3,898

Lincoln National Corp. 7% 5/17/66 (i)

8,870

9,190

QBE Insurance Group Ltd. 5.647% 7/1/23 (c)(i)

18,775

18,171

Symetra Financial Corp. 6.125% 4/1/16 (c)

10,405

10,401

Travelers Property Casualty Corp. 6.375% 3/15/33

6,275

6,303

82,461

Real Estate Investment Trusts - 2.4%

AMB Property LP 5.9% 8/15/13

9,635

9,724

Archstone-Smith Operating Trust:

5.25% 12/1/10

5,185

5,141

5.25% 5/1/15

12,430

12,054

Boston Properties, Inc. 6.25% 1/15/13

7,487

7,722

Brandywine Operating Partnership LP:

5.625% 12/15/10

10,855

10,855

5.75% 4/1/12

9,625

9,634

Camden Property Trust:

5.875% 6/1/07

6,320

6,336

5.875% 11/30/12

6,435

6,491

Colonial Properties Trust:

4.75% 2/1/10

12,060

11,708

5.5% 10/1/15

12,730

12,307

6.875% 8/15/12

5,000

5,262

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Real Estate Investment Trusts - continued

Developers Diversified Realty Corp.:

4.625% 8/1/10

$ 975

$ 942

5% 5/3/10

6,840

6,729

5.25% 4/15/11

5,400

5,327

5.375% 10/15/12

5,485

5,392

Duke Realty LP 5.95% 2/15/17

4,085

4,112

Equity One, Inc. 6.25% 1/15/17

4,535

4,612

Equity Residential 5.125% 3/15/16

10,765

10,294

Federal Realty Investment Trust:

6% 7/15/12

3,355

3,420

6.2% 1/15/17

2,215

2,277

Healthcare Realty Trust, Inc. 5.125% 4/1/14

4,130

3,906

HRPT Properties Trust 5.75% 11/1/15

2,925

2,879

iStar Financial, Inc.:

5.65% 9/15/11

15,495

15,442

5.8% 3/15/11

10,095

10,120

Liberty Property LP 6.375% 8/15/12

4,617

4,800

Mack-Cali Realty LP 5.05% 4/15/10

1,270

1,244

Simon Property Group LP:

4.6% 6/15/10

8,400

8,169

5.1% 6/15/15

16,415

15,692

5.45% 3/15/13

8,720

8,627

5.75% 12/1/15

10,655

10,660

Tanger Properties LP 6.15% 11/15/15

17,300

17,443

United Dominion Realty Trust 5.25% 1/15/15

1,950

1,869

Washington (REIT) 5.95% 6/15/11

10,660

10,814

252,004

Real Estate Management & Development - 1.1%

Colonial Realty LP 6.05% 9/1/16

11,060

11,072

EOP Operating LP:

4.65% 10/1/10

19,625

18,965

4.75% 3/15/14

14,345

13,416

5.875% 1/15/13

7,592

7,618

6.75% 2/15/12

9,295

9,761

7.5% 4/19/29

13,025

14,407

7.75% 11/15/07

12,245

12,551

Post Apartment Homes LP 6.3% 6/1/13

11,550

11,786

Regency Centers LP 6.75% 1/15/12

12,435

13,118

112,694

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Thrifts & Mortgage Finance - 1.1%

Independence Community Bank Corp.:

3.75% 4/1/14 (i)

$ 7,640

$ 7,319

4.9% 9/23/10

33,700

32,852

Residential Capital Corp.:

6.375% 6/30/10

19,180

19,346

6.5% 4/17/13

8,915

8,994

6.875% 6/30/15

10,955

11,345

Washington Mutual, Inc.:

4.625% 4/1/14

18,130

16,801

5.7956% 9/17/12 (i)

19,000

19,027

115,684

TOTAL FINANCIALS

1,103,705

INDUSTRIALS - 2.2%

Aerospace & Defense - 0.1%

Bombardier, Inc.:

6.3% 5/1/14 (c)

6,000

5,340

7.45% 5/1/34 (c)

12,035

10,410

15,750

Airlines - 1.5%

American Airlines, Inc. pass thru trust certificates:

6.855% 10/15/10

1,222

1,238

6.978% 10/1/12

3,162

3,245

7.024% 4/15/11

4,465

4,582

7.324% 4/15/11

13,531

13,260

7.858% 4/1/13

26,059

27,834

Continental Airlines, Inc. pass thru trust certificates:

6.32% 11/1/08

7,178

7,217

6.545% 8/2/20

4,398

4,426

6.648% 3/15/19

7,281

7,248

6.795% 2/2/20

2,369

2,244

7.056% 3/15/11

705

727

Delta Air Lines, Inc. pass thru trust certificates:

7.111% 3/18/13

16,260

16,260

7.57% 11/18/10

8,108

8,138

U.S. Airways pass thru trust certificates 6.85% 7/30/19

7,408

7,464

United Airlines pass thru certificates:

6.071% 9/1/14

5,825

5,825

6.201% 3/1/10

3,383

3,387

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

INDUSTRIALS - continued

Airlines - continued

United Airlines pass thru certificates: - continued

6.602% 9/1/13

$ 10,243

$ 10,241

7.032% 4/1/12

6,912

7,124

7.186% 10/1/12

17,099

17,441

7.811% 10/1/09 (m)

4,909

5,194

153,095

Commercial Services & Supplies - 0.0%

R.R. Donnelley & Sons Co. 5.5% 5/15/15

5,085

4,539

Industrial Conglomerates - 0.1%

Hutchison Whampoa International 03/33 Ltd. 7.45% 11/24/33 (c)

9,550

10,689

Road & Rail - 0.1%

CSX Corp. 6.75% 3/15/11

9,000

9,471

Transportation Infrastructure - 0.4%

BNSF Funding Trust I 6.613% 12/15/55 (i)

38,188

37,909

TOTAL INDUSTRIALS

231,453

INFORMATION TECHNOLOGY - 0.4%

Electronic Equipment & Instruments - 0.2%

Avnet, Inc. 6% 9/1/15

14,850

14,224

Semiconductors & Semiconductor Equipment - 0.2%

Chartered Semiconductor Manufacturing Ltd.:

5.75% 8/3/10

9,825

9,742

6.375% 8/3/15

13,495

13,291

23,033

Software - 0.0%

Oracle Corp./Ozark Holding, Inc. 5% 1/15/11

2,500

2,461

TOTAL INFORMATION TECHNOLOGY

39,718

MATERIALS - 0.3%

Chemicals - 0.1%

Agrium, Inc. 7.125% 5/23/36

11,735

12,267

Metals & Mining - 0.1%

Corporacion Nacional del Cobre (Codelco) 6.375% 11/30/12 (c)

3,460

3,591

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

MATERIALS - continued

Paper & Forest Products - 0.1%

International Paper Co. 4.25% 1/15/09

$ 11,580

$ 11,299

TOTAL MATERIALS

27,157

TELECOMMUNICATION SERVICES - 3.0%

Diversified Telecommunication Services - 2.6%

Ameritech Capital Funding Corp. 6.25% 5/18/09

6,440

6,529

AT&T, Inc. 6.8% 5/15/36

5,985

6,189

BellSouth Capital Funding Corp. 7.875% 2/15/30

9,250

10,350

British Telecommunications PLC 8.375% 12/15/10

1,779

1,972

Deutsche Telekom International Finance BV 5.25% 7/22/13

11,230

10,815

Embarq Corp.:

7.082% 6/1/16

17,205

17,555

7.995% 6/1/36

12,817

13,396

KT Corp. 5.875% 6/24/14 (c)

7,455

7,526

Sprint Capital Corp.:

6.875% 11/15/28

14,975

15,121

7.625% 1/30/11

11,500

12,339

Telecom Italia Capital SA:

4% 1/15/10

14,810

14,072

4.875% 10/1/10

18,035

17,499

4.95% 9/30/14

11,250

10,372

6.375% 11/15/33

19,850

18,743

Telefonica Emisiones SAU 7.045% 6/20/36

45,800

47,894

TELUS Corp. yankee 7.5% 6/1/07

18,550

18,808

Verizon Global Funding Corp.:

5.85% 9/15/35

7,208

6,636

7.75% 12/1/30

15,467

17,382

Verizon New York, Inc. 6.875% 4/1/12

10,520

10,923

264,121

Wireless Telecommunication Services - 0.4%

America Movil SA de CV 6.375% 3/1/35

13,585

12,924

Nextel Communications, Inc. 5.95% 3/15/14

10,170

9,941

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Vodafone Group PLC:

5% 12/16/13

$ 7,380

$ 7,028

5.5% 6/15/11

15,385

15,298

45,191

TOTAL TELECOMMUNICATION SERVICES

309,312

UTILITIES - 3.6%

Electric Utilities - 1.5%

Cleveland Electric Illuminating Co. 5.65% 12/15/13

11,490

11,421

Entergy Corp. 7.75% 12/15/09 (c)

12,500

13,271

Exelon Corp. 4.9% 6/15/15

27,100

25,366

FirstEnergy Corp. 6.45% 11/15/11

5,815

6,031

Nevada Power Co. 6.5% 5/15/18 (c)

24,160

24,663

Oncor Electric Delivery Co. 6.375% 5/1/12

10,150

10,430

Pacific Gas & Electric Co.:

4.2% 3/1/11

2,855

2,723

4.8% 3/1/14

2,670

2,553

Pepco Holdings, Inc. 4% 5/15/10

9,275

8,785

Progress Energy, Inc.:

7% 10/30/31

6,000

6,536

7.1% 3/1/11

12,875

13,735

Public Service Co. of Colorado:

5.5% 4/1/14

7,500

7,508

7.875% 10/1/12

5,630

6,332

Southern California Edison Co.:

4.65% 4/1/15

990

930

5% 1/15/14

585

567

Southwestern Public Service Co. 5.125% 11/1/06

5,000

4,997

TXU Energy Co. LLC 7% 3/15/13

10,903

11,376

157,224

Gas Utilities - 0.1%

Consolidated Natural Gas Co. 6.85% 4/15/11

2,735

2,866

Texas Eastern Transmission Corp. 7.3% 12/1/10

7,915

8,431

11,297

Independent Power Producers & Energy Traders - 0.8%

Constellation Energy Group, Inc. 7% 4/1/12

8,730

9,255

Duke Capital LLC:

4.331% 11/16/06

3,435

3,425

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

UTILITIES - continued

Independent Power Producers & Energy Traders - continued

Duke Capital LLC: - continued

5.668% 8/15/14

$ 13,400

$ 13,096

Exelon Generation Co. LLC 5.35% 1/15/14

26,963

26,320

PPL Energy Supply LLC 6.2% 5/15/16

11,895

12,171

PSEG Power LLC 7.75% 4/15/11

11,000

11,900

TXU Corp. 5.55% 11/15/14

7,555

6,999

83,166

Multi-Utilities - 1.2%

Dominion Resources, Inc.:

4.75% 12/15/10

13,875

13,455

5.95% 6/15/35

15,955

15,118

7.5% 6/30/66 (i)

12,110

12,506

DTE Energy Co. 7.05% 6/1/11

6,255

6,589

Duke Energy Corp. 5.625% 11/30/12

12,290

12,406

MidAmerican Energy Holdings, Inc. 6.125% 4/1/36 (c)

23,640

23,343

National Grid PLC 6.3% 8/1/16

26,485

27,084

TECO Energy, Inc. 7% 5/1/12

11,415

11,743

122,244

TOTAL UTILITIES

373,931

TOTAL NONCONVERTIBLE BONDS

(Cost $2,602,173)

2,595,183

U.S. Government and Government Agency Obligations - 16.4%

U.S. Government Agency Obligations - 2.5%

Fannie Mae:

4.375% 7/17/13

24,005

22,954

6.25% 2/1/11

115,475

120,226

Freddie Mac:

5.25% 11/5/12

8,420

8,291

5.875% 3/21/11

90,065

92,443

Tennessee Valley Authority 5.375% 4/1/56

15,097

15,141

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

259,055

U.S. Treasury Inflation Protected Obligations - 5.3%

U.S. Treasury Inflation-Indexed Notes 2% 1/15/14 (f)

549,831

539,957

U.S. Government and Government Agency Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

U.S. Treasury Obligations - 8.6%

U.S. Treasury Bond - principal STRIPS:

2/15/15

$ 289,357

$ 194,395

5/15/30

108,558

34,190

U.S. Treasury Bonds 8% 11/15/21

61,152

80,964

U.S. Treasury Notes:

4.25% 8/15/13 (b)

18,280

17,774

4.75% 5/15/14 (d)

199,025

199,323

U.S. Treasury Notes - principal STRIPS:

2/15/10

100,000

85,140

8/15/10

52,255

43,584

2/15/12

241,630

187,935

8/15/12

57,120

43,440

TOTAL U.S. TREASURY OBLIGATIONS

886,745

TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $1,683,791)

1,685,757

U.S. Government Agency - Mortgage Securities - 29.5%

Fannie Mae - 25.8%

3.744% 1/1/35 (i)

516

508

3.748% 12/1/34 (i)

955

939

3.757% 10/1/33 (i)

1,254

1,228

3.788% 6/1/34 (i)

5,593

5,445

3.796% 12/1/34 (i)

78

77

3.81% 6/1/33 (i)

269

265

3.834% 1/1/35 (i)

3,399

3,341

3.839% 11/1/34 (i)

6,914

6,860

3.846% 1/1/35 (i)

310

304

3.847% 5/1/34 (i)

31,173

30,409

3.88% 6/1/33 (i)

4,823

4,746

3.898% 10/1/34 (i)

382

379

3.905% 12/1/34 (i)

314

310

3.938% 11/1/34 (i)

2,251

2,231

3.941% 5/1/34 (i)

364

366

3.952% 1/1/35 (i)

401

397

3.954% 12/1/34 (i)

315

312

3.955% 12/1/34 (i)

7,601

7,522

3.957% 5/1/33 (i)

420

414

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

3.992% 1/1/35 (i)

$ 255

$ 253

3.996% 12/1/34 (i)

211

209

3.996% 12/1/34 (i)

380

375

3.998% 2/1/35 (i)

1,078

1,065

4% 7/1/18 to 9/1/18

16,434

15,511

4.022% 1/1/35 (i)

2,067

2,046

4.029% 1/1/35 (i)

151

149

4.034% 10/1/18 (i)

1,048

1,031

4.037% 1/1/35 (i)

241

238

4.041% 2/1/35 (i)

975

963

4.052% 12/1/34 (i)

574

571

4.058% 1/1/35 (i)

546

539

4.079% 2/1/35 (i)

1,892

1,870

4.082% 4/1/33 (i)

417

413

4.083% 2/1/35 (i)

646

639

4.086% 2/1/35 (i)

706

698

4.094% 11/1/34 (i)

437

433

4.102% 2/1/35 (i)

3,524

3,493

4.108% 1/1/35 (i)

2,136

2,111

4.114% 1/1/35 (i)

572

567

4.116% 2/1/35 (i)

2,406

2,379

4.126% 1/1/35 (i)

3,539

3,501

4.143% 2/1/35 (i)

1,867

1,847

4.156% 1/1/35 (i)

1,043

1,038

4.171% 1/1/35 (i)

2,585

2,523

4.181% 11/1/34 (i)

131

130

4.187% 1/1/35 (i)

1,801

1,787

4.202% 1/1/35 (i)

1,134

1,126

4.214% 1/1/34 (i)

5,652

5,567

4.249% 1/1/34 (i)

3,596

3,543

4.25% 2/1/35 (i)

1,293

1,264

4.272% 3/1/35 (i)

1,179

1,167

4.274% 2/1/35 (i)

681

677

4.275% 8/1/33 (i)

2,401

2,376

4.287% 12/1/34 (i)

189

187

4.306% 5/1/35 (i)

1,632

1,617

4.313% 3/1/33 (i)

659

644

4.337% 9/1/34 (i)

4,251

4,214

4.35% 1/1/35 (i)

1,353

1,325

4.351% 9/1/34 (i)

1,756

1,754

4.356% 4/1/35 (i)

756

749

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

4.362% 2/1/34 (i)

$ 2,807

$ 2,770

4.39% 11/1/34 (i)

11,040

11,044

4.393% 10/1/34 (i)

7,455

7,336

4.394% 5/1/35 (i)

3,699

3,672

4.396% 2/1/35 (i)

1,952

1,913

4.423% 10/1/34 (i)

5,679

5,668

4.426% 1/1/35 (i)

1,512

1,500

4.438% 3/1/35 (i)

1,775

1,741

4.456% 8/1/34 (i)

3,737

3,691

4.464% 5/1/35 (i)

1,269

1,258

4.489% 3/1/35 (i)

4,110

4,034

4.494% 1/1/35 (i)

1,674

1,659

4.497% 8/1/34 (i)

691

697

4.5% 12/1/17 to 4/1/35

322,091

308,654

4.5% 9/1/21 (d)

4,810

4,625

4.5% 9/1/21 (d)

16,044

15,427

4.516% 3/1/35 (i)

3,899

3,829

4.527% 2/1/35 (i)

15,939

15,772

4.532% 2/1/35 (i)

7,655

7,603

4.539% 7/1/35 (i)

4,604

4,565

4.54% 2/1/35 (i)

1,200

1,192

4.554% 2/1/35 (i)

815

809

4.577% 2/1/35 (i)

3,593

3,536

4.577% 7/1/35 (i)

5,634

5,588

4.584% 2/1/35 (i)

8,905

8,759

4.609% 11/1/34 (i)

3,856

3,807

4.661% 3/1/35 (i)

6,842

6,804

4.67% 11/1/34 (i)

4,351

4,303

4.716% 7/1/35 (i)

8,909

8,712

4.727% 7/1/34 (i)

3,568

3,536

4.77% 12/1/34 (i)

3,311

3,279

4.778% 12/1/34 (i)

1,318

1,305

4.796% 8/1/35 (i)

19,482

19,221

4.803% 12/1/32 (i)

1,679

1,680

4.809% 6/1/35 (i)

6,422

6,390

4.875% 10/1/34 (i)

11,562

11,481

5% 12/1/17 to 5/1/36

23,822

22,870

5% 9/1/36 (d)

34,000

32,581

5% 9/1/36 (d)

199,321

191,005

5% 9/1/36 (d)

60,000

57,497

5% 9/1/36 (d)

160,000

153,324

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

5% 9/1/36 (d)

$ 128,063

$ 122,720

5.083% 9/1/34 (i)

9,110

9,085

5.091% 5/1/35 (i)

8,171

8,163

5.1% 9/1/34 (i)

1,369

1,366

5.172% 5/1/35 (i)

10,469

10,429

5.196% 6/1/35 (i)

5,675

5,679

5.205% 3/1/35 (i)

739

737

5.215% 5/1/35 (i)

10,524

10,492

5.359% 12/1/34 (i)

2,207

2,211

5.5% 1/1/09 to 7/1/36

419,370

413,358

5.5% 9/1/36 (d)

35,000

34,359

5.5% 9/1/36 (d)

273,365

268,355

5.5% 9/1/36 (d)

163,230

160,239

5.5% 9/1/36 (d)

20,645

20,267

5.502% 2/1/36 (i)

18,364

18,417

5.628% 2/1/36 (i)

21,058

21,146

5.916% 1/1/36 (i)

4,966

5,011

6% 4/1/13 to 9/1/32

39,950

40,186

6% 9/1/21 (d)

313

317

6% 9/1/21 (d)

2,562

2,591

6% 9/1/36 (d)

9,075

9,086

6.5% 3/1/07 to 6/1/36

177,588

181,019

6.5% 9/1/36 (d)

14,391

14,613

6.5% 9/1/36 (d)

163,230

165,744

7% 5/1/13 to 10/1/32

31,672

32,660

7.5% 9/1/25 to 8/1/29

4,645

4,830

9.5% 4/1/17 to 2/1/25

389

432

12.5% 1/1/15 to 7/1/15

10

11

TOTAL FANNIE MAE

2,657,302

Freddie Mac - 1.5%

4.043% 12/1/34 (i)

1,327

1,307

4.097% 12/1/34 (i)

1,910

1,883

4.124% 1/1/35 (i)

1,686

1,663

4.256% 3/1/35 (i)

1,649

1,627

4.298% 5/1/35 (i)

2,945

2,910

4.301% 12/1/34 (i)

1,904

1,858

4.328% 1/1/35 (i)

3,973

3,927

4.351% 3/1/35 (i)

2,807

2,740

4.38% 2/1/35 (i)

3,527

3,445

4.438% 2/1/34 (i)

1,705

1,680

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Freddie Mac - continued

4.443% 3/1/35 (i)

$ 1,771

$ 1,732

4.454% 6/1/35 (i)

2,445

2,416

4.458% 3/1/35 (i)

2,007

1,963

4.471% 3/1/35 (i)

5,079

4,968

4.5% 5/1/19

4,195

4,038

4.546% 2/1/35 (i)

2,903

2,843

5.003% 4/1/35 (i)

6,473

6,445

5.127% 4/1/35 (i)

6,592

6,542

5.247% 2/1/36 (i)

67,865

67,505

5.5% 3/1/25

10,203

10,090

5.504% 8/1/33 (i)

217

219

6% 5/1/33

16,132

16,238

8.5% 1/1/25 to 9/1/27

625

675

TOTAL FREDDIE MAC

148,714

Government National Mortgage Association - 2.2%

5.5% 4/15/29 to 5/15/34

17,292

17,172

6% 10/15/08 to 10/15/30

8,068

8,191

6.5% 3/15/26 to 8/15/36 (e)

131,091

134,257

6.5% 10/1/36 (d)

33,354

34,100

7% 3/15/23 to 12/15/32

29,429

30,495

7.5% 1/15/07 to 8/15/28

1,890

1,982

8% 9/15/24 to 1/15/30

138

147

8.5% 8/15/29 to 1/15/31

86

93

9% 4/15/23

4

4

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

226,441

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $3,036,046)

3,032,457

Asset-Backed Securities - 4.4%

ACE Securities Corp. Series 2004-HE1:

Class M1, 5.8244% 2/25/34 (i)

3,275

3,286

Class M2, 6.4244% 2/25/34 (i)

3,700

3,739

Aircraft Lease Securitization Ltd. Series 2005-1 Class C1, 9.1563% 9/9/30 (c)(i)

2,712

2,759

AmeriCredit Automobile Receivables Trust Series 2005-1 Class E, 5.82% 6/6/12 (c)

2,099

2,097

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Ameriquest Mortgage Securities, Inc. Series 2004-R2:

Class M1, 5.7544% 4/25/34 (i)

$ 1,835

$ 1,835

Class M2, 5.8044% 4/25/34 (i)

1,425

1,425

Asset Backed Securities Corp. Home Equity Loan Trust:

Series 2003-HE7 Class A3, 5.69% 12/15/33 (i)

1,033

1,036

Series 2004-HE2 Class M1, 5.8744% 4/25/34 (i)

9,700

9,777

Bank One Issuance Trust:

Series 2002-C1 Class C1, 6.29% 12/15/09 (i)

11,295

11,345

Series 2004-B2 Class B2, 4.37% 4/15/12

13,800

13,486

Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.7781% 2/28/44 (i)

5,243

5,254

Capital Auto Receivables Asset Trust:

Series 2004-2 Class A2, 3.35% 2/15/08

12,032

11,958

Series 2006-1 Class D, 7.16% 1/15/13 (c)

4,195

4,190

Series 2006-SN1A Class D, 6.15% 4/20/11 (c)

2,730

2,735

Capital One Multi-Asset Execution Trust Series 2004-6 Class B, 4.15% 7/16/12

11,570

11,229

Carrington Mortgage Loan Trust Series 2006-NC3 Class M10, 7.37% 8/25/36 (c)(i)

1,449

1,300

Cendant Timeshare Receivables Funding LLC Series 2005-1A Class A1, 4.67% 5/20/17 (c)

5,540

5,456

Chase Credit Card Owner Trust Series 2004-1 Class B, 5.53% 5/15/09 (i)

6,220

6,220

Citibank Credit Card Issuance Trust Series 2005-B1 Class B1, 4.4% 9/15/10

6,384

6,274

CNH Equipment Trust Series 2006-A Class A4, 5.27% 9/15/11

34,085

34,214

Countrywide Home Loans, Inc.:

Series 2004-2 Class M1, 5.8244% 5/25/34 (i)

11,345

11,389

Series 2004-3 Class M1, 5.8244% 6/25/34 (i)

2,175

2,188

Series 2005-3 Class MV1, 5.7444% 8/25/35 (i)

12,300

12,337

CPS Auto Receivables Trust Series 2006-A Class A4, 5.33% 11/15/12 (c)

6,560

6,490

Crown Castle Towers LLC/Crown Atlantic Holdings Sub LLC/Crown Communication, Inc. Series 2005-1A:

Class B, 4.878% 6/15/35 (c)

7,921

7,792

Class C, 5.074% 6/15/35 (c)

7,190

7,085

DB Master Finance LLC Series 2006-1 Class M1, 8.285% 6/20/31 (c)

5,545

5,645

Fieldstone Mortgage Investment Corp. Series 2003-1 Class M2, 7.0744% 11/25/33 (i)

515

517

First Franklin Mortgage Loan Trust Series 2004-FF2:

Class M3, 5.8744% 3/25/34 (i)

600

601

Class M4, 6.2244% 3/25/34 (i)

450

452

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Ford Credit Auto Owner Trust:

Series 2005-A Class B, 3.88% 1/15/10

$ 5,151

$ 5,024

Series 2006-B Class D, 7.26% 2/15/13 (c)

5,810

5,821

Fremont Home Loan Trust Series 2005-A:

Class M1, 5.7544% 1/25/35 (i)

2,550

2,567

Class M2, 5.7844% 1/25/35 (i)

3,650

3,669

Class M3, 5.8144% 1/25/35 (i)

1,975

1,989

GCO Slims Trust Series 2006-1A, 5.72% 3/1/22 (c)

11,986

11,857

GS Auto Loan Trust Series 2006-1 Class D, 6.25% 1/15/14 (c)

7,046

7,039

GSAMP Trust:

Series 2004-FM2:

Class M1, 5.8244% 1/25/34 (i)

4,994

4,994

Class M2, 6.4244% 1/25/34 (i)

2,300

2,300

Class M3, 6.6244% 1/25/34 (i)

1,357

1,357

Series 2004-OPT Class A1, 5.6644% 11/25/34 (i)

5,119

5,131

Home Equity Asset Trust:

Series 2003-2 Class M1, 6.2044% 8/25/33 (i)

3,739

3,745

Series 2003-4 Class M1, 6.1244% 10/25/33 (i)

3,495

3,504

HSBC Home Equity Loan Trust Series 2005-2:

Class M1, 5.785% 1/20/35 (i)

2,807

2,813

Class M2, 5.815% 1/20/35 (i)

2,107

2,115

Hyundai Auto Receivables Trust Series 2004-1 Class A4, 5.26% 11/15/12

32,795

32,847

Lancer Funding Ltd. Series 2006-1A Class A3, 7.1856% 4/6/46 (c)(i)

2,314

2,320

MBNA Credit Card Master Note Trust Series 2003-B2 Class B2, 5.72% 10/15/10 (i)

2,155

2,166

Meritage Mortgage Loan Trust Series 2004-1:

Class M1, 5.8244% 7/25/34 (i)

2,983

2,989

Class M2, 5.8744% 7/25/34 (i)

575

576

Morgan Stanley ABS Capital I, Inc.:

Series 2002-HE3 Class M1, 6.4244% 12/27/32 (i)

2,830

2,853

Series 2003-NC8 Class M1, 6.0244% 9/25/33 (i)

3,930

3,942

Series 2004-NC2 Class M1, 5.8744% 12/25/33 (i)

4,061

4,086

Morgan Stanley Dean Witter Capital I Trust:

Series 2001-NC4 Class M1, 6.8244% 1/25/32 (i)

3,605

3,609

Series 2002-NC1 Class M1, 6.5244% 2/25/32 (c)(i)

4,363

4,483

Series 2002-NC3 Class M1, 6.0444% 8/25/32 (i)

2,308

2,310

National Collegiate Funding LLC Series 2004-GT1 Class IO1, 7.87% 6/25/10 (c)(i)(k)

12,180

3,287

National Collegiate Student Loan Trust:

Series 2004-2 Class AIO, 9.75% 10/25/14 (k)

12,615

5,284

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

National Collegiate Student Loan Trust: - continued

Series 2005-GT1 Class AIO, 6.75% 12/25/09 (k)

$ 6,500

$ 1,359

NovaStar Home Equity Loan Series 2004-1:

Class M1, 5.7744% 6/25/34 (i)

2,150

2,161

Class M4, 6.2994% 6/25/34 (i)

3,585

3,613

Onyx Acceptance Owner Trust Series 2005-A Class A3, 3.69% 5/15/09

5,521

5,474

Ownit Mortgage Loan Asset-Backed Certificates Series 2005-3 Class A2A, 5.4444% 6/25/36 (i)

9,516

9,517

Saxon Asset Securities Trust Series 2004-1 Class M1, 5.8544% 3/25/35 (i)

6,910

6,918

SLM Private Credit Student Loan Trust Series 2004-A Class C, 6.2794% 6/15/33 (i)

7,301

7,389

Specialty Underwriting & Residential Finance Series 2003-BC4 Class M1, 5.9244% 11/25/34 (i)

2,830

2,845

Structured Asset Securities Corp. Series 2006-BC1 Class B1, 7.8244% 3/25/36 (c)(i)

4,513

3,929

Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 5.78% 3/15/11 (c)(i)

9,340

9,340

Terwin Mortgage Trust Series 2006-9HGA Class A1, 5.451% 10/25/37 (c)(d)(i)

36,642

36,642

WaMu Master Note Trust Series 2006-C2A Class C2, 5.83% 8/15/15 (c)(i)

17,820

17,820

WFS Financial Owner Trust Class 2004-3 Series A3, 3.3% 3/17/09

8,425

8,373

Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (c)(i)

12,445

12,446

TOTAL ASSET-BACKED SECURITIES

(Cost $457,172)

456,614

Collateralized Mortgage Obligations - 10.5%

Private Sponsor - 5.5%

Adjustable Rate Mortgage Trust floater Series 2005-1 Class 5A2, 5.6544% 5/25/35 (i)

6,949

6,934

Bank of America Mortgage Securities, Inc.:

Series 2003-K:

Class 1A1, 3.3704% 12/25/33 (i)

1,475

1,489

Class 2A1, 4.1644% 12/25/33 (i)

6,877

6,762

Series 2003-L Class 2A1, 3.972% 1/25/34 (i)

12,971

12,670

Series 2004-1 Class 2A2, 4.6976% 10/25/34 (i)

11,143

10,977

Series 2004-B:

Class 1A1, 3.4336% 3/25/34 (i)

3,122

3,177

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Bank of America Mortgage Securities, Inc.: - continued

Series 2004-B:

Class 2A2, 4.1038% 3/25/34 (i)

$ 4,913

$ 4,802

Series 2004-C Class 1A1, 3.3338% 4/25/34 (i)

6,807

6,882

Series 2004-D:

Class 1A1, 3.5325% 5/25/34 (i)

9,053

9,020

Class 2A2, 4.1985% 5/25/34 (i)

13,487

13,209

Series 2004-G Class 2A7, 4.5587% 8/25/34 (i)

10,214

10,056

Series 2004-H Class 2A1, 4.4693% 9/25/34 (i)

10,850

10,661

Series 2004-J:

Class 1A2, 4.2847% 11/25/34 (i)

3,448

3,436

Class 2A1, 4.7822% 11/25/34 (i)

18,516

18,304

Series 2005-E Class 2A7, 4.6089% 6/25/35 (i)

11,900

11,587

Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1057% 8/25/35 (i)

14,232

14,198

Bear Stearns Alt-A Trust floater Series 2005-1 Class A1, 5.6044% 1/25/35 (i)

25,056

25,096

CS First Boston Mortgage Securities Corp. floater:

Series 2004-AR3 Class 6A2, 5.6944% 4/25/34 (i)

1,027

1,027

Series 2004-AR6 Class 9A2, 5.6944% 10/25/34 (i)

2,055

2,058

Gracechurch Mortgage Funding PLC floater Series 1A Class DB, 5.4981% 10/11/41 (c)(i)

12,935

12,936

Granite Master Issuer PLC floater:

Series 2005-2 Class M1, 5.6325% 12/20/54 (i)

19,250

19,261

Series 2006-1A Class C2, 5.9925% 12/20/54 (c)(i)

9,100

9,100

Series 2006-2 Class C1, 5.97% 12/20/54 (i)

22,100

22,120

JPMorgan Mortgage Trust Series 2005-A8 Class 2A3, 4.9591% 11/25/35 (i)

3,370

3,337

Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34

1,694

1,678

Master Asset Securitization Trust Series 2004-9 Class 7A1, 6.3247% 5/25/17 (i)

9,550

9,530

Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.2332% 8/25/17 (i)

7,205

7,277

Merrill Lynch Mortgage Investors, Inc. floater:

Series 2004-E Class A2B, 5.4394% 11/25/29 (i)

5,905

5,906

Series 2004-G Class A2, 5.8719% 11/25/29 (i)

3,735

3,738

Series 2005-B Class A2, 5.5475% 7/25/30 (i)

5,786

5,789

Opteum Mortgage Acceptance Corp. Series 2005-3 Class APT, 5.6144% 7/25/35 (i)

15,957

15,975

Residential Asset Mortgage Products, Inc. sequential pay:

Series 2003-SL1 Class A31, 7.125% 4/25/31

3,482

3,517

Series 2004-SL2 Class A1, 6.5% 10/25/16

1,286

1,298

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Residential Finance LP/Residential Finance Development Corp. floater:

Series 2003-B:

Class B3, 6.92% 7/10/35 (c)(i)

$ 13,313

$ 13,569

Class B4, 7.12% 7/10/35 (c)(i)

10,103

10,318

Class B5, 7.72% 7/10/35 (c)(i)

9,536

9,827

Class B6, 8.22% 7/10/35 (c)(i)

4,343

4,444

Series 2003-CB1:

Class B3, 6.82% 6/10/35 (c)(i)

4,616

4,705

Class B4, 7.02% 6/10/35 (c)(i)

4,132

4,219

Class B5, 7.62% 6/10/35 (c)(i)

2,821

2,886

Class B6, 8.12% 6/10/35 (c)(i)

1,674

1,697

Series 2004-A:

Class B4, 6.57% 2/10/36 (c)(i)

5,785

5,871

Class B5, 7.07% 2/10/36 (c)(i)

3,856

3,932

Series 2004-B:

Class B4, 6.47% 2/10/36 (c)(i)

2,124

2,164

Class B5, 6.92% 2/10/36 (c)(i)

1,448

1,464

Class B6, 7.37% 2/10/36 (c)(i)

386

389

Series 2004-C:

Class B4, 6.32% 9/10/36 (i)

2,724

2,752

Class B5, 6.72% 9/10/36 (i)

3,016

3,040

Class B6, 7.12% 9/10/36 (i)

487

490

Sequoia Mortgage Trust floater:

Series 2004-12 Class 1A2, 5.82% 1/20/35 (i)

11,497

11,533

Series 2004-4 Class A, 5.48% 5/20/34 (i)

9,241

9,242

Structured Adjustable Rate Mortgage Loan Trust floater Series 2001-14 Class A1, 5.6344% 7/25/35 (i)

19,515

19,591

Thornburg Mortgage Securities Trust floater Series 2005-3:

Class A2, 5.5644% 10/25/35 (i)

10,231

10,228

Class A4, 5.5944% 10/25/35 (i)

18,840

18,810

Wachovia Mortgage Loan Trust LLC Series 2005-B Class 2A4, 5.1863% 10/20/35 (i)

2,700

2,679

WaMu Mortgage pass thru certificates floater:

Series 2005-AR13 Class A1C1, 5.5144% 10/25/45 (i)

16,994

16,998

Series 2005-AR19 Class A1C1, 5.5144% 12/25/45 (i)

14,047

14,054

WaMu Mortgage Securities Corp. sequential pay:

Series 2003-MS9 Class 2A1, 7.5% 12/25/33

1,355

1,391

Series 2004-RA2 Class 2A, 7% 7/25/33

1,990

2,017

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Wells Fargo Mortgage Backed Securities Trust:

Series 2004-T Class A1, 3.458% 9/25/34 (i)

$ 9,700

$ 9,666

Series 2005-AR10 Class 2A2, 4.1091% 6/25/35 (i)

23,286

22,931

Series 2005-AR2 Class 2A2, 4.57% 3/25/35

24,366

23,913

Series 2005-AR9 Class 2A1, 4.3623% 5/25/35 (i)

10,909

10,699

Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (i)

19,955

19,790

TOTAL PRIVATE SPONSOR

559,116

U.S. Government Agency - 5.0%

Fannie Mae planned amortization class:

Series 2006-45 Class OP, 6/25/36 (l)

11,293

8,454

Series 2006-53 Class PB, 5.5% 1/25/30

20,373

20,287

Series 2006-64:

Class MB, 5.5% 9/25/33

14,041

13,835

Class PB, 5.5% 9/25/33

33,008

32,567

Fannie Mae Grantor Trust floater Series 2005-90 Class FG, 5.5744% 10/25/35 (i)

19,991

19,940

Fannie Mae guaranteed REMIC pass thru certificates:

planned amortization class:

Series 2003-73 Class GA, 3.5% 5/25/31

7,300

6,799

Series 2003-81 Class MX, 3.5% 3/25/24

14,243

13,942

Series 2006-57 Class PC, 5.5% 10/25/32

14,081

13,876

sequential pay:

Series 2003-112 Class AN, 4% 11/25/18

16,358

14,803

Series 2004-3 Class BA, 4% 7/25/17

1,284

1,233

Series 2004-70 Class GB, 4.5% 1/25/32

5,962

5,563

Series 2004-86 Class KC, 4.5% 5/25/19

5,642

5,442

Series 2004-95 Class AN, 5.5% 1/25/25

4,634

4,672

Freddie Mac planned amortization class:

Series 3033 Class UD, 5.5% 10/15/30

8,345

8,335

Series 3178:

Class PB, 5.5% 4/15/30

23,374

23,263

Class PC, 5.5% 12/15/32

7,453

7,355

Freddie Mac Multi-class participation certificates guaranteed:

planned amortization class:

Series 1669 Class H, 6.5% 7/15/23

15,240

15,349

Series 2006-15 Class OP, 3/25/36 (l)

12,893

9,172

Series 2425 Class JH, 6% 3/15/17

8,127

8,237

Series 2498 Class PD, 5.5% 2/15/16

4,067

4,061

Series 2614 Class TD, 3.5% 5/15/16

47,402

44,925

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 2649 Class TQ, 3.5% 12/15/21

$ 17,001

$ 16,723

Series 2665 Class PB, 3.5% 6/15/23

2,358

2,304

Series 2689 Class HC, 3.5% 9/15/26

6,465

6,249

Series 2695 Class GC, 4.5% 11/15/18

11,641

11,250

Series 2760 Class EB, 4.5% 9/15/16

28,779

27,859

Series 2773 Class EG, 4.5% 4/15/19

6,187

5,894

Series 2775:

Class OD, 4.5% 10/15/17

20,875

19,987

Class OE, 4.5% 4/15/19

31,083

29,090

Series 2836 Class EG, 5% 12/15/32

40,221

38,351

Series 3018 Class UD, 5.5% 9/15/30

9,555

9,539

Series 3075 Class PB, 5.5% 7/15/30

18,780

18,749

Series 3078 Class PB, 5.5% 7/15/29

32,145

32,048

Series 3159 Class TC, 5.5% 6/15/32

7,522

7,424

sequential pay Series 2750 Class ZT, 5% 2/15/34

11,221

9,782

TOTAL U.S. GOVERNMENT AGENCY

517,359

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $1,079,273)

1,076,475

Commercial Mortgage Securities - 5.5%

Banc of America Commercial Mortgage, Inc.:

Series 2005-1 Class A3, 4.877% 11/10/42

14,465

14,298

Series 2005-3 Series A3B, 5.09% 7/10/43 (i)

22,475

22,131

Banc of America Large Loan, Inc. Series 2006-ESH:

Class A, 6.19% 7/14/11 (c)(i)

10,873

10,865

Class B, 6.29% 7/14/11 (c)(i)

5,432

5,423

Class C, 6.44% 7/14/11 (c)(i)

10,879

10,871

Class D, 7.07% 7/14/11 (c)(i)

6,275

6,293

Bayview Commercial Asset Trust floater:

Series 2004-1:

Class A, 5.6844% 4/25/34 (c)(i)

7,239

7,252

Class B, 7.2244% 4/25/34 (c)(i)

818

826

Class M1, 5.8844% 4/25/34 (c)(i)

629

631

Class M2, 6.5244% 4/25/34 (c)(i)

629

636

Series 2004-2 Class A, 5.7544% 8/25/34 (c)(i)

7,455

7,483

Series 2004-3:

Class A1, 5.6944% 1/25/35 (c)(i)

8,811

8,839

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Bayview Commercial Asset Trust floater: - continued

Series 2004-3:

Class A2, 5.7444% 1/25/35 (c)(i)

$ 1,270

$ 1,272

Class M1, 5.8244% 1/25/35 (c)(i)

1,508

1,517

Class M2, 6.3244% 1/25/35 (c)(i)

992

1,004

Bear Stearns Commercial Mortgage Securities, Inc.:

sequential pay:

Series 2003-PWR2 Class A3, 4.834% 5/11/39

6,850

6,719

Series 2004-ESA Class A3, 4.741% 5/14/16 (c)

4,785

4,740

Series 2004-ESA:

Class B, 4.888% 5/14/16 (c)

7,720

7,657

Class C, 4.937% 5/14/16 (c)

3,395

3,371

Class D, 4.986% 5/14/16 (c)

1,980

1,969

Class E, 5.064% 5/14/16 (c)

6,160

6,143

Class F, 5.182% 5/14/16 (c)

1,480

1,477

Chase Commercial Mortgage Securities Corp.:

Series 2000-3 Class G 6.887% 10/15/32 (c)

9,742

9,998

Series 2001-245 Class A2, 6.275% 2/12/16 (c)(i)

5,760

6,007

Commercial Mortgage pass thru certificates:

floater Series 2005-F10A:

Class B, 5.56% 4/15/17 (c)(i)

10,865

10,866

Class C, 5.6% 4/15/17 (c)(i)

4,615

4,615

Class D, 5.64% 4/15/17 (c)(i)

3,750

3,751

Class I, 6.18% 4/15/17 (c)(i)

520

520

Class MOA3, 5.63% 3/15/20 (c)(i)

7,035

7,036

sequential pay Series 2006-CN2A Class A2FX, 5.449% 2/5/19 (c)

8,415

8,453

CS First Boston Mortgage Securities Corp.:

floater Series 2005-TFLA:

Class C, 5.57% 2/15/20 (c)(i)

8,630

8,633

Class E, 5.66% 2/15/20 (c)(i)

6,025

6,027

Class F, 5.71% 2/15/20 (c)(i)

2,665

2,666

Class G, 5.85% 2/15/20 (c)(i)

770

770

Class H, 6.08% 2/15/20 (c)(i)

1,095

1,095

sequential pay Series 2000-C1 Class A2, 7.545% 4/15/62

6,800

7,243

Series 1997-C2 Class D, 7.27% 1/17/35

3,840

3,967

Series 1998-C1 Class D, 7.17% 5/17/40

7,455

7,952

Series 1999-C1 Class E, 7.8822% 9/15/41 (i)

10,335

11,138

Series 2004-C1 Class ASP, 0.8785% 1/15/37 (c)(i)(k)

186,936

5,347

Series 2006-OMA:

Class H, 5.805% 5/15/23 (c)(i)

2,825

2,761

Class J, 5.805% 5/15/23 (c)(i)

4,770

4,620

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31

$ 5,730

$ 5,929

DLJ Commercial Mortgage Corp. sequential pay Series 2000-CF1 Class A1B, 7.62% 6/10/33

10,000

10,737

First Union National Bank-Bank of America Commercial Mortgage Trust Series 2001-C1 Class G, 6.936% 3/15/33 (c)

3,135

3,318

First Union-Lehman Brothers Commercial Mortgage Trust sequential pay Series 1997-C2 Class A3, 6.65% 11/18/29

2,092

2,108

GE Commercial Mortgage Corp. Series 2004-C1 Class X2, 1.098% 11/10/38 (i)(k)

102,008

3,497

Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.8831% 10/16/23 (i)

1,645

1,672

Ginnie Mae guaranteed REMIC pass thru securities:

sequential pay:

Series 2003-22 Class B, 3.963% 5/16/32

11,925

11,425

Series 2003-47 Class C, 4.227% 10/16/27

11,084

10,783

Series 2003-59 Class D, 3.654% 10/16/27

18,000

16,798

Series 2003-47 Class XA, 0.1774% 6/16/43 (i)(k)

44,719

2,492

GMAC Commercial Mortgage Securities, Inc. Series 2004-C3 Class X2, 0.7177% 12/10/41 (i)(k)

16,722

390

Greenwich Capital Commercial Funding Corp.:

sequential pay Series 2004-GG1 Class A4, 4.755% 6/10/36

4,940

4,868

Series 2006-GG7 Class A3, 6.1101% 7/10/38

14,490

14,969

GS Mortgage Securities Corp. II:

sequential pay:

Series 2001-LIBA Class A2, 6.615% 2/14/16 (c)

15,710

16,581

Series 2003-C1 Class A2A, 3.59% 1/10/40

9,075

8,881

Series 1998-GLII Class E, 6.9706% 4/13/31 (i)

1,710

1,754

Series 2006-GG6 Class A2, 5.506% 4/10/38 (i)

22,025

22,203

Hilton Hotel Pool Trust Series 2000-HLTA Class D, 7.555% 10/3/15 (c)

9,690

10,287

Host Marriott Pool Trust sequential pay Series 1999-HMTA Class B, 7.3% 8/3/15 (c)

3,485

3,669

JPMorgan Chase Commercial Mortgage Securities Corp. sequential pay Series 2005-LDP2 Class A2, 4.575% 7/15/42

11,425

11,156

LB-UBS Commercial Mortgage Trust:

sequential pay Series 2005-C3 Class A2, 4.553% 7/15/30

5,345

5,230

Series 2001-C3 Class B, 6.512% 6/15/36

8,035

8,454

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class C, 4.13% 11/20/37 (c)

$ 11,400

$ 10,201

Merrill Lynch Mortgage Trust sequential pay:

Series 2005-CIP1 Class A2, 4.96% 7/12/38

3,545

3,507

Series 2005-MCP1 Class A2, 4.556% 6/12/43

6,475

6,318

Merrill Lynch-CFC Commercial Mortgage Trust sequential pay Series 2006-1 CLass A3, 5.671% 2/12/39

10,640

10,698

Morgan Stanley Capital I Trust Series 2006-T23:

Class A1, 5.682% 8/12/41

5,765

5,848

Class A3, 5.98% 8/12/41 (i)

5,105

5,239

Morgan Stanley Capital I, Inc. Series 2006-HQ8 Class A3, 5.4413% 3/12/16 (i)

15,510

15,557

Mortgage Capital Funding, Inc. sequential pay Series 1998-MC2 Class A2, 6.423% 6/18/30

7,140

7,221

Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A2, 6.602% 11/15/07 (c)

9,000

9,120

TrizecHahn Office Properties Trust Series 2001-TZHA Class E3, 7.253% 3/15/13 (c)

5,069

5,180

Wachovia Bank Commercial Mortgage Trust:

sequential pay:

Series 2003-C8 Class A3, 4.445% 11/15/35

17,105

16,599

Series 2006-C24 Class A2, 5.506% 3/15/45

40,465

40,764

Series 2004-C15:

Class 180A, 5.3979% 10/15/41 (c)(i)

6,690

6,509

Class 180B, 5.3979% 10/15/41 (c)(i)

3,000

2,947

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $573,455)

567,791

Municipal Securities - 0.0%

Chicago Board of Ed. Series A, 5.5% 12/1/30 (AMBAC Insured)
(Cost $5,889)

5,000

5,864

Foreign Government and Government Agency Obligations - 0.3%

Israeli State 4.625% 6/15/13

12,555

11,864

United Mexican States 5.875% 1/15/14

16,280

16,565

TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $28,976)

28,429

Supranational Obligations - 0.1%

Principal Amount (000s)

Value (Note 1) (000s)

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $6,514)

$ 6,585

$ 6,953

Fixed-Income Funds - 20.0%

Shares

Fidelity Specialized High Income Central Investment Portfolio (j)

1,000,451

98,514

Fidelity Ultra-Short Central Fund (j)

19,702,539

1,960,403

TOTAL FIXED-INCOME FUNDS

(Cost $2,060,952)

2,058,917

Preferred Securities - 0.1%

Principal Amount (000s)

FINANCIALS - 0.1%

Diversified Financial Services - 0.1%

MUFG Capital Finance 1 Ltd. 6.346% (i)

$ 15,235

15,348

TOTAL PREFERRED SECURITIES

(Cost $15,235)

15,348

Cash Equivalents - 2.6%

Maturity Amount (000s)

Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at:

5.29%, dated 8/31/06 due 9/1/06

$ 235,316

235,281

5.29%, dated 8/31/06 due 9/1/06 (a)

29,298

29,294

TOTAL CASH EQUIVALENTS

(Cost $264,575)

264,575

TOTAL INVESTMENT PORTFOLIO - 114.6%

(Cost $11,814,051)

11,794,363

NET OTHER ASSETS - (14.6)%

(1,500,600)

NET ASSETS - 100%

$ 10,293,763

Swap Agreements

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps

Receive monthly notional amount multiplied by 3.05% and pay Merrill Lynch upon default event of Morgan Stanley ABS Capital I, Inc., par value of the proportional notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8, Class B3, 7.2913% 9/25/34

Oct. 2034

$ 3,200

$ 51

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, 7.6913% 11/25/34

Dec. 2034

3,380

49

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 8.8244% 8/25/34

Sept. 2034

2,971

35

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7, Class B3, 7.6913% 7/25/34

August 2034

2,971

37

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34

Oct. 2034

2,971

44

Receive from Merrill Lynch, Inc., upon default event of R.R. Donnelley & Sons Co., par value of the notional amount of R.R. Donnelley & Sons Co. 5.5% 5/15/15, and pay quarterly notional amount multiplied by 2.12%

Sept. 2013

5,085

(97)

Receive monthly notional amount multiplied by .55% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2004-WCW1 Class M4, 6.835% 9/25/34

Sept. 2034

9,300

(2)

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by .8% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WCH1 Class M6, 6.365% 1/25/35

Feb. 2035

$ 3,200

$ 2

Receive monthly notional amount multiplied by .82% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34

August 2034

2,971

11

Receive monthly notional amount multiplied by .85% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. 6.105% Series 2005-WHQ2 Class M6 5/25/35

June 2035

3,200

6

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34

Nov. 2034

2,971

11

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34

Oct. 2034

2,971

22

Receive monthly notional amount multiplied by 1.6% 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 M7, 5.4413% 5/25/35

June 2035

2,730

4

Receive monthly notional amount multiplied by 1.66% 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 M7, 5.4413% 5/25/35

June 2035

2,971

8

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon default event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32

April 2032

$ 374

$ 3

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.3913% 2/25/34

March 2034

730

2

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.0413% 1/25/34

Feb. 2034

581

1

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

10,445

(7)

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

7,465

79

Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon default event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33

May 2033

2,971

35

Receive quarterly notional amount multiplied by .20% and pay Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 5 Index, par value of the proportional notional amount (g)

Dec. 2007

74,500

134

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

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

$ 17,065

$ 42

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

12,540

31

Receive quarterly notional amount multiplied by .31% and pay Deutsche Bank upon default of Altria Group, Inc., par value of the notional amount of Altria Group 7% 11/4/13

June 2008

61,000

184

Receive quarterly notional amount multiplied by .34% and pay Goldman Sachs upon default event of Duke Energy Corp. par value of the notional amount of Duke Energy Corp. 6.25% 1/15/12

March 2011

17,600

78

Receive quarterly notional amount multiplied by .35% and pay Goldman Sachs upon default event of Southern California Edison Co., par value of the notional amount of Southern California Edison Co. 7.625% 1/15/10

Sept. 2010

11,200

41

Receive quarterly notional amount multiplied by .38% and pay Bank of America upon default event of Pacific Gas & Electric Co., par value of the notional amount of Pacific Gas & Electric Co. 4.8% 3/1/14

March 2011

17,600

90

Receive quarterly notional amount multiplied by .40% and pay Lehman Brothers, Inc., upon each default event of one of the issues of Dow Jones CDX N.A. Investment Grade 6 Index, par value of the proportional notional amount (h)

June 2011

96,800

150

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

35,000

164

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive semi-annually notional amount multiplied by .5% 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 2008

$ 22,335

$ 91

Receive semi-annually notional amount multiplied by .5% and pay Deutsche Bank upon default event of Russian Federation, par value of the notional amount of Russian Federation 5% 3/31/30

June 2008

14,815

59

Receive semi-annually notional amount multiplied by .53% 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 2008

12,150

57

Receive semi-annually notional amount multiplied by .625% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

63,135

544

Receive semi-annually notional amount multiplied by .665% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

20,000

207

Receive semi-annually notional amount multiplied by .735% and pay Deutsche Bank upon default event of United Mexican States, par value of the notional amount of United Mexican States 7.5% 4/8/33

May 2011

13,100

176

TOTAL CREDIT DEFAULT SWAPS

562,298

2,342

Swap Agreements - continued

Expiration Date

Notional Amount (000s)

Value
(000s)

Interest Rate Swaps

Receive quarterly a fixed rate equal to 4.4771% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

August 2010

$ 140,000

$ (3,361)

Receive quarterly a fixed rate equal to 4.898% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

July 2014

32,550

(689)

Receive semi-annually a fixed rate equal to 4.745% and pay quarterly a floating rate based on 3-month LIBOR with UBS

Jan. 2011

70,000

(1,244)

Receive semi-annually a fixed rate equal to 4.921% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc.

Dec. 2008

315,000

(2,085)

Receive semi-annually a fixed rate equal to 5.13% and pay quarterly a floating rate based on 3-month LIBOR with Citibank

March 2009

280,030

3,228

Receive semi-annually a fixed rate equal to 5.3135% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc.

August 2009

302,645

1,201

TOTAL INTEREST RATE SWAPS

1,140,225

(2,950)

Total Return Swaps

Receive monthly a return equal to Lehman Brothers CMBS AAA 8.5+ Index and pay monthly a floating rate based on 1-month LIBOR minus 25 basis points with Citibank

Oct. 2006

105,000

1,829

$ 1,807,523

$ 1,221

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 end of the period, the value of these securities amounted to $798,807,000 or 7.8% of net assets.

(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

(e) A portion of the security is subject to a forward commitment to sell.

(f) Security or a portion of the security has been segregated as collateral for open swap agreements. At the period end, the value of securities pledged amounted to $2,264,000.

(g) Dow Jones CDX N.A. Investment Grade 5 is a tradable index of credit default swaps on investment grade debt of U.S. companies.

(h) Dow Jones CDX N.A. Investment Grade 6 is a tradable index of credit default swaps on investment grade debt of U.S. companies.

(i) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

(j) 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.

(k) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool.

(l) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans.

(m) Non-income producing - Issuer is in default.

Affiliated Central Funds

Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows:

Fund

Four months ended
August 31, 2006
Income earned
(Amounts in thousands)

Year ended
April 30, 2006
Income earned
(Amounts in thousands)

Fidelity Specialized High Income Central Investment Portfolio

$ 1,773

$ 2,729

Fidelity Ultra-Short Central Fund

30,450

47,063

Total

$ 32,223

$ 49,792

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
(Amounts in thousands)

Value at
April 30, 2006

Purchases

Sales Proceeds

Value at
August 31, 2006

% ownership, end of period

Fidelity Specialized High Income Central Investment Portfolio

$ 69,107

$ 29,167*

$ -

$ 98,514

47.6%

Fidelity Ultra-Short Central Fund

1,560,165

400,040

-

1,960,403

23.4%

Total

$ 1,629,272

$ 429,207

$ -

$ 2,058,917

* Represents the value of shares received through in-kind contributions.

Other Information

Distribution of investments by country of issue, as a percentage of total net assets, is as follows:

United States of America

89.9%

United Kingdom

2.8%

Cayman Islands

1.4%

Others (individually less than 1%)

5.9%

100.0%

Income Tax Information

At August 31, 2006, the fund had a capital loss carryforward of approximately $125,558,000 of which $731,000 expires on August 31, 2013 and the remainder expires on August 31, 2014. Of the loss carryforwards expiring on August 31, 2013, $731,000 was acquired in the merger and is available to offset future capital gains of the fund to the extent provided by regulations.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amounts)

August 31, 2006

Assets

Investment in securities, at value (including securities loaned of $28,720 and repurchase agreements of $264,575) - See accompanying schedule:

Unaffiliated issuers (cost $9,753,099)

$ 9,735,446

Affiliated Central Funds (cost $2,060,952)

2,058,917

Total Investments (cost $11,814,051)

$ 11,794,363

Commitment to sell securities on a delayed delivery basis

(34,123)

Receivable for securities sold on a delayed delivery basis

34,095

(28)

Receivable for investments sold, regular delivery

52,957

Cash

2

Receivable for swap agreements

130

Receivable for fund shares sold

7,918

Interest receivable

79,899

Swap agreements, at value

1,221

Other receivables

67

Total assets

11,936,529

Liabilities

Payable for investments purchased
Regular delivery

$ 83,115

Delayed delivery

1,519,698

Payable for fund shares redeemed

5,633

Distributions payable

1,073

Accrued management fee

2,707

Distribution fees payable

33

Other affiliated payables

1,180

Other payables and accrued expenses

33

Collateral on securities loaned, at value

29,294

Total liabilities

1,642,766

Net Assets

$ 10,293,763

Net Assets consist of:

Paid in capital

$ 10,414,269

Undistributed net investment income

11,929

Accumulated undistributed net realized gain (loss) on investments

(113,941)

Net unrealized appreciation (depreciation) on investments

(18,494)

Net Assets

$ 10,293,763

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Assets and Liabilities - continued

Amounts in thousands (except per-share amounts)

August 31, 2006

Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share
($45,580 ÷ 6,201 shares)

$ 7.35

Maximum offering price per share (100/95.25 of $7.35)

$ 7.72

Class T:
Net Asset Value and redemption price per share ($58,716 ÷ 7,985 shares)

$ 7.35

Maximum offering price per share (100/96.50 of $7.35)

$ 7.62

Class B:
Net Asset Value and offering price per share
($9,462 ÷ 1,286 shares)A

$ 7.36

Class C:
Net Asset Value and offering price per share
($9,993 ÷ 1,358 shares)A

$ 7.36

Investment Grade Bond:
Net Asset Value, offering price and redemption price per share ($10,140,626 ÷ 1,378,852 shares)

$ 7.35

Institutional Class:
Net Asset Value, offering price and redemption price per share ($29,386 ÷ 3,992 shares)

$ 7.36

A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Operations

Amounts in thousands

Four months ended
August 31, 2006

Year ended
April 30, 2006

Investment Income

Dividends

$ 344

$ -

Interest

129,776

305,454

Income from affiliated Central Funds

32,223

49,792

Total income

162,343

355,246

Expenses

Management fee

$ 9,241

$ 24,689

Transfer agent fees

2,941

7,988

Distribution fees

128

351

Accounting and security lending fees

-

110

Fund wide operations fee

850

1,909

Independent trustees' compensation

11

31

Appreciation in deferred trustee compensation account

-

2

Custodian fees and expenses

-

14

Registration fees

-

12

Audit

-

8

Legal

-

2

Miscellaneous

5

19

Total expenses before reductions

13,176

35,135

Expense reductions

(231)

(465)

Total expenses

12,945

34,670

Net investment income

149,398

320,576

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

Unaffiliated issuers

(17,205)

(28,344)

Swap agreements

(120)

(9,904)

Total net realized gain (loss)

(17,325)

(38,248)

Change in net unrealized appreciation (depreciation) on:

Investment securities

136,790

(175,529)

Swap agreements

9,322

(9,287)

Delayed delivery commitments

(28)

(13)

Total change in net unrealized appreciation (depreciation)

146,084

(184,829)

Net gain (loss)

128,759

(223,077)

Net increase (decrease) in net assets resulting from operations

$ 278,157

$ 97,499

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Changes in Net Assets

Amounts in thousands

Four months ended
August 31,
2006

Year ended
April 30,
2006

Year ended
April 30,
2005

Increase (Decrease) in Net Assets

Operations

Net investment income

$ 149,398

$ 320,576

$ 210,849

Net realized gain (loss)

(17,325)

(38,248)

99,455

Change in net unrealized appreciation (depreciation)

146,084

(184,829)

7,281

Net increase (decrease) in net assets resulting
from operations

278,157

97,499

317,585

Distributions to shareholders from net investment income

(127,262)

(304,745)

(211,677)

Distributions to shareholders from net realized gain

-

(66,460)

(80,651)

Total distributions

(127,262)

(371,205)

(292,328)

Share transactions - net increase (decrease)

1,985,853

1,599,350

1,000,708

Total increase (decrease) in net assets

2,136,748

1,325,644

1,025,965

Net Assets

Beginning of period

8,157,015

6,831,371

5,805,406

End of period (including undistributed net investment income of $11,929, $289, and $4,438, respectively)

$ 10,293,763

$ 8,157,015

$ 6,831,371

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class A

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.118

.298

.237

.224

.186

Net realized and unrealized gain (loss)

.092

(.206)

.131

(.095)

.326

Total from investment operations

.210

.092

.368

.129

.512

Distributions from net investment income

(.100)

(.282)

(.238)

(.229)

(.172)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.100)

(.352)

(.338)

(.359)

(.292)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.50

$ 7.47

$ 7.70

Total Return B, C, D

2.92%

1.23%

5.03%

1.68%

6.98%

Ratios to Average Net Assets F, I

Expenses before reductions

.71% A

.71%

.83%

.83%

.79% A

Expenses net of fee waivers, if any

.71% A

.71%

.83%

.83%

.79% A

Expenses net of all reductions

.71% A

.71%

.83%

.83%

.79% A

Net investment income

4.86% A

4.04%

3.17%

2.96%

3.73% A

Supplemental Data

Net assets, end of period
(in millions)

$ 46

$ 37

$ 31

$ 22

$ 8

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

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 funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class T

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.116

.290

.230

.214

.180

Net realized and unrealized gain (loss)

.091

(.216)

.141

(.094)

.324

Total from investment operations

.207

.074

.371

.120

.504

Distributions from net investment income

(.097)

(.274)

(.231)

(.220)

(.164)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.097)

(.344)

(.331)

(.350)

(.284)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.89%

.98%

5.07%

1.56%

6.87%

Ratios to Average Net Assets F, I

Expenses before reductions

.82% A

.83%

.93%

.96%

.97% A

Expenses net of fee waivers, if any

.82% A

.83%

.93%

.95%

.95% A

Expenses net of all reductions

.81% A

.83%

.93%

.95%

.95% A

Net investment income

4.76% A

3.92%

3.07%

2.84%

3.57% A

Supplemental Data

Net assets, end of period
(in millions)

$ 59

$ 57

$ 48

$ 30

$ 10

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

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 funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class B

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.099

.239

.180

.166

.147

Net realized and unrealized gain (loss)

.102

(.216)

.140

(.095)

.322

Total from investment operations

.201

.023

.320

.071

.469

Distributions from net investment income

(.081)

(.223)

(.180)

(.171)

(.129)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.081)

(.293)

(.280)

(.301)

(.249)

Net asset value,
end of period

$ 7.36

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.79%

.28%

4.37%

.90%

6.39%

Ratios to Average Net Assets F, I

Expenses before reductions

1.50% A

1.51%

1.64%

1.63%

1.60% A

Expenses net of fee waivers, if any

1.50% A

1.51%

1.60%

1.60%

1.60% A

Expenses net of all reductions

1.50% A

1.51%

1.59%

1.60%

1.60% A

Net investment income

4.07% A

3.24%

2.40%

2.19%

2.92% A

Supplemental Data

Net assets, end of period
(in millions)

$ 9

$ 9

$ 9

$ 9

$ 8

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Total returns do not include the effect of the contingent deferred sales charge.

E Calculated based on average shares outstanding during the period.

F Amounts do not include the activity of the affiliated central funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Class C

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 H

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.24

$ 7.51

$ 7.47

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income E

.097

.233

.176

.161

.145

Net realized and unrealized gain (loss)

.102

(.216)

.140

(.095)

.322

Total from investment operations

.199

.017

.316

.066

.467

Distributions from net investment income

(.079)

(.217)

(.176)

(.166)

(.127)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.079)

(.287)

(.276)

(.296)

(.247)

Net asset value,
end of period

$ 7.36

$ 7.24

$ 7.51

$ 7.47

$ 7.70

Total Return B, C, D

2.76%

.20%

4.30%

.84%

6.35%

Ratios to Average Net Assets F, I

Expenses before reductions

1.58% A

1.60%

1.67%

1.66%

1.64% A

Expenses net of fee waivers, if any

1.58% A

1.60%

1.66%

1.66%

1.64% A

Expenses net of all reductions

1.58% A

1.60%

1.66%

1.66%

1.64% A

Net investment income

3.99% A

3.15%

2.34%

2.13%

2.88% A

Supplemental Data

Net assets, end of period
(in millions)

$ 10

$ 9

$ 7

$ 7

$ 6

Portfolio turnover rate G

206% A, J

145%

227%

238%

276%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns would have been lower had certain expenses not been reduced during the periods shown.

D Total returns do not include the effect of the contingent deferred sales charge.

E Calculated based on average shares outstanding during the period.

F Amounts do not include the activity of the affiliated central funds.

G Amounts do not include the portfolio activity of the affiliated central funds.

H For the period August 27, 2002 (commencement of sale of shares) to April 30, 2003.

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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Investment Grade Bond

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003

2002

Selected Per-Share Data

Net asset value, beginning of period

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.33

$ 7.18

Income from Investment Operations

Net investment income D

.124

.317

.254

.240

.290

.379

Net realized and unrealized gain (loss)

.092

(.206)

.130

(.095)

.483

.158

Total from investment operations

.216

.111

.384

.145

.773

.537

Distributions from net investment income

(.106)

(.301)

(.254)

(.245)

(.283)

(.377)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

(.010)

Total distributions

(.106)

(.371)

(.354)

(.375)

(.403)

(.387)

Net asset value,
end of period

$ 7.35

$ 7.24

$ 7.50

$ 7.47

$ 7.70

$ 7.33

Total Return B, C

3.01%

1.48%

5.26%

1.89%

10.82%

7.61%

Ratios to Average Net Assets E, G

Expenses before reductions

.45% A

.46%

.61%

.63%

.66%

.66%

Expenses net of fee waivers,
if any

.45% A

.46%

.61%

.63%

.66%

.66%

Expenses net of all reductions

.45% A

.46%

.61%

.63%

.66%

.66%

Net investment income

5.12% A

4.29%

3.39%

3.16%

3.86%

5.18%

Supplemental Data

Net assets,
end of period
(in millions)

$ 10,141

$ 8,018

$ 6,721

$ 5,735

$ 5,274

$ 4,056

Portfolio turnover rate F

206% A, H

145%

227%

238%

276%

230%

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 funds.

F Amounts do not include the portfolio activity of the affiliated central funds.

G 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.

H The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights - Institutional Class

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003 G

Selected Per-Share Data

Net asset value,
beginning of period

$ 7.25

$ 7.51

$ 7.48

$ 7.70

$ 7.48

Income from Investment Operations

Net investment income D

.124

.313

.254

.233

.202

Net realized and unrealized gain (loss)

.091

(.205)

.129

(.078)

.321

Total from investment operations

.215

.108

.383

.155

.523

Distributions from net investment income

(.105)

(.298)

(.253)

(.245)

(.183)

Distributions from net realized gain

-

(.070)

(.100)

(.130)

(.120)

Total distributions

(.105)

(.368)

(.353)

(.375)

(.303)

Net asset value,
end of period

$ 7.36

$ 7.25

$ 7.51

$ 7.48

$ 7.70

Total Return B, C

2.99%

1.44%

5.24%

2.04%

7.14%

Ratios to Average Net Assets E, H

Expenses before reductions

.49% A

.50%

.59%

.64%

.56% A

Expenses net of fee waivers, if any

.49% A

.50%

.59%

.64%

.56% A

Expenses net of all reductions

.49% A

.50%

.59%

.64%

.56% A

Net investment income

5.07% A

4.25%

3.40%

3.15%

3.96% A

Supplemental Data

Net assets,
end of period
(000 omitted)

$ 29,386

$ 25,776

$ 16,084

$ 2,840

$ 275

Portfolio turnover rate F

206% A, I

145%

227%

238%

276%

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 funds.

F Amounts do not include the portfolio activity of the affiliated central funds.

G For the period August 27, 2002 (commencement of sale of shares) to April 30, 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 The portfolio turnover rate does not include the assets acquired in the merger.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Notes to Financial Statements

For the period ended August 31, 2006

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Fidelity Investment Grade Bond Fund (the Fund) is a fund of Fidelity Fixed-Income Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.

The Fund offers Class A, Class T, Class B, Class C, Investment Grade Bond and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.

The Fund may invest in Fidelity Ultra-Short Central Fund (Ultra-Short Central Fund) and fixed-income Central Investment Portfolios (CIPs), collectively referred to as the Central Funds, which are open-end investment companies 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 Funds:

On July 20, 2006, the Board of Trustees approved a change in the fiscal year end of the Fund from April 30 to August 31. Accordingly, the Fund's financial statements and related notes include information as of the four month period ended August 31, 2006 and the one year period ended April 30, 2006.

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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Security Valuation - continued

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 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, including the Fund's investment activity in the Central Funds, are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income and distributions from the Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity.

Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.

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.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), 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.

Annual Report

1. Significant Accounting Policies - continued

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 swap agreements, prior period premium and discount on debt securities, market discount, partnerships (including allocations from CIP), 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:

Unrealized appreciation

$ 93,937

Unrealized depreciation

(114,338)

Net unrealized appreciation (depreciation)

(20,401)

Undistributed ordinary income

25,527

Capital loss carryforward

(125,558)

Cost for federal income tax purposes

$ 11,814,764

The tax character of distributions paid was as follows:

Four months ended
August 31, 2006

April 30, 2006

April 30, 2005

Ordinary Income

$ 127,262

$ 323,808

$ 248,105

Long-term Capital Gains

-

47,397

44,223

Total

$ 127,262

$ 371,205

$ 292,328

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

New Accounting Pronouncements. 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, results of operations and financial statement disclosures.

In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.

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 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

Annual Report

2. Operating Policies - continued

Delayed Delivery Transactions and When-Issued Securities - continued

Investments. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.

Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.

Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.

Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the Fund are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.

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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Operating Policies - continued

Swap Agreements - continued

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 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 $1,231,454 and $411,323, respectively for the four month period ended August 31, 2006.

Annual Report

4. Fees and Other Transactions with Affiliates.

Management Fee and Expense Contract. 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% (.30% prior to June 1, 2005) 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 periods ended August 31, 2006 and April 30, 2006, the management fee was equivalent to an annualized rate of .32% and an annual rate of .33%, respectively, of the Fund's average net assets.

Effective upon the completion of the reorganization with Spartan Investment Grade Bond Fund, the Fund entered into a new expense contract with FMR which will not allow expenses for the Investment Grade Bond share class to be increased above the current limit of .45% of the class' average net assets without shareholder approval.

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 periods ended August 31, 2006 and April 30, 2006, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:

Four months ended
August 31, 2006

April 30, 2006

Distribution
Fee

Service
Fee

Paid to
FDC

Retained
by FDC

Paid to
FDC

Retained
by FDC

Class A

0%

.15%

$ 20

$ 2

$ 49

$ -

Class T

0%

.25%

48

1

136

2

Class B

.65%

.25%

28

21

86

63

Class C

.75%

.25%

32

10

80

23

$ 128

$ 34

$ 351

$ 88

Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Sales Load - continued

depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C,.75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.

For the four month period ended August 31, 2006, sales charge amounts retained by FDC were as follows:

Retained
by FDC

Class A

$ 7

Class T

2

Class B*

6

Class C*

2

$ 17

* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the
sales are made.

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 Investment Grade Bond. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Investment Grade 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 Investment Grade Bond's average net assets. Prior to June 1, 2005, FSC also received account fees in addition to the asset-based fee. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. For the periods ended August 31, 2006 and April 30, 2006, the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:

Four months ended
August 31, 2006

April 30, 2006

Amount

% of
Average
Net Assets*

Amount

% of
Average
Net Assets

Class A

$ 28

.21

$ 66

.21

Class T

42

.22

122

.22

Class B

8

.25

24

.25

Class C

8

.23

19

.24

Investment Grade Bond

2,842

.10

7,726

.11

Institutional Class

13

.14

31

.14

$ 2,941

$ 7,988

* Annualized

Annual Report

4. Fees and Other Transactions with Affiliates - continued

Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. Under a separate contract, FSC administers the security lending program. Effective June 1, 2005, FMR pays for these fees. Prior to June 1, 2005, the accounting fee was based on the level of average net assets for the month and the security lending fee was based on the number and duration of lending transactions.

Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE), which became effective on June 1, 2005, FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b-1 fees, 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. Effective upon the completion of the reorganization with Spartan Investment Grade Bond Fund, the .35% fee can not be increased without shareholder approval. The FWOE paid by the Fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the periods ended August 31, 2006 and April 30, 2006, the FWOE fee was equivalent to an annualized rate of .03% of the Fund's average net assets.

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 may also invest in CIPs managed by FIMM, or Fidelity Management & Research Company Inc. (FMRC), each an affiliate of FMR.

The Specialized High Income Central Investment Portfolio seeks a high level of current income by normally investing in income-producing debt securities, with an emphasis on lower-quality debt securities.

The Fund's Schedule of Investments lists the Central Funds as an investment of the Fund but does not include the underlying holdings of the Central Funds. Based on their investment objectives, the Central Funds may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the Central Funds may also participate in loans and other direct debt instruments and derivatives. 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 Funds and the Fund.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Affiliated Central Funds - continued

A complete unaudited list of holdings for the Central Funds, 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 Funds 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 for the periods ended August 31, 2006 and April 30, 2006, amounted to $5 and $14, respectively, and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities for the period ended August 31, 2006 and April 30, 2006, amounted to $163 and $128, respectively.

Annual Report

7. 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 ended August 31, 2006, these credits reduced the management fee by $7. During the period ended April 30, 2006, these credits reduced the Fund's custody expenses by $14. During the period, credits reduced each class' transfer agent expense as noted in the table below.

Four months ended
August 31, 2006

April 30, 2006

Transfer Agent
expense reduction

Transfer Agent
expense reduction

Class A

$ 1

$ 1

Class T

2

3

Investment Grade Bond

221

447

$ 224

$451

8. 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.

Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.

At the end of the period, FMR or its affiliates were the owners of record of 41% of the total outstanding shares of the fund.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

From net investment income

Class A

$ 557

$ 1,232

$ 869

Class T

768

2,022

1,202

Class B

105

289

205

Class C

104

234

169

Investment Grade Bond

125,340

300,091

208,879

Institutional Class

388

877

353

Total

$ 127,262

$ 304,745

$ 211,677

From net realized gain

Class A

$ -

$ 293

$ 318

Class T

-

479

496

Class B

-

86

112

Class C

-

71

96

Investment Grade Bond

-

65,359

79,525

Institutional Class

-

172

104

Total

$ -

$ 66,460

$ 80,651

10. Share Transactions.

Transactions for each class of shares were as follows:

Shares

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class A

Shares sold

1,787

5,817

3,493

Reinvestment of distributions

74

170

65

Shares redeemed

(775)

(4,972)

(2,416)

Net increase (decrease)

1,086

1,015

1,142

Class T

Shares sold

1,019

3,807

3,871

Reinvestment of distributions

104

334

225

Shares redeemed

(1,054)

(2,644)

(1,686)

Net increase (decrease)

69

1,497

2,410

Annual Report

10. Share Transactions - continued

Shares

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class B

Shares sold

115

488

306

Reinvestment of distributions

11

41

35

Shares redeemed

(151)

(388)

(335)

Net increase (decrease)

(25)

141

6

Class C

Shares sold

183

850

397

Reinvestment of distributions

12

35

31

Shares redeemed

(126)

(474)

(443)

Net increase (decrease)

69

411

(15)

Investment Grade Bond

Shares sold

69,585

296,083

201,524

Issued in exchange for shares of Spartan Investment Grade Bond Fund

250,883

-

-

Reinvestment of distributions

16,933

48,523

37,730

Shares redeemed

(66,028)

(132,782)

(111,431)

Net increase (decrease)

271,373

211,824

127,823

Institutional Class

Shares sold

907

1,805

1,969

Reinvestment of distributions

46

125

58

Shares redeemed

(517)

(515)

(266)

Net increase (decrease)

436

1,415

1,761

Dollars

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class A

Shares sold

$ 12,921

$ 42,930

$ 26,275

Reinvestment of distributions

536

1,256

490

Shares redeemed

(5,603)

(36,700)

(18,200)

Net increase (decrease)

$ 7,854

$ 7,486

$ 8,565

Class T

Shares sold

$ 7,370

$ 28,191

$ 29,055

Reinvestment of distributions

757

2,473

1,687

Shares redeemed

(7,604)

(19,510)

(12,629)

Net increase (decrease)

$ 523

$ 11,154

$ 18,113

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

10. Share Transactions - continued

Dollars

Four months ended
August 31,

Years ended
April 30,

2006

2006

2005

Class B

Shares sold

$ 830

$ 3,626

$ 2,293

Reinvestment of distributions

82

301

262

Shares redeemed

(1,094)

(2,863)

(2,511)

Net increase (decrease)

$ (182)

$ 1,064

$ 44

Class C

Shares sold

$ 1,328

$ 6,307

$ 2,982

Reinvestment of distributions

89

261

234

Shares redeemed

(914)

(3,511)

(3,318)

Net increase (decrease)

$ 503

$ 3,057

$ (102)

Investment Grade Bond

Shares sold

$ 506,029

$ 2,186,923

$ 1,513,409

Issued in exchange for shares of Spartan Investment Grade Bond Fund

1,823,921

-

-

Reinvestment of distributions

122,970

359,152

282,446

Shares redeemed

(478,951)

(979,977)

(835,079)

Net increase (decrease)

$ 1,973,969

$ 1,566,098

$ 960,776

Institutional Class

Shares sold

$ 6,594

$ 13,369

$ 14,872

Reinvestment of distributions

334

926

438

Shares redeemed

(3,742)

(3,804)

(1,998)

Net increase (decrease)

$ 3,186

$ 10,491

$ 13,312

11. Reorganization.

On July 28, 2006, the Fund acquired all of the assets and assumed all of the liabilities of Spartan Investment Grade Bond Fund pursuant to an agreement and plan of reorganization approved by the Board of Trustees on April 20, 2006. The acquisition was accomplished by an exchange of 250,883 shares of Investment Grade Bond class for the 178,345 shares then outstanding (valued at $10.23) of Spartan Investment Grade Bond Fund. Based on the opinion of Fund counsel, the reorganization qualified as a tax-free transaction for federal income tax purposes with no gain or loss recognized by the funds or their shareholders. Spartan Investment Grade Bond Fund's net assets, including $(19,309) of unrealized depreciation, were combined with the Fund's net assets of $8,190,101 for total net assets after the acquisition of $10,014,022.

Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of Fidelity Investment Grade 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 Investment Grade Bond Fund (a fund of Fidelity Fixed-Income Trust) at August 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Investment Grade Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 24, 2006

Annual Report

Trustees and Officers

The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 346 funds advised by FMR or an affiliate. Mr. McCoy oversees 348 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 fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (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 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 Vice Chairman (2006- present), a Director (2003-present), and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd.

* 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, and a member of the Consumer Electronics Hall of Fame.

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 Sony Corporation (2006-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 Fixed-Income Trust. 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), 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).

Peter S. Lynch (62)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity Fixed-Income Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001- present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund.

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).

Jeffrey Moore (40)

Year of Election or Appointment: 2004

Vice President of Investment Grade Bond. Mr. Moore also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Moore worked as a research analyst and portfolio manager.

Eric D. Roiter (57)

Year of Election or Appointment: 1998

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 (47)

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 (37)

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 (60)

Year of Election or Appointment: 1986

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 (48)

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

A total of 8.62% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

The fund designates $127,261,654 of distributions paid during the fiscal year ended August 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

Board Approval of Investment Advisory Contracts and Management Fees

Fidelity Investment Grade 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. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, as applicable, the cumulative total returns of Class C and Fidelity Investment Grade 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 C and Fidelity Investment Grade 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 Investment Grade Bond Fund



The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Fidelity Investment Grade Bond (retail class) was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board also stated that the relative investment performance of Fidelity Investment Grade Bond (retail class) compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.

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 periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 8% means that 92% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.

Fidelity Investment Grade 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 Investment Grade Bond (retail class) to 10 basis points, and (iii) limit the total expenses for Fidelity Investment Grade 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 had been 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

Annual Report

Annual Report

Annual Report

Annual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)

Fidelity Investments Money
Management, Inc.

Fidelity Investments Japan Limited

Fidelity International Investment Advisors

Fidelity International Investment Advisors
(U.K.) Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Service Agents

Fidelity Investments Institutional Operations Company, Inc.

Boston, MA

Fidelity Service Company, Inc.

Boston, MA

Custodian

JPMorgan Chase Bank

New York, NY

(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

AIGBI-UANN-1006
1.784724.104

Fidelity®

Short-Term Bond

Fund

Annual Report

August 31, 2006

(2_fidelity_logos) (Registered_Trademark)

Contents

Chairman's Message

<Click Here>

Ned Johnson's message to shareholders.

Performance

<Click Here>

How the fund has done over time.

Management's Discussion

<Click Here>

The manager's review of fund performance, strategy and outlook.

Shareholder Expense Example

<Click Here>

An example of shareholder expenses.

Investment Changes

<Click Here>

A summary of major shifts in the fund's investments over the past four months.

Investments

<Click Here>

A complete list of the fund's investments with their market values.

Financial Statements

<Click Here>

Statements of assets and liabilities, operations, and changes in net assets,
as well as financial highlights.

Notes

<Click Here>

Notes to the financial statements.

Report of Independent Registered Public Accounting Firm

<Click Here>

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Board Approval of Investment Advisory Contracts and Management Fees

<Click Here>

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 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 fund nor Fidelity Distributors Corporation is a bank.

Annual Report

Chairman's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

Stock and bond markets around the world have seen largely positive results year to date, although weakness in the technology sector and growth stocks in general have tempered performance. While financial markets are always unpredictable, there are a number of time-tested principles that can put the historical odds in your favor.

One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.

You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).

A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.

We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.

Sincerely,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of the 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.

Note to Shareholders: The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Performance data reflects returns for periods ended August 31, 2006.

Average Annual Total Returns

Periods ended August 31, 2006

Past 1
year

Past 5
years

Past 10
years

Fidelity® Short-Term Bond Fund

3.36%

3.69%

5.09%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity® Short-Term Bond Fund on August 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the Lehman Brothers® 1-3 Year Government/Credit Bond Index performed over the same period.



Annual Report

Management's Discussion of Fund Performance

Comments from Andrew Dudley, Portfolio Manager of Fidelity® Short-Term Bond Fund

A weak start, a strong finish and a modestly positive overall return highlighted investment-grade bond performance for the year ending August 31, 2006. Bonds sank in the first two months of the period after Gulf Coast hurricanes sent energy prices soaring, prompting fears of a corresponding leap in inflation. However, core inflation readings - which strip out volatile food and energy prices - remained relatively benign. That, combined with an easing of oil prices, helped bonds rally between November and February. But the asset class fell again from March through May, partly as a result of continued interest rate hikes by the Federal Reserve Board. In all, the Fed raised interest rates seven times during the past year. Bonds rose again in July and August, though, after Fed Chairman Ben Bernanke hinted at a pause in its rate hike campaign, which was soon realized when the central bank left rates unchanged at its August meeting. The late rally helped the debt market gain 1.71% for the 12-month period as a whole according the Lehman Brothers® Aggregate Bond Index.

The fund returned 3.36% for the 12 months ending August 31, 2006 - the fund's new fiscal year end. In comparison, the Lehman Brothers 1-3 Year Government/Credit Bond Index rose 3.09%. For the four months ending August 31, 2006 - the period since I last reported to you - the fund gained 1.95%, while the Lehman Brothers index rose 1.86%. Boosting our returns relative to the index during the past year 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 both directly and through our investment 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 - outpaced the index. Also aiding the fund's performance relative to the index was yield-curve positioning. A position in the Fidelity Ultra-Short Central Fund, combined with an overweighting in bonds with maturities of between three and five years, worked in our favor early in the period. Modestly detracting from returns was an underweighting in government agency securities, which performed well during the year.

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

The Board of Trustees approved a change in the fiscal year end of the fund from April 30th to August 31st, effective August 31, 2006. Expenses are based on the past six months of activity for the period ended August 31, 2006.

As a shareholder of the 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 Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (March 1, 2006 to August 31, 2006).

Actual Expenses

The first line of the accompanying table 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 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. 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 provides information about hypothetical account values and hypothetical expenses based on the 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. 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.

Annual Report

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

Beginning
Account Value
March 1, 2006

Ending
Account Value
August 31, 2006

Expenses Paid
During Period*
March 1, 2006
to August 31, 2006

Actual

$ 1,000.00

$ 1,024.20

$ 2.30

Hypothetical (5% return per year before expenses)

$ 1,000.00

$ 1,022.94

$ 2.29

* Expenses are equal to the Fund's annualized expense ratio of .45%; multiplied by the average account value over the period, multiplied by 184/365 (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.

Annual Report

Investment Changes

The current period information is as of the Fund's new fiscal year end. The comparative information is as of the Fund's most recently published annual report.

Quality Diversification (% of fund's net assets)

As of August 31, 2006

As of April 30, 2006

U.S. Government and
U.S. Government
Agency Obligations 38.0%

U.S. Government and
U.S. Government
Agency Obligations 36.6%

AAA 20.9%

AAA 22.0%

AA 5.0%

AA 4.8%

A 11.7%

A 10.8%

BBB 18.5%

BBB 17.8%

BB and Below 0.9%

BB and Below 1.5%

Not Rated 1.7%

Not Rated 2.0%

Short-Term
Investments and
Net Other Assets 3.3%

Short-Term
Investments and
Net Other Assets 4.5%



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 August 31, 2006

4 months ago

Years

2.6

2.7

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 August 31, 2006

4 months ago

Years

1.7

1.7

Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example.

Asset Allocation (% of fund's net assets)

As of August 31, 2006*

As of April 30, 2006**

Corporate Bonds 20.8%

Corporate Bonds 20.6%

U.S. Government and
U.S. Government
Agency Obligations 38.0%

U.S. Government and
U.S. Government
Agency Obligations 36.6%

Asset-Backed
Securities 21.0%

Asset-Backed
Securities 20.1%

CMOs and Other Mortgage Related Securities 16.6%

CMOs and Other Mortgage Related Securities 17.6%

Other Investments 0.3%

Other Investments 0.6%

Short-Term
Investments and
Net Other Assets 3.3%

Short-Term
Investments and
Net Other Assets 4.5%

* Foreign investments

7.5%

** Foreign investments

7.1%

* Futures and Swaps

15.1%

** Futures and Swaps

14.1%



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.

Annual Report

Investments August 31, 2006

Showing Percentage of Net Assets

Nonconvertible Bonds - 20.4%

Principal Amount (000s)

Value (Note 1) (000s)

CONSUMER DISCRETIONARY - 2.9%

Auto Components - 0.4%

DaimlerChrysler NA Holding Corp.:

5.74% 3/13/09 (f)

$ 11,200

$ 11,213

5.75% 8/10/09

15,600

15,658

26,871

Household Durables - 0.3%

Whirlpool Corp. 6.125% 6/15/11

20,500

20,789

Media - 2.2%

AOL Time Warner, Inc. 6.75% 4/15/11

15,000

15,542

British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06

11,690

11,704

Continental Cablevision, Inc. 9% 9/1/08

20,700

22,074

Cox Communications, Inc.:

3.875% 10/1/08

14,785

14,293

6.4% 8/1/08

3,170

3,208

Hearst-Argyle Television, Inc. 7% 11/15/07

5,750

5,805

Liberty Media Corp.:

6.8294% 9/17/06 (f)

12,107

12,111

7.75% 7/15/09

3,900

4,066

7.875% 7/15/09

5,000

5,226

Time Warner Entertainment Co. LP 7.25% 9/1/08

12,764

13,179

Univision Communications, Inc.:

3.5% 10/15/07

2,515

2,441

3.875% 10/15/08

10,110

9,645

Viacom, Inc. 5.75% 4/30/11 (c)

16,335

16,201

135,495

TOTAL CONSUMER DISCRETIONARY

183,155

CONSUMER STAPLES - 0.4%

Food Products - 0.2%

H.J. Heinz Co. 6.428% 12/1/08 (c)(f)

5,935

6,048

Kraft Foods, Inc. 4% 10/1/08

7,770

7,571

13,619

Tobacco - 0.2%

Altria Group, Inc. 5.625% 11/4/08

9,500

9,552

TOTAL CONSUMER STAPLES

23,171

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

ENERGY - 1.7%

Energy Equipment & Services - 0.1%

Cooper Cameron Corp. 2.65% 4/15/07

$ 6,415

$ 6,302

Oil, Gas & Consumable Fuels - 1.6%

Canadian Oil Sands Ltd. 4.8% 8/10/09 (c)

7,435

7,275

Delek & Avner Yam Tethys Ltd. 5.326% 8/1/13 (c)

7,822

7,619

Duke Capital LLC:

4.37% 3/1/09

9,565

9,328

7.5% 10/1/09

9,800

10,394

Enterprise Products Operating LP:

4% 10/15/07

10,520

10,344

4.625% 10/15/09

11,730

11,410

Kinder Morgan Energy Partners LP:

5.35% 8/15/07

8,100

8,026

6.3% 2/1/09

2,005

2,031

Pemex Project Funding Master Trust:

6.125% 8/15/08

15,990

16,054

9.125% 10/13/10

10,000

11,160

Petroleum Export Ltd.:

4.623% 6/15/10 (c)

5,133

5,059

4.633% 6/15/10 (c)

3,084

3,040

101,740

TOTAL ENERGY

108,042

FINANCIALS - 6.7%

Capital Markets - 0.6%

Bank of New York Co., Inc.:

3.4% 3/15/13 (f)

14,750

14,333

4.25% 9/4/12 (f)

7,460

7,389

Lehman Brothers Holdings E-Capital Trust I 6.1725% 8/19/65 (f)

4,700

4,719

Lehman Brothers Holdings, Inc. 4.25% 1/27/10

3,260

3,153

Merrill Lynch & Co., Inc. 3.7% 4/21/08

6,910

6,744

Morgan Stanley:

3.625% 4/1/08

425

414

5.8% 4/1/07

1,500

1,502

38,254

Commercial Banks - 0.4%

Bank One Corp. 6% 8/1/08

4,700

4,756

Corporacion Andina de Fomento yankee 7.25% 3/1/07

4,435

4,470

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Commercial Banks - continued

Korea Development Bank:

3.875% 3/2/09

$ 12,600

$ 12,184

4.75% 7/20/09

5,500

5,419

26,829

Consumer Finance - 0.8%

American General Finance Corp. 4.5% 11/15/07

5,200

5,150

Household Finance Corp.:

4.125% 12/15/08

4,170

4,067

4.75% 5/15/09

8,978

8,877

6.4% 6/17/08

2,715

2,765

Household International, Inc. 5.836% 2/15/08

10,500

10,571

HSBC Finance Corp. 4.125% 3/11/08

13,140

12,925

MBNA Capital I 8.278% 12/1/26

4,885

5,108

49,463

Diversified Financial Services - 0.8%

Aspetuck Trust 5.7869% 10/16/06 (f)(i)

13,080

13,151

Bank of America Corp. 7.4% 1/15/11

485

523

Iberbond 2004 PLC 4.826% 12/24/17 (i)

11,628

11,236

ICB OJSC 6.2% 9/29/15 (Issued by Or-ICB for ICB OJSC) (f)

1,750

1,729

ILFC E-Capital Trust I 5.9% 12/21/65 (c)(f)

8,150

8,148

J.P. Morgan & Co., Inc. 6.25% 1/15/09

4,935

5,024

Keycorp Institutional Capital B 8.25% 12/15/26

7,850

8,212

Prime Property Funding II 6.25% 5/15/07 (c)

6,000

6,008

54,031

Insurance - 0.7%

Hartford Financial Services Group, Inc. 5.55% 8/16/08

3,565

3,579

The Chubb Corp.:

4.934% 11/16/07

15,345

15,265

5.472% 8/16/08

15,000

15,016

The St. Paul Travelers Companies, Inc.:

5.01% 8/16/07

7,185

7,125

5.75% 3/15/07

3,818

3,825

Travelers Property Casualty Corp. 3.75% 3/15/08

2,830

2,756

47,566

Real Estate Investment Trusts - 2.5%

Arden Realty LP 8.5% 11/15/10

7,855

8,781

AvalonBay Communities, Inc. 5% 8/1/07

5,260

5,203

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Real Estate Investment Trusts - continued

Brandywine Operating Partnership LP:

4.5% 11/1/09

$ 9,995

$ 9,685

5.625% 12/15/10

7,470

7,470

BRE Properties, Inc.:

5.95% 3/15/07

3,310

3,320

7.2% 6/15/07

6,690

6,755

Camden Property Trust:

4.375% 1/15/10

5,440

5,276

5.875% 6/1/07

3,305

3,313

Colonial Properties Trust:

4.75% 2/1/10

5,005

4,859

7% 7/14/07

4,784

4,835

Developers Diversified Realty Corp.:

3.875% 1/30/09

11,505

11,093

5% 5/3/10

4,910

4,830

7% 3/19/07

7,905

7,966

Duke Realty LP 5.625% 8/15/11

1,845

1,848

iStar Financial, Inc. 6.55% 3/12/07 (f)

12,630

12,701

JDN Realty Corp. 6.95% 8/1/07

3,215

3,213

Simon Property Group LP:

4.6% 6/15/10

8,660

8,422

4.875% 8/15/10

13,630

13,352

5.6% 9/1/11

8,605

8,627

6.875% 11/15/06

14,862

14,894

Tanger Properties LP 9.125% 2/15/08

9,630

10,063

156,506

Real Estate Management & Development - 0.4%

Chelsea GCA Realty Partnership LP 7.25% 10/21/07

6,260

6,329

EOP Operating LP:

4.65% 10/1/10

5,728

5,535

6.763% 6/15/07

8,650

8,725

7.75% 11/15/07

3,100

3,178

23,767

Thrifts & Mortgage Finance - 0.5%

Countrywide Home Loans, Inc. 5.625% 5/15/07

3,765

3,768

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - continued

Thrifts & Mortgage Finance - continued

Residential Capital Corp. 6.875% 6/29/07 (f)

$ 15,000

$ 15,077

Washington Mutual, Inc. 4.375% 1/15/08

11,170

11,026

29,871

TOTAL FINANCIALS

426,287

INDUSTRIALS - 1.3%

Air Freight & Logistics - 0.3%

Federal Express Corp. pass thru trust certificates 7.53% 9/23/06

121

121

FedEx Corp. 5.5% 8/15/09

18,575

18,670

18,791

Airlines - 0.9%

America West Airlines pass thru certificates 7.33% 7/2/08

8,211

8,252

American Airlines, Inc. pass thru trust certificates:

6.855% 10/15/10

1,768

1,791

6.978% 10/1/12

393

404

Continental Airlines, Inc. pass thru trust certificates:

6.32% 11/1/08

15,400

15,483

7.056% 3/15/11

2,110

2,175

United Airlines pass thru certificates:

6.071% 9/1/14

5,237

5,237

6.201% 3/1/10

4,330

4,335

6.602% 9/1/13

10,599

10,598

7.186% 10/1/12

10,000

10,200

58,475

Commercial Services & Supplies - 0.1%

R.R. Donnelley & Sons Co. 3.75% 4/1/09

6,060

5,730

TOTAL INDUSTRIALS

82,996

INFORMATION TECHNOLOGY - 0.4%

Communications Equipment - 0.4%

Motorola, Inc. 4.608% 11/16/07

24,000

23,782

MATERIALS - 0.2%

Containers & Packaging - 0.1%

Sealed Air Corp. 6.95% 5/15/09 (c)

4,365

4,516

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

MATERIALS - continued

Paper & Forest Products - 0.1%

International Paper Co. 4.25% 1/15/09

$ 6,130

$ 5,981

TOTAL MATERIALS

10,497

TELECOMMUNICATION SERVICES - 3.5%

Diversified Telecommunication Services - 2.9%

Ameritech Capital Funding Corp. 6.25% 5/18/09

7,715

7,822

AT&T Corp. 6% 3/15/09

15,575

15,771

BellSouth Corp. 4.2% 9/15/09

7,115

6,878

Deutsche Telekom International Finance BV 5.375% 3/23/11

20,000

19,795

Sprint Capital Corp. 6% 1/15/07

11,760

11,775

Telecom Italia Capital SA:

4% 11/15/08

16,130

15,630

4% 1/15/10

15,080

14,329

Telefonica Emisiones SAU 5.984% 6/20/11

26,000

26,387

Telefonos de Mexico SA de CV:

4.5% 11/19/08

12,600

12,315

4.75% 1/27/10

12,910

12,529

TELUS Corp. yankee 7.5% 6/1/07

16,185

16,410

Verizon Global Funding Corp.:

6.125% 6/15/07

12,295

12,351

7.25% 12/1/10

13,925

14,859

186,851

Wireless Telecommunication Services - 0.6%

America Movil SA de CV 4.125% 3/1/09

17,610

16,995

Vodafone Group PLC 5.5% 6/15/11

20,000

19,886

36,881

TOTAL TELECOMMUNICATION SERVICES

223,732

UTILITIES - 3.3%

Electric Utilities - 1.8%

American Electric Power Co., Inc. 4.709% 8/16/07

14,020

13,931

Entergy Corp. 7.75% 12/15/09 (c)

12,000

12,740

Exelon Corp. 4.45% 6/15/10

14,150

13,638

FirstEnergy Corp. 5.5% 11/15/06

13,022

13,020

Monongahela Power Co. 5% 10/1/06

5,685

5,681

Pepco Holdings, Inc.:

4% 5/15/10

4,570

4,328

Nonconvertible Bonds - continued

Principal Amount (000s)

Value (Note 1) (000s)

UTILITIES - continued

Electric Utilities - continued

Pepco Holdings, Inc.:

5.5% 8/15/07

$ 16,221

$ 16,213

Progress Energy, Inc.:

5.85% 10/30/08

4,000

4,032

7.1% 3/1/11

20,505

21,875

Southwestern Public Service Co. 5.125% 11/1/06

3,900

3,898

TXU Energy Co. LLC 6.125% 3/15/08

3,510

3,537

112,893

Gas Utilities - 0.1%

NiSource Finance Corp. 3.2% 11/1/06

4,940

4,922

Independent Power Producers & Energy Traders - 0.5%

Constellation Energy Group, Inc.:

6.125% 9/1/09

11,680

11,877

6.35% 4/1/07

11,715

11,763

Duke Capital LLC 4.331% 11/16/06

4,805

4,792

TXU Corp. 4.8% 11/15/09

6,500

6,240

34,672

Multi-Utilities - 0.9%

Dominion Resources, Inc. 4.125% 2/15/08

9,925

9,748

DTE Energy Co. 5.63% 8/16/07

11,380

11,383

MidAmerican Energy Holdings, Inc. 4.625% 10/1/07

4,180

4,145

NiSource, Inc. 3.628% 11/1/06

6,050

6,031

PSEG Funding Trust I 5.381% 11/16/07

12,900

12,867

Sempra Energy:

4.621% 5/17/07

9,545

9,488

4.75% 5/15/09

4,475

4,405

58,067

TOTAL UTILITIES

210,554

TOTAL NONCONVERTIBLE BONDS

(Cost $1,301,436)

1,292,216

U.S. Government and Government Agency Obligations - 19.5%

U.S. Government Agency Obligations - 6.9%

Fannie Mae:

3.25% 8/15/08

12,882

12,441

3.25% 2/15/09

128,000

122,726

U.S. Government and Government Agency Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

U.S. Government Agency Obligations - continued

Fannie Mae: - continued

4% 9/2/08 (b)

$ 73,170

$ 71,494

Freddie Mac:

2.7% 3/16/07

84,000

82,802

3.875% 6/15/08

152,291

149,190

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

438,653

U.S. Treasury Inflation Protected Obligations - 0.7%

U.S. Treasury Inflation-Indexed Notes 3.875% 1/15/09

45,155

46,672

U.S. Treasury Obligations - 11.9%

U.S. Treasury Bonds 12% 8/15/13

61,275

69,494

U.S. Treasury Notes:

3.375% 2/15/08 (b)

250,000

244,785

3.75% 5/15/08 (e)

306,903

301,540

4.375% 11/15/08 (b)

55,000

54,555

4.875% 5/15/09

84,000

84,318

TOTAL U.S. TREASURY OBLIGATIONS

754,692

TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS

(Cost $1,251,561)

1,240,017

U.S. Government Agency - Mortgage Securities - 10.5%

Fannie Mae - 7.9%

3.738% 10/1/33 (f)

756

740

3.744% 1/1/35 (f)

1,032

1,015

3.748% 12/1/34 (f)

678

666

3.75% 1/1/34 (f)

683

668

3.757% 10/1/33 (f)

627

614

3.788% 6/1/34 (f)

2,945

2,867

3.796% 12/1/34 (f)

156

153

3.81% 6/1/33 (f)

551

542

3.82% 10/1/33 (f)

9,476

9,289

3.834% 1/1/35 (f)

1,873

1,841

3.838% 4/1/33 (f)

2,046

2,014

3.846% 1/1/35 (f)

635

624

3.851% 10/1/33 (f)

17,458

17,150

3.866% 1/1/35 (f)

1,125

1,109

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

3.88% 6/1/33 (f)

$ 2,759

$ 2,715

3.898% 10/1/34 (f)

765

758

3.905% 12/1/34 (f)

732

723

3.938% 6/1/34 (f)

5,119

5,004

3.938% 11/1/34 (f)

1,289

1,277

3.941% 5/1/34 (f)

188

189

3.952% 1/1/35 (f)

802

794

3.954% 12/1/34 (f)

614

609

3.955% 12/1/34 (f)

4,181

4,137

3.957% 5/1/33 (f)

216

213

3.992% 1/1/35 (f)

511

505

3.996% 12/1/34 (f)

423

419

3.996% 12/1/34 (f)

759

751

3.998% 2/1/35 (f)

593

586

4.022% 1/1/35 (f)

1,172

1,160

4.029% 1/1/35 (f)

320

316

4.034% 10/1/18 (f)

649

638

4.037% 1/1/35 (f)

468

462

4.041% 2/1/35 (f)

538

532

4.052% 12/1/34 (f)

1,147

1,140

4.058% 1/1/35 (f)

1,092

1,078

4.079% 2/1/35 (f)

1,053

1,040

4.082% 4/1/33 (f)

259

256

4.083% 2/1/35 (f)

346

342

4.086% 2/1/35 (f)

387

382

4.094% 11/1/34 (f)

887

878

4.102% 2/1/35 (f)

1,949

1,932

4.108% 1/1/35 (f)

1,180

1,166

4.114% 1/1/35 (f)

1,144

1,134

4.116% 2/1/35 (f)

1,335

1,320

4.126% 1/1/35 (f)

1,957

1,936

4.14% 7/1/34 (f)

3,283

3,220

4.143% 2/1/35 (f)

964

954

4.144% 1/1/35 (f)

2,035

2,020

4.156% 1/1/35 (f)

2,072

2,062

4.162% 10/1/34 (f)

1,559

1,553

4.171% 1/1/35 (f)

1,651

1,612

4.181% 10/1/34 (f)

1,666

1,658

4.181% 11/1/34 (f)

266

265

4.187% 1/1/35 (f)

991

983

4.202% 1/1/35 (f)

575

571

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

4.25% 1/1/34 (f)

$ 1,012

$ 997

4.25% 2/1/34 (f)

807

794

4.25% 2/1/35 (f)

685

670

4.272% 3/1/35 (f)

608

601

4.274% 2/1/35 (f)

352

350

4.275% 8/1/33 (f)

1,244

1,232

4.282% 7/1/34 (f)

493

493

4.287% 12/1/34 (f)

394

389

4.29% 6/1/33 (f)

427

423

4.294% 1/1/34 (f)

5,086

5,016

4.296% 10/1/33 (f)

329

325

4.297% 3/1/33 (f)

297

290

4.3% 1/1/34 (f)

1,102

1,086

4.3% 10/1/34 (f)

166

165

4.306% 5/1/35 (f)

838

830

4.31% 3/1/33 (f)

938

929

4.313% 3/1/33 (f)

408

399

4.327% 3/1/35 (f)

1,443

1,429

4.337% 9/1/34 (f)

2,065

2,047

4.346% 10/1/34 (f)

2,390

2,375

4.349% 1/1/35 (f)

2,104

2,088

4.35% 1/1/35 (f)

848

830

4.351% 9/1/34 (f)

841

840

4.356% 4/1/35 (f)

378

375

4.362% 2/1/34 (f)

1,794

1,770

4.39% 12/1/34 (f)

3,398

3,371

4.391% 11/1/34 (f)

1,782

1,766

4.393% 10/1/34 (f)

4,288

4,220

4.394% 5/1/35 (f)

1,869

1,855

4.396% 2/1/35 (f)

1,239

1,214

4.401% 10/1/34 (f)

7,412

7,357

4.406% 10/1/34 (f)

2,821

2,809

4.423% 10/1/34 (f)

3,070

3,064

4.426% 1/1/35 (f)

773

767

4.438% 3/1/35 (f)

938

919

4.456% 8/1/34 (f)

2,333

2,305

4.464% 5/1/35 (f)

634

629

4.481% 5/1/35 (f)

5,703

5,684

4.494% 1/1/35 (f)

857

849

4.497% 8/1/34 (f)

1,329

1,339

4.514% 10/1/35 (f)

363

360

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

4.515% 8/1/35 (f)

$ 1,593

$ 1,579

4.516% 7/1/34 (f)

3,139

3,098

4.532% 2/1/35 (f)

4,032

4,004

4.537% 7/1/34 (f)

854

851

4.539% 7/1/35 (f)

2,311

2,292

4.54% 2/1/35 (f)

607

603

4.554% 1/1/35 (f)

1,290

1,282

4.554% 2/1/35 (f)

418

415

4.557% 7/1/35 (f)

2,033

2,017

4.56% 9/1/34 (f)

2,379

2,390

4.567% 6/1/35 (f)

2,209

2,192

4.577% 2/1/35 (f)

367

361

4.584% 2/1/35 (f)

2,958

2,909

4.601% 8/1/34 (f)

781

775

4.601% 2/1/35 (f)

3,096

3,065

4.609% 11/1/34 (f)

397

392

4.643% 1/1/33 (f)

488

486

4.645% 3/1/35 (f)

297

296

4.661% 3/1/35 (f)

4,934

4,906

4.703% 6/1/35 (f)

5,760

5,730

4.704% 9/1/34 (f)

230

229

4.708% 10/1/32 (f)

134

133

4.713% 2/1/33 (f)

142

143

4.727% 7/1/34 (f)

1,892

1,876

4.729% 10/1/34 (f)

2,627

2,602

4.732% 10/1/32 (f)

219

222

4.736% 1/1/35 (f)

110

109

4.77% 12/1/34 (f)

326

323

4.778% 12/1/34 (f)

786

779

4.8% 2/1/35 (f)

2,724

2,693

4.803% 12/1/32 (f)

863

863

4.807% 9/1/34 (f)

12,473

12,370

4.808% 8/1/34 (f)

661

661

4.815% 5/1/33 (f)

36

36

4.817% 2/1/33 (f)

994

990

4.818% 11/1/34 (f)

2,107

2,089

4.828% 9/1/34 (f)

2,155

2,139

4.832% 10/1/35 (f)

2,776

2,765

4.837% 9/1/34 (f)

2,655

2,635

4.847% 9/1/34 (f)

233

231

4.855% 10/1/35 (f)

2,102

2,082

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fannie Mae - continued

4.858% 8/1/34 (f)

$ 2,730

$ 2,711

4.86% 1/1/35 (f)

13,488

13,383

4.876% 7/1/34 (f)

3,556

3,534

4.921% 2/1/35 (f)

7,167

7,106

4.96% 8/1/34 (f)

7,936

7,900

4.989% 12/1/32 (f)

81

81

4.99% 11/1/32 (f)

498

500

4.994% 11/1/35 (f)

47,222

46,817

4.995% 2/1/35 (f)

249

248

5% 3/1/18 to 10/1/18

13,795

13,558

5.007% 9/1/34 (f)

9,572

9,532

5.01% 7/1/34 (f)

341

340

5.021% 4/1/35 (f)

2,295

2,290

5.037% 11/1/34 (f)

165

166

5.091% 5/1/35 (f)

4,094

4,090

5.096% 1/1/34 (f)

641

642

5.1% 9/1/34 (f)

776

774

5.108% 5/1/35 (f)

2,396

2,395

5.15% 1/1/36 (f)

6,608

6,599

5.177% 5/1/35 (f)

2,627

2,617

5.185% 8/1/33 (f)

937

939

5.196% 6/1/35 (f)

2,846

2,848

5.205% 3/1/35 (f)

370

369

5.269% 7/1/35 (f)

360

360

5.359% 12/1/34 (f)

1,073

1,075

5.5% 3/1/13 to 5/1/25

77,097

76,817

5.513% 5/1/36 (f)

4,837

4,862

5.534% 5/1/36 (f)

2,552

2,565

6.5% 11/1/11 to 3/1/35

47,683

48,602

7% 12/1/07 to 5/1/32

6,454

6,598

7.5% 6/1/12 to 11/1/31

435

448

11.5% 11/1/15

167

180

TOTAL FANNIE MAE

500,392

Freddie Mac - 2.5%

3.946% 3/1/34 (f)

7,284

7,110

4.043% 12/1/34 (f)

675

665

4.097% 12/1/34 (f)

979

965

4.124% 1/1/35 (f)

933

920

4.166% 1/1/34 (f)

9,998

9,809

4.256% 3/1/35 (f)

849

838

U.S. Government Agency - Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Freddie Mac - continued

4.285% 3/1/34 (f)

$ 7,175

$ 7,044

4.298% 5/1/35 (f)

1,507

1,490

4.301% 12/1/34 (f)

990

966

4.319% 10/1/34 (f)

1,636

1,625

4.326% 2/1/35 (f)

1,863

1,841

4.328% 1/1/35 (f)

2,204

2,178

4.38% 2/1/35 (f)

1,062

1,037

4.407% 8/1/35 (f)

18,154

17,914

4.438% 2/1/34 (f)

914

900

4.443% 3/1/35 (f)

960

938

4.454% 6/1/35 (f)

1,260

1,244

4.458% 3/1/35 (f)

1,063

1,040

4.546% 2/1/35 (f)

1,560

1,528

4.742% 3/1/33 (f)

325

323

4.773% 10/1/32 (f)

122

123

4.93% 9/1/35 (f)

4,637

4,576

4.93% 11/1/35 (f)

4,117

4,091

5.003% 4/1/35 (f)

4,565

4,545

5.251% 1/1/36 (f)

4,444

4,435

5.305% 6/1/35 (f)

3,159

3,147

5.5% 9/1/21 (d)

28,672

28,563

5.5% 7/1/23 to 4/1/24

15,724

15,550

5.504% 8/1/33 (f)

420

422

5.619% 12/1/35 (f)

7,347

7,386

5.652% 4/1/32 (f)

166

168

5.888% 6/1/35 (f)

2,077

2,095

7.5% 7/1/34

18,571

19,323

8.5% 5/1/27 to 7/1/28

495

535

12% 11/1/19

44

49

TOTAL FREDDIE MAC

155,383

Government National Mortgage Association - 0.1%

4.25% 7/20/34 (f)

1,357

1,341

7% 11/15/27 to 8/15/32

6,261

6,501

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

7,842

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $668,091)

663,617

Asset-Backed Securities - 19.1%

Principal Amount (000s)

Value (Note 1) (000s)

Accredited Mortgage Loan Trust:

Series 2003-2 Class A1, 4.23% 10/25/33

$ 4,002

$ 3,865

Series 2003-3 Class A1, 4.46% 1/25/34

3,948

3,772

Series 2004-2 Class A2, 5.6244% 7/25/34 (f)

10,509

10,544

Series 2004-4 Class A2D, 5.6744% 1/25/35 (f)

1,789

1,795

ACE Securities Corp.:

Series 2003-HE1:

Class M1, 5.9744% 11/25/33 (f)

1,852

1,859

Class M2, 7.0244% 11/25/33 (f)

1,228

1,241

Series 2004-OP1 Class M1, 5.8444% 4/25/34 (f)

835

840

Series 2006-OP1 Class M1, 5.665% 4/25/36 (f)

8,000

8,000

Aesop Funding II LLC Series 2005-1A Class A1, 3.95% 4/20/08 (c)

8,000

7,836

American Express Credit Account Master Trust
Series 2004-C Class C, 5.83% 2/15/12 (c)(f)

7,151

7,168

AmeriCredit Automobile Receivables Trust:

Series 2004-1:

Class B, 3.7% 1/6/09

675

671

Class C, 4.22% 7/6/09

720

711

Class D, 5.07% 7/6/10

5,065

5,023

Series 2004-CA Class A4, 3.61% 5/6/11

2,505

2,453

Series 2005-1 Class D, 5.04% 5/6/11

9,500

9,381

Series 2005-CF Class A4, 4.63% 6/6/12

11,130

11,012

Series 2005-DA Class A4, 5.02% 11/6/12

15,975

15,928

Series 2006-1 Class D, 5.49% 4/6/12

4,635

4,628

Series 2006-RM Class A1, 5.37% 10/6/09

14,000

14,009

Ameriquest Mortgage Securities, Inc.:

Series 2004-R10:

Class M1, 6.0244% 11/25/34 (f)

5,485

5,518

Class M5, 6.4744% 11/25/34 (f)

2,425

2,457

Series 2004-R11 Class M1, 5.9844% 11/25/34 (f)

8,015

8,068

Series 2004-R3 Class M2, 6.4744% 5/25/34 (f)

11,810

11,951

Series 2004-R9 Class M5, 6.7244% 10/25/34 (f)

885

899

Amortizing Residential Collateral Trust Series 2002-BC3 Class A, 5.6544% 6/25/32 (f)

981

984

ARG Funding Corp. Series 2005-1A Class A1, 4.02% 4/20/09 (c)

15,900

15,607

Argent Securities Trust Series 2006-M1:

Class M7, 6.385% 7/25/36 (f)

4,400

4,400

Class M8, 6.585% 7/25/36 (f)

4,400

4,400

Argent Securities, Inc.:

Series 2003-W3 Class M2, 7.1244% 9/25/33 (f)

14,400

14,555

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Argent Securities, Inc.: - continued

Series 2003-W7:

Class A2, 5.7144% 3/1/34 (f)

$ 867

$ 868

Class M1, 6.0144% 3/1/34 (f)

11,700

11,786

Series 2003-W9 Class M1, 6.0144% 3/25/34 (f)

8,200

8,246

Series 2004-W11 Class M2, 6.0244% 11/25/34 (f)

3,030

3,065

Series 2004-W5 Class M1, 5.9244% 4/25/34 (f)

3,990

3,995

Arran Funding Ltd. Series 2005-A Class C, 5.65% 12/15/10 (f)

14,290

14,308

Asset Backed Securities Corp. Home Equity Loan Trust:

Series 2003-HE7 Class A3, 5.69% 12/15/33 (f)

675

677

Series 2004-HE3 Class M2, 6.4444% 6/25/34 (f)

3,325

3,359

Series 2005-HE2:

Class M1, 5.7744% 3/25/35 (f)

7,116

7,156

Class M2, 5.8244% 3/25/35 (f)

1,780

1,794

Series 2005-HE3 Class A4, 5.5244% 4/25/35 (f)

9,577

9,580

Series 2006-HE2 Class M3, 5.7144% 3/25/36 (f)

3,195

3,201

Bayview Financial Asset Trust Series 2003-F Class A, 5.8281% 9/28/43 (f)

4,603

4,605

Bayview Financial Mortgage Loan Trust Series 2004-A Class A, 5.7781% 2/28/44 (f)

3,557

3,564

Bear Stearns Asset Backed Securities, Inc. Series 2004-HE8:

Class M1, 5.9744% 9/25/34 (f)

7,205

7,249

Class M2, 6.5244% 9/25/34 (f)

3,570

3,589

BMW Vehicle Owner Trust Series 2005-A Class B, 4.42% 4/25/11

3,965

3,912

Capital Auto Receivables Asset Trust:

Series 2005-1 Class B, 5.705% 6/15/10 (f)

4,675

4,696

Series 2006-1 Class B, 5.26% 10/15/10

2,055

2,048

Series 2006-SN1A:

Class B, 5.5% 4/20/10 (c)

1,030

1,032

Class C, 5.77% 5/20/10 (c)

990

992

Class D, 6.15% 4/20/11 (c)

1,680

1,683

Capital One Auto Finance Trust:

Series 2005-BSS:

Class B, 4.32% 5/15/10

5,385

5,306

Series D, 4.8% 9/15/12

4,585

4,514

Series 2006-B Class A3A, 5.45% 2/15/11

12,500

12,553

Capital One Master Trust:

Series 2001-1 Class B, 5.84% 12/15/10 (f)

8,715

8,751

Series 2001-6 Class C, 6.7% 6/15/11 (c)

13,900

14,240

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Capital One Prime Auto Receivable Trust Series 2005-1
Class B, 4.58% 8/15/12

$ 7,118

$ 6,988

Carrington Mortgage Loan Trust Series 2006-NC3
Class M10, 7.37% 8/25/36 (c)(f)

890

798

Caterpillar Financial Asset Trust Series 2006-A:

Class A3, 5.57% 5/25/10

12,300

12,299

Class B, 5.71% 6/25/12

13,600

13,596

CDC Mortgage Capital Trust Series 2002-HE2 Class M1, 6.3744% 1/25/33 (f)

4,639

4,641

Chase Credit Card Master Trust Series 2003-6 Class B, 5.68% 2/15/11 (f)

9,850

9,912

Chase Credit Card Owner Trust Series 2004-1 Class B, 5.53% 5/15/09 (f)

4,125

4,125

Chase Issuance Trust:

Series 2004-C3 Class C3, 5.8% 6/15/12 (f)

13,025

13,100

Series 2006-C3 Class C3, 5.56% 6/15/11 (f)

12,500

12,500

CIT Equipment Collateral Trust Series 2006-VT1:

Class A3, 5.13% 12/21/08

12,130

12,119

Class B, 5.23% 2/20/13

3,915

3,910

Class D, 5.48% 2/20/13

4,352

4,344

Citibank Credit Card Issuance Trust:

Series 2002-C1 Class C1, 6.47% 2/9/09 (f)

13,600

13,649

Series 2003-C1 Class C1, 6.5888% 4/7/10 (f)

12,200

12,378

Citigroup Mortgage Loan Trust Series 2003-HE4
Class A, 5.7344% 12/25/33 (c)(f)

5,471

5,471

CNH Equipment Trust Series 2005-B Class B, 4.57% 7/16/12

3,195

3,096

College Loan Corp. Trust I Series 2006-1 Class AIO, 10% 7/25/08 (h)

24,670

4,622

Countrywide Home Loans, Inc.:

Series 2004-2:

Class 3A4, 5.5744% 7/25/34 (f)

1,848

1,849

Class M1, 5.8244% 5/25/34 (f)

5,200

5,220

Series 2004-3 Class 3A4, 5.5744% 8/25/34 (f)

3,493

3,502

Series 2004-4:

Class A, 5.6944% 8/25/34 (f)

793

794

Class M1, 5.8044% 7/25/34 (f)

3,650

3,672

Class M2, 5.8544% 6/25/34 (f)

4,405

4,427

Series 2005-1 Class M1, 5.7444% 8/25/35 (f)

2,755

2,763

CPS Auto Receivables Trust:

Series 2006-A Class A2, 5.22% 1/15/10 (c)

2,996

2,985

Series 2006-B Class A3, 5.73% 6/15/16 (c)

5,720

5,763

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Credit-Based Asset Backed Servicing and Securitization Mortgage Loan Certificates Series 2006-SC1 Class A, 5.5944% 5/25/36 (c)(f)

$ 6,873

$ 6,875

Crown Castle Towers LLC/Crown Atlantic Holdings Sub LLC/Crown Communication, Inc. Series 2005-1A Class C, 5.074% 6/15/35 (c)

3,662

3,609

CS First Boston Mortgage Securities Corp.:

Series 2003-6 Class M2, 6.9944% 2/25/34 (f)

735

745

Series 2005-FIX1 Class A2, 4.31% 5/25/35

7,980

7,845

DaimlerChrysler Auto Trust Series 2004-B Class B, 3.89% 1/8/11

3,230

3,163

Discover Card Master Trust I Series 2003-4 Class B1, 5.66% 5/16/11 (f)

11,240

11,296

Diversified REIT Trust Series 2000-1A:

Class A2, 6.971% 3/8/10 (c)

5,532

5,655

Class E, 6.971% 3/8/10 (c)

4,135

4,285

Drive Auto Receivables Trust:

Series 2005-1 Class A3, 3.75% 4/15/09 (c)

3,925

3,897

Series 2005-3 Class A3, 4.99% 10/15/10 (c)

10,525

10,469

Series 2006-1 Class A3, 5.49% 4/15/11 (c)

7,360

7,392

Fannie Mae guaranteed REMIC pass thru certificates
Series 2004-T5:

Class AB1, 5.3867% 5/28/35 (f)

2,051

2,051

Class AB3, 5.5252% 5/28/35 (f)

752

752

Fieldstone Mortgage Investment Corp. Series 2006-2:

Class 2A2, 5.4944% 7/25/36 (f)

5,670

5,670

Class M1, 5.6344% 7/25/36 (f)

11,330

11,334

First Franklin Mortgage Loan Trust Series 2006-FF4N Class N1, 5.5% 3/25/36 (c)

2,543

2,537

First Investors Auto Owner Trust Series 2006-A Class A3, 4.93% 2/15/11 (c)

4,955

4,923

Ford Credit Auto Owner Trust:

Series 2005-A:

Class A4, 3.72% 10/15/09

15,900

15,578

Class B, 3.88% 1/15/10

2,230

2,175

Series 2006-B Class C, 5.68% 6/15/12

9,900

9,923

Fremont Home Loan Trust:

Series 2004-1:

Class M1, 5.7744% 2/25/34 (f)

468

468

Class M2, 5.8244% 2/25/34 (f)

800

801

Series 2004-C Class 2A2, 5.8744% 8/25/34 (f)

7,355

7,366

Series 2004-D:

Class M4, 6.2744% 11/25/34 (f)

1,160

1,170

Class M5, 6.3244% 11/25/34 (f)

965

973

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Fremont Home Loan Trust: - continued

Series 2005-A Class 2A2, 5.5644% 2/25/35 (f)

$ 6,542

$ 6,547

Series 2006-A:

Class M1, 5.685% 5/25/36 (f)

10,000

9,996

Class M2, 5.705% 5/25/36 (f)

6,000

6,012

GCO Slims Trust Series 2006-1A, 5.72% 3/1/22 (c)

5,760

5,698

GE Business Loan Trust Series 2005-2 Class IO, 0.5242% 9/15/17 (c)(h)

541,760

5,228

Greenpoint Credit LLC Series 2001-1 Class 1A, 5.665% 4/20/32 (f)

2,769

2,769

GSAMP Trust:

Series 2002-NC1 Class A2, 5.6444% 7/25/32 (f)

26

26

Series 2003-HE2 Class M1, 5.9744% 8/25/33 (f)

2,985

2,998

Series 2004-HE1 Class M1, 5.8744% 5/25/34 (f)

2,078

2,078

Series 2005-MTR1 Class A1, 5.4644% 10/25/35 (f)

8,426

8,426

Series 2006-NC2 Class M4, 5.735% 6/25/36 (f)

9,945

9,945

Guggenheim Structured Real Estate Funding Ltd.
Series 2005-1 Class C, 6.4044% 5/25/30 (c)(f)

16,485

16,485

Harwood Street Funding I LLC Series 2004-1A
Class CTFS, 7.325% 9/20/09 (c)(f)

14,800

14,820

Home Equity Asset Trust:

Series 2002-2 Class A4, 5.6744% 6/25/32 (f)

33

33

Series 2003-3 Class A4, 5.7844% 2/25/33 (f)

2

2

Series 2003-5:

Class A2, 5.6744% 12/25/33 (f)

183

183

Class M2, 7.0544% 12/25/33 (f)

1,505

1,530

Series 2003-7 Class A2, 5.7044% 3/25/34 (f)

888

888

Series 2003-8 Class M1, 6.0444% 4/25/34 (f)

3,860

3,896

Series 2004-1 Class M2, 6.5244% 6/25/34 (f)

3,075

3,105

Series 2004-2 Class A2, 5.6144% 7/25/34 (f)

387

387

Series 2004-3:

Class M1, 5.8944% 8/25/34 (f)

2,035

2,044

Class M2, 6.5244% 8/25/34 (f)

2,220

2,248

Series 2004-6 Class A2, 5.6744% 12/25/34 (f)

2,262

2,266

Series 2005-1 Class M3, 5.8244% 5/25/35 (f)

4,655

4,677

Household Automotive Trust Series 2004-1 Class A4, 3.93% 7/18/11

4,630

4,536

Household Home Equity Loan Trust Series 2003-2
Class M, 5.905% 9/20/33 (f)

659

659

Household Mortgage Loan Trust Series 2004-HC1
Class A, 5.675% 2/20/34 (f)

1,485

1,486

Household Private Label Credit Card Master Note Trust I Series 2002-2 Class B, 5.88% 1/18/11 (f)

5,900

5,913

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

HSBC Automotive Trust:

Series 2006-1 Class A3, 5.43% 6/17/11

$ 9,400

$ 9,446

Series 2006-2 Class A4, 5.67% 6/17/13

16,500

16,733

HSBC Home Equity Loan Trust:

Series 2005-2:

Class M1, 5.785% 1/20/35 (f)

1,408

1,411

Class M2, 5.815% 1/20/35 (f)

1,055

1,059

Series 2005-3 Class A1, 5.585% 1/20/35 (f)

8,668

8,676

Hyundai Auto Receivables Trust:

Series 2005-A:

Class B, 4.2% 2/15/12

4,245

4,157

Class C, 4.22% 2/15/12

720

707

Series 2006-1:

Class B, 5.29% 11/15/12

690

690

Class C, 5.34% 11/15/12

895

895

John Deere Owner Trust Series 2006-A Class A3,
5.38% 7/15/10

14,905

14,960

Lancer Funding Ltd. Series 2006-1A Class A3, 7.1856% 4/6/46 (c)(f)

3,981

3,991

Long Beach Mortgage Loan Trust Series 2006-6:

Class 2A3, 5.5438% 7/25/36 (f)

10,340

10,340

Class M4, 5.7538% 7/25/36 (f)

3,065

3,066

Class M5, 5.7838% 7/25/36 (f)

1,915

1,915

Class M6, 5.8438% 7/25/36 (f)

1,915

1,915

Marriott Vacation Club Owner Trust:

Series 2005-2 Class A, 5.25% 10/20/27 (c)

4,120

4,083

Series 2006-1A:

Class B, 5.827% 4/20/28 (c)

1,287

1,298

Class C, 6.125% 4/20/28 (c)

1,287

1,298

MBNA Credit Card Master Note Trust:

Series 2002-B1 Class B1, 5.15% 7/15/09

5,235

5,227

Series 2002-B2 Class B2, 5.71% 10/15/09 (f)

19,400

19,442

MBNA Master Credit Card Trust II:

Series 1998-E Class B, 5.8369% 9/15/10 (f)

8,000

8,037

Series 1998-G Class B, 5.73% 2/17/09 (f)

9,200

9,201

Series 2000-L Class B, 5.83% 4/15/10 (f)

3,350

3,363

Meritage Mortgage Loan Trust Series 2004-1 Class M1, 5.8244% 7/25/34 (f)

1,993

1,997

Merrill Lynch Mortgage Investors, Inc.:

Series 2003-OPT1 Class M1, 5.9744% 7/25/34 (f)

6,480

6,518

Series 2004-CB6 Class A1, 5.6544% 7/25/35 (f)

811

812

Morgan Stanley ABS Capital I, Inc.:

Series 2004-HE6 Class A2, 5.6644% 8/25/34 (f)

1,875

1,879

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Morgan Stanley ABS Capital I, Inc.: - continued

Series 2004-WMC3 Class M5, 6.2744% 1/25/35 (f)

$ 5,425

$ 5,488

Series 2006-HE4 Class M4, 5.735% 6/25/36 (f)

6,060

6,060

Series 2006-NC4 Class A2D, 5.625% 6/25/36 (f)

7,135

7,132

Morgan Stanley Dean Witter Capital I Trust:

Series 2001-NC4 Class M1, 6.8244% 1/25/32 (f)

2,581

2,583

Series 2002-AM3 Class A3, 5.8144% 2/25/33 (f)

470

471

Series 2002-NC1 Class M1, 6.5244% 2/25/32 (c)(f)

2,937

3,018

Series 2003-NC1 Class M1, 6.3744% 11/25/32 (f)

2,410

2,415

National Collegiate Funding LLC Series 2004-GT1
Class IO1, 7.87% 6/25/10 (c)(f)(h)

7,900

2,132

National Collegiate Student Loan Trust:

Series 2004-1 Class AIO, 5.5% 4/25/11 (h)

6,385

1,363

Series 2004-2 Class AIO, 9.75% 10/25/14 (h)

7,415

3,106

Series 2005-2 Class AIO, 7.73% 3/25/12 (h)

4,760

1,177

Series 2005-3W Class AIO1, 4.8% 7/25/12 (h)

15,875

2,661

Series 2005-GT1 Class AIO, 6.75% 12/25/09 (h)

3,500

732

Navistar Financial Corp. Owner Trust Series 2005-A Class A4, 4.43% 1/15/14

4,445

4,356

Nissan Auto Lease Trust Series 2005-A Class A3, 4.7% 10/15/08

12,080

12,009

Nissan Auto Receivables Owner Trust Series 2005-A Class A4, 3.82% 7/15/10

4,730

4,627

Northstar Education Finance, Inc., Delaware
Series 2005-1 Class A5, 4.74% 10/30/45

6,550

6,435

Novastar Mortgage Funding Trust Series 2006-2
Class M1, 5.5944% 6/25/36 (f)

7,145

7,145

Onyx Acceptance Owner Trust Series 2005-A Class A3, 3.69% 5/15/09

2,989

2,963

Ownit Mortgage Loan Asset-Backed Certificates
Series 2005-4 Class A2A1, 5.4444% 8/25/36 (f)

7,226

7,227

Park Place Securities, Inc.:

Series 2004 WWF1 Class M4, 6.4244% 1/25/35 (f)

7,490

7,589

Series 2004-WCW1:

Class M1, 5.9544% 9/25/34 (f)

2,590

2,621

Class M2, 6.0044% 9/25/34 (f)

1,545

1,559

Class M3, 6.5744% 9/25/34 (f)

2,950

2,985

Series 2004-WCW2:

Class A2, 5.7044% 10/25/34 (f)

1,674

1,676

Class M3, 5.8744% 7/25/35 (f)

2,190

2,202

Series 2004-WHQ2 Class A3E, 5.7444% 2/25/35 (f)

3,056

3,064

Series 2004-WWF1:

Class M2, 6.0044% 2/25/35 (f)

8,715

8,796

Class M3, 6.0644% 2/25/35 (f)

1,075

1,087

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

People's Choice Financial Realty Mortgage Securities Trust Series 2006-1:

Class M4, 5.7281% 9/25/36 (f)

$ 8,037

$ 8,037

Class M5, 5.7581% 9/25/36 (f)

4,005

4,005

People's Choice Home Loan Securities Trust Series 2005-1 Class M4, 6.2244% 1/25/35 (f)

1,650

1,666

Providian Master Note Trust Series 2006-B1A Class B1, 5.35% 3/15/13 (c)

10,210

10,213

Residential Asset Mortgage Products, Inc.:

Series 2003-RS9 Class MII2, 7.1244% 10/25/33 (f)

1,295

1,322

Series 2003-RZ2 Class A1, 3.6% 4/25/33

1,819

1,773

Series 2004-RS10 Class MII2, 6.5744% 10/25/34 (f)

10,200

10,399

Series 2005-SP2 Class 1A1, 5.4744% 5/25/44 (f)

4,399

4,400

Salomon Brothers Mortgage Securities VII, Inc. Series 2003-UP1 Class A, 3.45% 4/25/32 (c)

2,413

2,319

SBA CMBS Trust Series 2005-1A:

Class D, 6.219% 11/15/35 (c)

5,280

5,322

Class E, 6.706% 11/15/35 (c)

1,410

1,404

Securitized Asset Backed Receivables LLC Trust
Series 2004-NC1:

Class A2, 5.5744% 2/25/34 (f)

1,316

1,316

Class M1, 5.8444% 2/25/34 (f)

2,920

2,930

Sierra Timeshare Receivables Fund LLC Series 2006-1A
Class A1, 5.84% 5/20/18 (c)

8,480

8,580

SLM Private Credit Student Loan Trust:

Series 2004 B Class A2, 5.11% 6/15/21 (f)

8,200

8,247

Series 2004-A:

Class B, 5.9094% 6/15/33 (f)

2,100

2,128

Class C, 6.2794% 6/15/33 (f)

4,915

4,975

Series 2004-B Class C, 5.78% 9/15/33 (f)

8,600

8,613

SLMA Student Loan Trust Series 2005-7 Class A3, 4.41% 7/25/25

9,600

9,465

Structured Asset Securities Corp. Series 2005-5N
Class 3A1A, 5.6244% 11/25/35 (f)

9,780

9,789

Superior Wholesale Inventory Financing Trust VII
Series 2003-A8 Class CTFS, 5.78% 3/15/11 (c)(f)

11,595

11,595

Superior Wholesale Inventory Financing Trust XII
Series 2005-A12 Class C, 6.53% 6/15/10 (f)

5,350

5,360

Terwin Mortgage Trust Series 2003-4HE Class A1, 5.7544% 9/25/34 (f)

678

681

Textron Financial Floorplan Master Note Trust
Series 2006-1A Class A, 5.4269% 4/13/11 (c)(f)

10,000

10,000

Asset-Backed Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Volkswagen Auto Lease Trust:

Series 2004-A Class A3, 2.84% 7/20/07

$ 1,918

$ 1,914

Series 2005-A Class A4, 3.94% 10/20/10

13,930

13,735

Series 2006-A Class A3, 5.5% 9/21/09

5,000

5,027

WFS Financial Owner Trust:

Series 2004-3 Class A4, 3.93% 2/17/12

15,000

14,753

Series 2004-4 Class D, 3.58% 5/17/12

2,083

2,045

Series 2005-1 Class D, 4.09% 8/15/12

1,810

1,782

Series 2005-3 Class C, 4.54% 5/17/13

3,240

3,190

Whinstone Capital Management Ltd. Series 1A Class B3, 6.385% 10/25/44 (c)(f)

12,500

12,501

WM Asset Holdings Corp. Series 2006-7 Class N1, 5.926% 10/25/46 (c)

10,320

10,320

World Omni Auto Receivables Trust Series 2005-A Class A3, 3.54% 6/12/09

3,817

3,776

TOTAL ASSET-BACKED SECURITIES

(Cost $1,213,149)

1,212,077

Collateralized Mortgage Obligations - 14.5%

Private Sponsor - 6.9%

Adjustable Rate Mortgage Trust floater:

Series 2004-1 Class 9A2, 5.7244% 1/25/34 (f)

1,685

1,690

Series 2004-2 Class 7A3, 5.7244% 2/25/35 (f)

3,848

3,861

Series 2004-4 Class 5A2, 5.7244% 3/25/35 (f)

1,536

1,540

American Home Mortgage Assets Trust floater Series 2006-1 Class 2A1, 5.5144% 5/25/46 (f)

9,128

9,110

Bear Stearns Adjustable Rate Mortgage Trust Series 2005-6 Class 1A1, 5.1057% 8/25/35 (f)

10,778

10,752

Bear Stearns Alt-A Trust floater:

Series 2005-1 Class A1, 5.6044% 1/25/35 (f)

2,587

2,591

Series 2005-2 Class 1A1, 5.5744% 3/25/35 (f)

6,214

6,215

Series 2005-5 Class 1A1, 5.5444% 7/25/35 (f)

4,406

4,405

Citigroup Mortgage Loan Trust floater Series 2006-NC1:

Class M4, 5.7144% 8/25/36 (f)

7,754

7,754

Class M5, 5.7444% 8/25/36 (f)

5,550

5,552

Countrywide Alternative Loan Trust Series 2006-OC5N
Class N, 7.25% 7/25/37 (c)

4,625

4,618

Countrywide Home Loans, Inc. sequential pay:

Series 2002-25 Class 2A1, 5.5% 11/27/17

2,930

2,915

Series 2002-32 Class 2A3, 5% 1/25/18

51

51

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

CS First Boston Mortgage Securities Corp. floater:

Series 2004-AR4 Class 5A2, 5.6944% 5/25/34 (f)

$ 743

$ 744

Series 2004-AR5 Class 11A2, 5.6944% 6/25/34 (f)

1,112

1,113

Series 2004-AR8 Class 8A2, 5.7044% 9/25/34 (f)

1,384

1,391

Granite Master Issuer PLC floater:

Series 2005-2 Class C1, 5.8925% 12/20/54 (f)

6,750

6,749

Series 2005-4:

Class C1, 5.8225% 12/20/54 (f)

5,200

5,201

Class M2, 5.6725% 12/20/54 (f)

5,000

5,001

Series 2006-1A Class C2, 5.9925% 12/20/54 (c)(f)

4,400

4,400

Series 2006-2:

Class C1, 5.97% 12/20/54 (f)

11,475

11,486

Class M2, 5.73% 12/20/54 (f)

3,000

3,002

Granite Mortgages PLC floater:

Series 2003-1 Class 1C, 6.95% 1/20/43 (f)

4,025

4,097

Series 2003-3 Class 1C, 6.95% 1/20/44 (f)

3,650

3,726

Series 2004-2 Class 1C, 6.1138% 6/20/44 (f)

551

551

Holmes Financing No. 8 PLC floater Series 2:

Class B, 5.6769% 7/15/40 (f)

2,700

2,701

Class C, 6.2269% 7/15/40 (f)

6,205

6,215

Homestar Mortgage Acceptance Corp. floater Series 2004-5 Class A1, 5.7744% 10/25/34 (f)

5,289

5,309

HSI Asset Securitization Corp. Trust floater Series 2006-WMC1 Class M-3, 5.7156% 7/25/36 (f)

7,100

7,103

Impac CMB Trust floater:

Series 2004-6 Class 1A2, 5.7144% 10/25/34 (f)

1,470

1,473

Series 2004-9:

Class M2, 5.9744% 1/25/35 (f)

1,904

1,911

Class M3, 6.0244% 1/25/35 (f)

1,411

1,415

Class M4, 6.3744% 1/25/35 (f)

720

722

Series 2005-1:

Class M1, 5.7844% 4/25/35 (f)

1,730

1,733

Class M2, 5.8244% 4/25/35 (f)

3,022

3,027

Class M3, 5.8544% 4/25/35 (f)

743

745

JPMorgan Mortgage Trust Series 2005-A8 Class 2A3, 4.9591% 11/25/35 (f)

1,715

1,698

Lehman Structured Securities Corp. floater Series 2005-1
Class A2, 5.7838% 9/26/45 (c)(f)

3,835

3,846

Lehman XS Trust floater Series 2006-GP1 Class A1, 5.4144% 5/25/46 (f)

14,771

14,760

Master Alternative Loan Trust Series 2004-3 Class 3A1, 6% 4/25/34

1,129

1,119

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Master Seasoned Securitization Trust Series 2004-1 Class 1A1, 6.2332% 8/25/17 (f)

$ 4,267

$ 4,309

MASTR Adjustable Rate Mortgages Trust floater Series 2005-1 Class 1A1, 5.5944% 3/25/35 (f)

3,257

3,264

Merrill Lynch Mortgage Investors, Inc.:

floater:

Series 2003-A Class 2A1, 5.7144% 3/25/28 (f)

5,329

5,359

Series 2003-F Class A2, 5.42% 10/25/28 (f)

5,919

5,927

Series 2004-B Class A2, 5.5875% 6/25/29 (f)

3,969

3,969

Series 2004-C Class A2, 5.01% 7/25/29 (f)

5,212

5,206

Series 2004-D Class A2, 5.82% 9/25/29 (f)

4,056

4,060

Series 2005-B Class A2, 5.5475% 7/25/30 (f)

3,760

3,762

Series 2003-E Class XA1, 0.8108% 10/25/28 (f)(h)

27,113

189

Series 2003-G Class XA1, 1% 1/25/29 (h)

23,685

177

Series 2003-H Class XA1, 1% 1/25/29 (c)(h)

20,631

175

MortgageIT Trust floater Series 2004-2:

Class A1, 5.6944% 12/25/34 (f)

3,382

3,379

Class A2, 5.7744% 12/25/34 (f)

4,577

4,614

Opteum Mortgage Acceptance Corp. Series 2005-3 Class APT, 5.6144% 7/25/35 (f)

8,238

8,247

Permanent Financing No. 3 PLC floater Series 2 Class C, 6.35% 6/10/42 (f)

2,900

2,908

Permanent Financing No. 4 PLC floater Series 2:

Class C, 6.02% 6/10/42 (f)

6,790

6,818

Class M, 5.63% 6/10/42 (f)

1,620

1,619

Permanent Financing No. 9 PLC floater Series 9A:

Class 1C, 5.6% 6/10/42 (c)(f)

2,450

2,450

Class 2C, 5.68% 6/10/42 (c)(f)

4,465

4,465

Class 3C, 5.8% 6/10/42 (c)(f)

3,845

3,845

Residential Asset Mortgage Products, Inc.:

sequential pay Series 2003-SL1 Class A31, 7.125% 4/25/31

3,273

3,306

Series 2005-AR5 Class 1A1, 4.836% 9/19/35 (f)

3,036

3,022

ResMAE Mortgage Loan Trust floater Series 2006-1 Class A2A, 5.4244% 2/25/36 (c)(f)

6,205

6,204

Sasco Net Interest Margin Trust Series 2006-BC1A Class A, 6.25% 3/27/36 (c)

2,408

2,411

Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/08 (c)(h)

68,872

266

Sequoia Mortgage Trust:

floater:

Series 2003-5 Class A2, 5.27% 9/20/33 (f)

1,862

1,862

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

Private Sponsor - continued

Sequoia Mortgage Trust: - continued

floater:

Series 2003-6 Class A2, 4.69% 11/20/33 (f)

$ 4,057

$ 4,057

Series 2003-7 Class A2, 5.6419% 1/20/34 (f)

4,437

4,439

Series 2004-2 Class A, 5.21% 3/20/34 (f)

2,004

2,006

Series 2004-3 Class A, 5.3063% 5/20/34 (f)

4,465

4,465

Series 2004-4 Class A, 5.48% 5/20/34 (f)

4,006

4,007

Series 2004-5 Class A3, 5.5769% 6/20/34 (f)

4,122

4,120

Series 2004-6 Class A3A, 5.8275% 6/20/35 (f)

2,737

2,743

Series 2004-8 Class A2, 5.31% 9/20/34 (f)

3,797

3,807

Series 2005-1 Class A2, 5.8325% 2/20/35 (f)

2,882

2,890

Series 2003-8 Class X1, 0.7221% 1/20/34 (f)(h)

119,462

632

Series 2004-1 Class X1, 0.8% 2/20/34 (h)

25,378

81

Structured Adjustable Rate Mortgage Loan Trust floater
Series 2005-10 Class A1, 5.5244% 6/25/35 (f)

3,082

3,082

Wachovia Mortgage Loan Trust LLC Series 2005-B Class 2A4, 5.1863% 10/20/35 (f)

1,370

1,360

WaMu Mortgage pass thru certificates floater:

Series 2005-AR11 Class A1C1, 5.5244% 8/25/45 (f)

3,573

3,574

Series 2005-AR13 Class A1C1, 5.5144% 10/25/45 (f)

3,393

3,394

Series 2006-AR7 Class C1B1, 5.3844% 7/25/46 (f)

8,263

8,263

WaMu Mortgage Securities Corp. sequential pay
Series 2003-MS9 Class 2A1, 7.5% 12/25/33

882

905

Wells Fargo Mortgage Backed Securities Trust:

Series 2003-14 Class 1A1, 4.75% 12/25/18

6,319

6,091

Series 2004-M Class A3, 4.6742% 8/25/34 (f)

8,364

8,309

Series 2005-AR10 Class 2A2, 4.1091% 6/25/35 (f)

25,005

24,623

Series 2005-AR2 Class 2A2, 4.57% 3/25/35

18,707

18,359

Series 2005-AR4 Class 2A2, 4.5296% 4/25/35 (f)

31,234

30,597

Series 2005-AR9 Class 2A1, 4.3623% 5/25/35 (f)

28,144

27,602

Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (f)

14,165

14,048

TOTAL PRIVATE SPONSOR

437,559

U.S. Government Agency - 7.6%

Fannie Mae planned amortization class:

Series 1993-187 Class L, 6.5% 7/25/23

5,878

5,989

Series 2003-24 CLass PB, 4.5% 12/25/12

10,779

10,684

Series 2006-53 Class WB, 6% 12/25/31

7,925

8,058

Series 2006-64 Class PA, 5.5% 2/25/30

41,669

41,724

Collateralized Mortgage Obligations - continued

Principal Amount (000s)

Value (Note 1) (000s)

U.S. Government Agency - continued

Fannie Mae guaranteed REMIC pass thru certificates:

planned amortization class:

Series 2003-113 Class PJ, 3.5% 2/25/13

$ 10,250

$ 10,026

Series 2003-122 Class TU, 4% 5/25/16

12,635

12,414

Series 2005-67 Class HD, 5.5% 12/25/30

11,138

11,106

Series 2006-4 Class PB, 6% 9/25/35

20,000

20,307

Series 2006-49 Class CA, 6% 2/25/31

38,141

38,642

Series 2006-54 Class PE, 6% 2/25/33

11,325

11,491

sequential pay:

Series 2001-40 Class Z, 6% 8/25/31

5,543

5,620

Series 2002-56 Class MC, 5.5% 9/25/17

4,152

4,150

Series 2003-123 Class AB, 4% 10/25/16

11,325

10,923

Series 2003-76 Class BA, 4.5% 3/25/18

16,048

15,550

Series 2004-3 Class BA, 4% 7/25/17

659

632

Series 2004-45 Class AV, 4.5% 10/25/22

5,055

4,987

Series 2004-86 Class KC, 4.5% 5/25/19

2,839

2,738

Series 2004-91 Class AH, 4.5% 5/25/29

5,766

5,612

Series 2004-31 Class IA, 4.5% 6/25/10 (h)

2,284

26

Freddie Mac sequential pay:

Series 2114 Class ZM, 6% 1/15/29

2,525

2,549

Series 2508 Class UL, 5% 12/15/16

5,106

5,057

Freddie Mac Multi-class participation certificates guaranteed:

planned amortization class:

Series 1215 Class H, 7.5% 3/15/07

194

194

Series 2358 Class PD, 6% 9/15/16

3,649

3,696

Series 2382 Class MB, 6% 11/15/16

9,448

9,571

Series 2394 Class KD, 6% 12/15/16

5,116

5,186

Series 2417 Class EH, 6% 2/15/17

2,675

2,715

Series 2489 Class PD, 6% 2/15/31

2,165

2,168

Series 2535 Class PC, 6% 9/15/32

7,585

7,686

Series 2587 Class WG, 4.5% 8/15/15

12,522

12,350

Series 2617 Class TH, 4.5% 5/15/15

9,310

9,125

Series 2625 Class QX, 2.25% 3/15/22

969

946

Series 2640 Class QG, 2% 4/15/22

1,246

1,213

Series 2656 Class BW, 4.5% 4/15/28

9,330

9,126

Series 2660 Class ML, 3.5% 7/15/22

45,945

45,022

Series 2690 Class PD, 5% 2/15/27

12,140

12,009

Series 2702 Class AB, 4.5% 7/15/27

22,260

21,740

Series 2755 Class LC, 4% 6/15/27

9,078

8,717

Series 2901 Class UM, 4.5% 1/15/30

22,658

22,159

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 3018 Class UD, 5.5% 9/15/30

$ 6,819

$ 6,808

sequential pay:

Series 2523 Class JB, 5% 6/15/15

4,347

4,323

Series 2609 Class UJ, 6% 2/15/17

6,392

6,471

Series 2635 Class DG, 4.5% 1/15/18

18,013

17,478

Series 2780 Class A, 4% 12/15/14

16,903

16,398

Series 2786 Class GA, 4% 8/15/17

7,509

7,206

Series 2809 Class UA, 4% 12/15/14

3,592

3,512

Series 2970 Class YA, 5% 9/15/18

7,519

7,436

Series 3077 Class GA, 4.5% 8/15/19

12,068

11,730

Ginnie Mae guaranteed REMIC pass thru securities planned amortization class Series 2002-5 Class PD, 6.5% 5/16/31

1,616

1,629

TOTAL U.S. GOVERNMENT AGENCY

484,899

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $923,487)

922,458

Commercial Mortgage Securities - 8.6%

280 Park Avenue Trust floater Series 2001-280 Class X1, 1.0056% 2/3/11 (c)(f)(h)

83,832

3,151

Asset Securitization Corp.:

sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29

284

286

Series 1997-D5 Class PS1, 1.7254% 2/14/43 (f)(h)

57,193

2,134

Banc of America Commercial Mortgage, Inc.:

sequential pay Series 2005-1 Class A2, 4.64% 11/10/42

11,035

10,925

Series 2002-2 Class XP, 1.7827% 7/11/43 (c)(f)(h)

42,920

1,978

Series 2004-6 Class XP, 0.6075% 12/10/42 (f)(h)

54,288

1,073

Series 2005-4 Class XP, 0.2063% 7/10/45 (f)(h)

67,894

670

Banc of America Large Loan, Inc.:

floater:

Series 2003-BBA2:

Class C, 5.8% 11/15/15 (c)(f)

130

130

Class D, 5.88% 11/15/15 (c)(f)

1,665

1,665

Class F, 6.23% 11/15/15 (c)(f)

1,190

1,190

Class H, 6.73% 11/15/15 (c)(f)

1,070

1,070

Class J, 7.28% 11/15/15 (c)(f)

1,105

1,105

Class K, 7.93% 11/15/15 (c)(f)

995

990

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Banc of America Large Loan, Inc.: - continued

floater:

Series 2006-LAQ:

Class H, 6.0481% 2/9/21 (c)(f)

$ 2,790

$ 2,801

Class J, 6.1381% 2/9/21 (c)(f)

2,010

2,018

Class K, 6.3681% 2/9/21 (c)(f)

5,575

5,592

Series 2006-ESH:

Class A, 6.19% 7/14/11 (c)(f)

5,752

5,748

Class B, 6.29% 7/14/11 (c)(f)

2,868

2,863

Class C, 6.44% 7/14/11 (c)(f)

5,745

5,740

Class D, 7.07% 7/14/11 (c)(f)

3,291

3,300

Series 2006-LAQ Class X1, 0.6974% 2/9/21 (c)(f)(h)

521,349

3,489

Bayview Commercial Asset Trust:

floater:

Series 2003-2 Class A, 5.9044% 12/25/33 (c)(f)

9,942

9,973

Series 2004-1:

Class A, 5.6844% 4/25/34 (c)(f)

4,847

4,856

Class B, 7.2244% 4/25/34 (c)(f)

504

509

Class M1, 5.8844% 4/25/34 (c)(f)

441

442

Class M2, 6.5244% 4/25/34 (c)(f)

378

382

Series 2004-2:

Class A, 5.7544% 8/25/34 (c)(f)

4,528

4,545

Class M1, 5.9044% 8/25/34 (c)(f)

1,462

1,469

Series 2004-3:

Class A1, 5.6944% 1/25/35 (c)(f)

5,080

5,096

Class A2, 5.7444% 1/25/35 (c)(f)

714

716

Series 2005-4A:

Class A2, 5.7144% 1/25/36 (c)(f)

6,286

6,293

Class B1, 6.7244% 1/25/36 (c)(f)

476

481

Class M1, 5.7744% 1/25/36 (c)(f)

2,000

2,006

Class M2, 5.7944% 1/25/36 (c)(f)

667

669

Class M3, 5.8244% 1/25/36 (c)(f)

857

859

Class M4, 5.9344% 1/25/36 (c)(f)

476

478

Class M5, 5.9744% 1/25/36 (c)(f)

476

479

Class M6, 6.0244% 1/25/36 (c)(f)

476

478

Series 2006-1:

Class A2, 5.6844% 4/25/36 (c)(f)

2,427

2,427

Class M1, 5.7044% 4/25/36 (c)(f)

740

740

Class M2, 5.7244% 4/25/36 (c)(f)

783

783

Class M3, 5.7444% 4/25/36 (c)(f)

672

672

Class M4, 5.8444% 4/25/36 (c)(f)

382

382

Class M5, 5.8844% 4/25/36 (c)(f)

367

367

Class M6, 5.9644% 4/25/36 (c)(f)

812

812

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Bayview Commercial Asset Trust: - continued

floater:

Series 2006-2A:

Class A2, 5.6044% 7/25/36 (c)(f)

$ 1,863

$ 1,862

Class B1, 6.1944% 7/25/36 (c)(f)

671

671

Class B3, 8.0244% 7/25/36 (c)(f)

1,119

1,119

Class M1, 5.6344% 7/25/36 (c)(f)

1,954

1,954

Class M2, 5.6544% 7/25/36 (c)(f)

1,375

1,375

Class M3, 5.6744% 7/25/36 (c)(f)

1,081

1,081

Class M4, 5.7444% 7/25/36 (c)(f)

724

724

Class M5, 5.7944% 7/25/36 (c)(f)

893

893

Class M6, 5.8644% 7/25/36 (c)(f)

1,414

1,414

Series 2004-1 Class IO, 1.25% 4/25/34 (c)(h)

52,916

2,865

Series 2006-2A Class IO, 0.8495% 7/25/36 (c)(h)

79,638

7,037

Bear Stearns Commercial Mortgage Securities Trust sequential pay Series 2006-PW12 Class A2, 5.688% 9/11/38

6,640

6,739

Bear Stearns Commercial Mortgage Securities, Inc.:

floater Series 2004-BBA3 Class E, 6.03% 6/15/17 (c)(f)

9,160

9,157

sequential pay Series 2004-ESA Class A3, 4.741% 5/14/16 (c)

2,375

2,353

Series 2002-TOP8 Class X2, 2.1025% 8/15/38 (c)(f)(h)

47,286

3,002

Series 2003-PWR2 Class X2, 0.5762% 5/11/39 (c)(f)(h)

94,945

1,785

Series 2004-PWR6 Class X2, 0.6764% 11/11/41 (c)(f)(h)

32,218

899

Series 2005-PWR9 Class X2, 0.4052% 9/11/42 (c)(f)(h)

198,045

3,707

CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, 0.8426% 5/15/35 (c)(f)(h)

173,356

9,286

Chase Commercial Mortgage Securities Corp.:

sequential pay Series 1999-2 Class A1, 7.032% 1/15/32

350

351

Series 2001-245 Class A1, 5.974% 2/12/16 (c)(f)

7,182

7,274

Citigroup / Deutsche Bank Commercial Mortgage Trust sequential pay Series 2006-CD2 Class A1, 5.302% 1/15/46

9,028

9,035

Citigroup Commercial Mortgage Trust:

sequential pay Series 2005-EMG Class A2, 4.2211% 9/20/51 (c)

3,715

3,596

Series 2004-C2 Class XP, 0.9601% 10/15/41 (c)(f)(h)

36,711

1,354

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

COMM:

floater:

Series 2002-FL6 Class G, 7.23% 6/14/14 (c)(f)

$ 4,441

$ 4,441

Series 2002-FL7:

Class D, 5.9% 11/15/14 (c)(f)

554

554

Class H, 7.58% 11/15/14 (c)(f)

6,613

6,614

Series 2004-LBN2 Class X2, 1.0022% 3/10/39 (c)(f)(h)

15,267

439

Commercial Mortgage Acceptance Corp. Series 1998-C2 Class B, 6.0903% 9/15/30 (f)

12,880

13,080

Commercial Mortgage Asset Trust sequential pay Series 1999-C1 Class A3, 6.64% 1/17/32

2,545

2,623

Commercial Mortgage pass thru certificates Series 2005-LP5 Class XP, 0.3858% 5/10/43 (f)(h)

69,331

973

CS First Boston Mortgage Securities Corp.:

floater Series 2005-TFLA:

Class C, 5.57% 2/15/20 (c)(f)

4,600

4,601

Class E, 5.66% 2/15/20 (c)(f)

1,670

1,671

Class F, 5.71% 2/15/20 (c)(f)

1,420

1,421

Class G, 5.85% 2/15/20 (c)(f)

410

410

Class H, 6.08% 2/15/20 (c)(f)

585

585

sequential pay Series 2004-C1 Class A2, 3.516% 1/15/37

12,255

11,857

Series 1998-C1 Class D, 7.17% 5/17/40

4,590

4,896

Series 1999-C1 Class E, 7.8822% 9/15/41 (f)

6,370

6,865

Series 2001-CK6 Class AX, 0.645% 9/15/18 (h)

123,999

3,622

Series 2003-C3 Class ASP, 1.7652% 5/15/38 (c)(f)(h)

115,576

5,424

Series 2004-C1 Class ASP, 0.8785% 1/15/37 (c)(f)(h)

73,494

2,102

Series 2005-C1 Class ASP, 0.393% 2/15/38 (c)(f)(h)

341,590

5,298

Series 2005-C2 Class ASP, 0.583% 4/15/37 (c)(f)(h)

60,207

1,483

Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31

4,515

4,672

DLJ Commercial Mortgage Corp. sequential pay
Series 2000-CF1:

Class A1A, 7.45% 6/10/33

250

250

Class A1B, 7.62% 6/10/33

6,935

7,446

EQI Financing Partnership I LP Series 1997-1 Class B, 7.37% 12/20/15 (c)

1,550

1,557

First Union-Lehman Brothers Commercial Mortgage Trust sequential pay Series 1997-C2 Class A3, 6.65%
11/18/29

9,426

9,498

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

GE Capital Commercial Mortgage Corp. Series 2001-1
Class X1, 0.4582% 5/15/33 (c)(f)(h)

$ 77,074

$ 2,544

GE Capital Mall Finance Corp. Series 1998-1A Class B2, 7.25% 9/13/28 (c)(f)

9,550

9,894

GE Commercial Mortgage Corp. sequential pay
Series 2004-C3 Class A2, 4.433% 7/10/39

8,525

8,361

GGP Mall Properties Trust sequential pay Series 2001-C1A Class A2, 5.007% 11/15/11 (c)

35

35

Global Signal Trust III Series 2006-1:

Class B, 5.588% 2/15/36 (c)

3,040

3,037

Class C, 5.707% 2/15/36 (c)

3,755

3,755

GMAC Commercial Mortgage Securities, Inc.:

sequential pay:

Series 1997-C2 Class A3, 6.566% 4/15/29

1,294

1,305

Series 2003-C2 Class A1, 4.576% 5/10/40

23,032

22,668

Series 2006-C1 Class XP, 4.975% 11/10/45

6,505

6,470

Series 2004-C3 Class X2, 0.7177% 12/10/41 (f)(h)

51,075

1,191

Series 2006-C1 Class XP, 0.1666% 11/10/45 (f)(h)

96,321

882

Greenwich Capital Commercial Funding Corp.:

Series 2002-C1 Class SWDB, 5.857% 11/11/19 (c)

4,000

3,954

Series 2003-C2 Class XP, 1.0316% 1/5/36 (c)(f)(h)

102,181

3,007

Series 2005-GG3 Class XP, 0.803% 8/10/42 (c)(f)(h)

221,957

6,387

GS Mortgage Securities Corp. II sequential pay
Series 2003-C1 Class A2A, 3.59% 1/10/40

8,695

8,509

Guggenheim Structure Real Estate Funding Ltd. floater
Series 2006-3:

Class B, 5.73% 9/25/46 (c)(f)

3,350

3,350

Class C, 5.88% 9/25/46 (c)(f)

8,400

8,400

Hilton Hotel Pool Trust:

floater Series 2000-HLTA Class A2, 5.79% 10/3/15 (c)(f)

6,245

6,291

sequential pay Series 2000-HLTA Class A1, 7.055% 10/3/15 (c)

2,431

2,523

Series 2000-HLTA Class D, 7.555% 10/3/15 (c)

4,870

5,170

Host Marriott Pool Trust sequential pay
Series 1999-HMTA:

Class A, 6.98% 8/3/15 (c)

1,525

1,561

Class B, 7.3% 8/3/15 (c)

1,980

2,084

JPMorgan Chase Commercial Mortgage Securities Corp.:

sequential pay Series 2001-C1 Class A2, 5.464% 10/12/35

7,840

7,831

Series 2002-C3 Class X2, 1.2396% 7/12/35 (c)(f)(h)

35,877

1,027

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

JPMorgan Chase Commercial Mortgage Securities Corp.: - continued

Series 2003-CB7 Class X2, 0.7763% 1/12/38 (c)(f)(h)

$ 16,884

$ 407

Series 2003-LN1 Class X2, 0.685% 10/15/37 (c)(f)(h)

121,994

2,458

Series 2004-C1 Class X2, 0.9934% 1/15/38 (c)(f)(h)

18,692

605

Series 2004-CB8 Class X2, 1.1192% 1/12/39 (c)(f)(h)

23,340

866

LB Commercial Conduit Mortgage Trust sequential pay:

Series 1998-C4 Class A1B, 6.21% 10/15/35

10,142

10,294

Series 1999-C1 Class A2, 6.78% 6/15/31

10,195

10,523

LB-UBS Commercial Mortgage Trust:

sequential pay Series 2003-C3 Class A2, 3.086%
5/15/27

7,510

7,251

Series 2002-C4 Class XCP, 1.4444% 10/15/35 (c)(f)(h)

73,766

2,576

Series 2002-C7 Class XCP, 1.1074% 1/15/36 (c)(f)(h)

73,922

1,484

Series 2003-C1 Class XCP, 1.3428% 12/15/36 (c)(f)(h)

30,983

1,011

Series 2004-C2 Class XCP, 1.4108% 3/1/36 (c)(f)(h)

51,901

1,769

Series 2004-C6 Class XCP, 0.7182% 8/15/36 (c)(f)(h)

59,860

1,397

Series 2006-C1 Class XCP, 0.3519% 2/15/41 (f)(h)

257,598

4,646

Lehman Brothers Floating Rate Commercial Mortgage Trust floater Series 2003-LLFA:

Class J, 7.38% 12/16/14 (c)(f)

5,585

5,584

Class K1, 7.88% 12/16/14 (c)(f)

2,850

2,847

Merrill Lynch Mortgage Trust:

Series 2002-MW1 Class XP, 1.5436% 7/12/34 (c)(f)(h)

22,776

885

Series 2005-GGP1 Class H, 4.374% 11/15/10 (c)

5,475

5,416

Series 2005-MCP1 Class XP, 0.5842% 6/12/43 (f)(h)

58,599

1,609

Series 2005-MKB2 Class XP, 0.2943% 9/12/42 (f)(h)

29,005

349

Merrill Lynch/Countrywide Commercial Mortgage Trust
Series 2006-2 Class A1, 5.773% 6/12/46

6,253

6,325

Morgan Stanley Capital I Trust Series 2006-T23 Class A1, 5.682% 8/12/41

3,550

3,601

Morgan Stanley Capital I, Inc.:

sequential pay:

Series 1999-LIFE Class A1, 6.97% 4/15/33

1,979

2,011

Series 2003-IQ5:

Class A2, 4.09% 4/15/38

3,204

3,151

Class X2, 0.9674% 4/15/38 (c)(f)(h)

39,916

1,220

Commercial Mortgage Securities - continued

Principal Amount (000s)

Value (Note 1) (000s)

Morgan Stanley Capital I, Inc.: - continued

Series 2003-IQ6 Class X2, 0.5979% 12/15/41 (c)(f)(h)

$ 71,464

$ 1,656

Series 2005-HQ5 Class X2, 0.3508% 1/14/42 (f)(h)

64,546

829

Series 2005-IQ9 Class X2, 1.069% 7/15/56 (c)(f)(h)

55,729

2,341

Series 2005-TOP17 Class X2, 0.624% 12/13/41 (f)(h)

42,834

1,198

Morgan Stanley Dean Witter Capital I Trust:

Series 2003-HQ2 Class X2, 1.3935% 3/12/35 (c)(f)(h)

61,086

2,927

Series 2003-TOP9 Class X2, 1.5085% 11/13/36 (c)(f)(h)

44,360

2,071

NationsLink Funding Corp. Series 1999-1 Class C, 6.571% 1/20/31

4,150

4,255

STRIPS III Ltd./STRIPS III Corp. floater Series 2004-1A Class A, 5.8056% 3/24/18 (c)(f)

5,369

5,379

TrizecHahn Office Properties Trust Series 2001-TZHA:

Class C3, 6.522% 3/15/13 (c)

2,154

2,178

Class E3, 7.253% 3/15/13 (c)

4,447

4,543

Wachovia Bank Commercial Mortgage Trust:

floater Series 2005-WL6A:

Class A2, 5.58% 10/15/17 (c)(f)

5,665

5,668

Class B, 5.63% 10/15/17 (c)(f)

1,135

1,135

Class D, 5.76% 10/15/17 (c)(f)

2,270

2,271

sequential pay Series 2003-C7 Class A1, 4.241% 10/15/35 (c)

9,219

8,958

Series 2004-C14 Class PP, 5.14% 8/15/41 (c)(f)

6,171

5,904

Series 2006-C23 Class X, 0.0876% 1/15/45 (c)(f)(h)

1,200,227

8,407

Series 2006-C24 Class XP, 0.1059% 3/15/45 (c)(f)(h)

239,165

1,688

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $553,098)

545,676

Foreign Government and Government Agency Obligations - 0.1%

Chilean Republic 5.625% 7/23/07
(Cost $4,211)

4,225

4,233

Commercial Paper - 0.2%

Rockies Express Pipeline LLC 5.7422% 9/20/06
(Cost $15,950)

16,000

15,954

Fixed-Income Funds - 5.7%

Shares

Fidelity Ultra-Short Central Fund (g)
(Cost $360,979)

3,620,176

360,208

Preferred Securities - 0.2%

Principal Amount (000s)

Value (Note 1) (000s)

FINANCIALS - 0.2%

Commercial Banks - 0.2%

Abbey National PLC 7.35% (f)

$ 8,537

$ 8,537

National Westminster Bank PLC 7.75% (f)

5,509

5,792

14,329

TOTAL PREFERRED SECURITIES

(Cost $14,409)

14,329

Cash Equivalents - 6.8%

Maturity Amount (000s)

Investments in repurchase agreements (Collateralized by U.S. Government Obligations) in a joint trading account at:

5.29%, dated 8/31/06 due 9/1/06

$ 74,238

74,227

5.29%, dated 8/31/06 due 9/1/06 (a)

355,637

355,585

TOTAL CASH EQUIVALENTS

(Cost $429,812)

429,812

TOTAL INVESTMENT PORTFOLIO - 105.6%

(Cost $6,736,183)

6,700,597

NET OTHER ASSETS - (5.6)%

(355,516)

NET ASSETS - 100%

$ 6,345,081

Futures Contracts

Expiration
Date

Underlying
Face Amount
at Value
(000s)

Unrealized
Appreciation/
(Depreciation)
(000s)

Purchased

Eurodollar Contracts

744 Eurodollar 90 Day Index Contracts

Sept. 2006

$ 733,965

$ (1,997)

744 Eurodollar 90 Day Index Contracts

Dec. 2006

734,058

(1,578)

744 Eurodollar 90 Day Index Contracts

March 2007

734,300

(1,239)

744 Eurodollar 90 Day Index Contracts

June 2007

734,561

(804)

744 Eurodollar 90 Day Index Contracts

Sept. 2007

734,784

40

744 Eurodollar 90 Day Index Contracts

Dec. 2007

734,905

528

582 Eurodollar 90 Day Index Contracts

March 2008

574,907

514

133 Eurodollar 90 Day Index Contracts

June 2008

131,374

187

TOTAL EURODOLLAR CONTRACTS

(4,349)

Futures Contracts - continued

Expiration
Date

Underlying
Face Amount
at Value
(000s)

Unrealized
Appreciation/
(Depreciation)
(000s)

Sold

Eurodollar Contracts

207 Eurodollar 90 Day Index Contracts

Sept. 2008

$ 204,454

$ 106

156 Eurodollar 90 Day Index Contracts

Dec. 2008

154,066

59

101 Eurodollar 90 Day Index Contracts

March 2009

99,739

31

76 Eurodollar 90 Day Index Contracts

June 2009

75,043

(62)

74 Eurodollar 90 Day Index Contracts

Sept. 2009

73,061

(58)

73 Eurodollar 90 Day Index Contracts

Dec. 2009

72,066

(56)

72 Eurodollar 90 Day Index Contracts

March 2010

71,073

(52)

72 Eurodollar 90 Day Index Contracts

June 2010

71,067

(50)

70 Eurodollar 90 Day Index Contracts

Sept. 2010

69,087

(48)

69 Eurodollar 90 Day Index Contracts

Dec. 2010

68,093

(47)

22 Eurodollar 90 Day Index Contracts

March 2011

21,710

(14)

TOTAL EURODOLLAR CONTRACTS

(191)

$ (4,540)

Swap Agreements

Notional
Amount (000s)

Value
(000s)

Credit Default Swaps

Receive monthly notional amount multiplied by 3.05% and pay Merrill Lynch upon default event of Morgan Stanley ABS Capital I, Inc., par value of the proportional notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8, Class B3, 7.2913% 9/25/34

Oct. 2034

$ 1,600

$ 25

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, 7.6913% 11/25/34

Dec. 2034

1,645

24

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE7 Class B3, 8.8244% 8/25/34

Sept. 2034

1,462

17

Swap Agreements - continued

Expiration
Date

Notional
Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC7, Class B3, 7.6913% 7/25/34

August 2034

$ 1,462

$ 18

Receive monthly notional amount multiplied by 3.35% and pay Morgan Stanley, Inc. upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-HE8 Class B3, 7.3913% 9/25/34

Oct. 2034

1,462

21

Receive monthly notional amount multiplied by .42% and pay Bank of America upon default event of Bear Stearns Asset Backed Securities, par value of the notional amount of Bear Stearns Asset Backed Securities 6.175% Series 2005-HE2 Class M3 2/25/35

March 2035

5,600

(13)

Receive monthly notional amount multiplied by .42% and pay Bank of America upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust 6.055% Series 2005-B Class M7 4/25/35

May 2035

5,600

(1)

Receive monthly notional amount multiplied by .56% and pay Bank of America upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R11 Class M6, 6.785% 11/25/34

Dec. 2034

7,000

(8)

Receive monthly notional amount multiplied by .8% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WCH1 Class M6, 6.365% 1/25/35

Feb. 2035

2,400

2

Receive monthly notional amount multiplied by .82% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC6 Class M3, 5.6413% 7/25/34

August 2034

1,462

6

Swap Agreements - continued

Expiration
Date

Notional
Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by .85% and pay Deutsche Bank upon default event of Park Place Securities, Inc., par value of the notional amount of Park Place Securities, Inc. Series 2005-WHQ2 Class M6, 6.105% 5/25/35

June 2035

$ 2,400

$ 4

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Ameriquest Mortgage Securities, Inc., par value of the notional amount of Ameriquest Mortgage Securities, Inc. Series 2004-R9 Class M5, 5.5913% 10/25/34

Nov. 2034

1,462

6

Receive monthly notional amount multiplied by .85% and pay UBS upon default event of Morgan Stanley ABS Capital I, Inc., par value of the notional amount of Morgan Stanley ABS Capital I, Inc. Series 2004-NC8 Class M6, 5.4413% 9/25/34

Oct. 2034

1,462

11

Receive monthly notional amount multiplied by 1.6% 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 M7, 5.4413% 5/25/35

June 2035

1,330

2

Receive monthly notional amount multiplied by 1.66% 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 M7, 5.4413% 5/25/35

June 2035

1,462

4

Receive monthly notional amount multiplied by 1.85% and pay Citibank upon default event of Carrington Mortgage Loan Trust, par value of the notional amount of Carrington Mortgage Loan Trust Series 2006-NC2 Class M9, 7.02% 6/25/36

July 2036

4,500

(26)

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

3,400

(19)

Swap Agreements - continued

Expiration
Date

Notional
Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive monthly notional amount multiplied by 2% and pay Goldman Sachs upon default event of Long Beach Mortgage Loan Trust, par value of the notional amount of Long Beach Mortgage Loan Trust, Series 2006-7 Class M9, 7.14% 8/25/36

Sept. 2036

$ 4,100

$ (2)

Receive monthly notional amount multiplied by 2.54% and pay Merrill Lynch upon default event of Countrywide Home Loans, Inc., par value of the notional amount of Countrywide Home Loans, Inc. Series 2003-BC1 Class B1, 7.6913% 3/25/32

April 2032

184

1

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-1 Class M9, 7.3913% 2/25/34

March 2034

782

3

Receive monthly notional amount multiplied by 2.61% and pay Goldman Sachs upon default event of Fremont Home Loan Trust, par value of the notional amount of Fremont Home Loan Trust Series 2004-A Class B3, 7.0413% 1/25/34

Feb. 2034

623

1

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

3,625

38

Receive monthly notional amount multiplied by 5% and pay Deutsche Bank upon default event of MASTR Asset Backed Securities Trust, par value of the notional amount of MASTR Asset Backed Securities Trust Series 2003-NC1 Class M6, 8.1913% 4/25/33

May 2033

1,462

17

Receive quarterly notional amount multiplied by .25% and pay Merrill Lynch, Inc. upon default event of Consolidated Natural Gas Co., par value of the notional amount of Consolidated Natural Gas Co. 6% 10/15/10

July 2007

12,000

20

Swap Agreements - continued

Expiration
Date

Notional
Amount (000s)

Value
(000s)

Credit Default Swaps - continued

Receive quarterly notional amount multiplied by .25% and pay Merrill Lynch, Inc. upon default event of Consolidated Natural Gas Co., par value of the notional amount of Consolidated Natural Gas Co. 6% 10/15/10

June 2007

$ 4,000

$ 7

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

10,100

16

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

12,200

21

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

14,600

(30)

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

8,265

20

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

6,095

15

Receive quarterly notional amount multiplied by .41% and pay Merrill Lynch, Inc. upon default event of Talisman Energy, Inc., par value of the notional amount of Talisman Energy, Inc. 7.25% 10/15/27

March 2009

4,600

26

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

10,265

48

Swap Agreements - continued

Expiration
Date

Notional
Amount (000s)

Value
(000s)

Credit Default Swaps - continued

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

10,000

116

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

12,400

25

TOTAL CREDIT DEFAULT SWAPS

161,010

415

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

35,840

(12)

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

Sept. 2006

56,500

(13)

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 15 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

43,200

(8)

Swap Agreements - continued

Expiration
Date

Notional
Amount (000s)

Value
(000s)

Total Return Swaps - continued

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

$ 18,100

$ (3)

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 5 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

40,000

(12)

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

57,300

(15)

TOTAL TOTAL RETURN SWAPS

250,940

(63)

$ 411,950

$ 352

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 end of the period, the value of these securities amounted to $688,278,000 or 10.8% of net assets.

(d) Security or a portion of the security purchased on a delayed delivery or when-issued basis.

(e) 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 $3,537,000.

(f) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

(g) 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. 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.

(h) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool.

(i) 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 $24,387,000 or 0.4% of net assets.

Additional information on each holding is as follows:

Security

Acquisition Date

Acquisition Cost (000s)

Aspetuck Trust 5.7869% 10/16/06

12/14/05

$ 13,080

Iberbond 2004 PLC 4.826% 12/24/17

11/30/05

$ 11,279

Affiliated Central Funds

Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows:

Fund

Four months ended August 31, 2006
Income earned
(Amounts in thousands)

Year ended
April 30, 2006
Income earned
(Amounts in thousands)

Fidelity Ultra-Short Central Fund

$ 6,607

$ 16,252

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
(Amounts in thousands)

Value at
April 30, 2006

Purchases

Sales Proceeds

Value at
August 31, 2006

% ownership, end of period

Fidelity Ultra-Short Central Fund

$ 360,171

$ -

$ -

$ 360,208

4.3%

Income Tax Information

At August 31, 2006, the fund had a capital loss carryforward of approximately $49,856,000 of which $8,450,000, $4,866,000, $22,435,000 and $14,105,000 will expire on August 31, 2007, 2008, 2013 and 2014, respectively.

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amount)

August 31, 2006

Assets

Investment in securities, at value (including securities loaned of $348,613 and repurchase agreements of $429,812) - See accompanying schedule:

Unaffiliated issuers (cost $6,375,204)

$ 6,340,389

Affiliated Central Funds (cost $360,979)

360,208

Total Investments (cost $6,736,183)

$ 6,700,597

Cash

235

Receivable for investments sold

1,331

Receivable for swap agreements

75

Receivable for fund shares sold

4,086

Interest receivable

44,462

Receivable for daily variation on futures contracts

448

Swap agreements, at value

352

Other receivables

74

Total assets

6,751,660

Liabilities

Payable for investments purchased
Regular delivery

$ 15,183

Delayed delivery

28,468

Payable for fund shares redeemed

3,157

Distributions payable

1,713

Accrued management fee

1,663

Other affiliated payables

753

Other payables and accrued expenses

57

Collateral on securities loaned, at value

355,585

Total liabilities

406,579

Net Assets

$ 6,345,081

Net Assets consist of:

Paid in capital

$ 6,421,757

Undistributed net investment income

8,972

Accumulated undistributed net realized gain (loss) on investments

(45,875)

Net unrealized appreciation (depreciation) on investments

(39,773)

Net Assets, for 716,528 shares outstanding

$ 6,345,081

Net Asset Value, offering price and redemption price per share ($6,345,081 ÷ 716,528 shares)

$ 8.86

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Statements - continued

Statement of Operations

Amounts in thousands

Four months ended
August 31,
2006

Year ended
April 30,
2006

Investment Income

Dividends

$ -

$ 1,005

Interest

94,681

207,885

Income from affiliated Central Funds

6,607

16,252

Total income

101,288

225,142

Expenses

Management fee

$ 6,521

$ 17,120

Transfer agent fees

2,036

5,265

Accounting and security lending fees

-

94

Fund wide operations fee

599

1,321

Independent trustees' compensation

8

22

Appreciation in deferred trustee compensation account

-

2

Custodian fees and expenses

-

11

Registration fees

-

10

Audit

-

8

Legal

-

2

Miscellaneous

4

15

Total expenses before reductions

9,168

23,870

Expense reductions

(92)

(103)

Total expenses

9,076

23,767

Net investment income

92,212

201,375

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

Unaffiliated issuers

(8,692)

(5,729)

Affiliated Central Funds

-

(19)

Futures contracts

(2,103)

(3,154)

Swap agreements

1,235

249

Total net realized gain (loss)

(9,560)

(8,653)

Change in net unrealized appreciation (depreciation) on:

Investment securities

31,574

(51,984)

Futures contracts

2,591

(4,236)

Swap agreements

(740)

(514)

Delayed delivery commitments

-

(1)

Total change in net unrealized appreciation (depreciation)

33,425

(56,735)

Net gain (loss)

23,865

(65,388)

Net increase (decrease) in net assets resulting from operations

$ 116,077

$ 135,987

See accompanying notes which are an integral part of the financial statements.

Annual Report

Statement of Changes in Net Assets

Amounts in thousands

Four months ended
August 31,
2006

Year ended
April 30,
2006

Year ended
April 30,
2005

Increase (Decrease) in Net Assets

Operations

Net investment income

$ 92,212

$ 201,375

$ 137,054

Net realized gain (loss)

(9,560)

(8,653)

(2,256)

Change in net unrealized appreciation (depreciation)

33,425

(56,735)

(35,103)

Net increase (decrease) in net assets resulting from operations

116,077

135,987

99,695

Distributions to shareholders from net investment income

(90,346)

(197,708)

(138,443)

Share transactions
Proceeds from sales of shares

811,714

2,324,813

1,665,954

Reinvestment of distributions

83,646

179,567

123,083

Cost of shares redeemed

(441,411)

(1,456,102)

(2,383,973)

Net increase (decrease) in net assets resulting from share transactions

453,949

1,048,278

(594,936)

Total increase (decrease) in net assets

479,680

986,557

(633,684)

Net Assets

Beginning of period

5,865,401

4,878,844

5,512,528

End of period (including undistributed net investment income of $8,972, $6,980, and $3,561, respectively)

$ 6,345,081

$ 5,865,401

$ 4,878,844

Other Information

Shares

Sold

92,079

262,268

185,611

Issued in reinvestment of distributions

9,485

20,246

13,723

Redeemed

(50,105)

(164,124)

(265,949)

Net increase (decrease)

51,459

118,390

(66,615)

See accompanying notes which are an integral part of the financial statements.

Annual Report

Financial Highlights

Four months ended
August 31,

Years ended April 30,

2006

2006

2005

2004

2003

2002

Selected Per-Share Data

Net asset value, beginning of period

$ 8.82

$ 8.92

$ 8.99

$ 9.04

$ 8.78

$ 8.70

Income from Investment Operations

Net investment income D

.133

.344

.243

.236

.346

.427

Net realized and unrealized gain (loss)

.037

(.107)

(.067)

(.057)

.277

.076

Total from investment operations

.170

.237

.176

.179

.623

.503

Distributions from net investment income

(.130)

(.337)

(.246)

(.229)

(.363)

(.423)

Net asset value,
end of period

$ 8.86

$ 8.82

$ 8.92

$ 8.99

$ 9.04

$ 8.78

Total Return B, C

1.95%

2.70%

1.98%

1.99%

7.23%

5.88%

Ratios to Average Net Assets E, G

Expenses before reductions

.45% A

.46%

.56%

.57%

.57%

.58%

Expenses net of fee waivers, if any

.45% A

.46%

.56%

.57%

.57%

.58%

Expenses net of all reductions

.44% A

.46%

.56%

.57%

.57%

.58%

Net investment income

4.48% A

3.88%

2.71%

2.61%

3.88%

4.86%

Supplemental Data

Net assets,
end of period
(in millions)

$ 6,345

$ 5,865

$ 4,879

$ 5,513

$ 5,695

$ 3,285

Portfolio turnover rate F

55% A

62%

93%

100%

80%

145%

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 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 August 31, 2006

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Fidelity Short-Term Bond Fund (the Fund) is a fund of Fidelity Fixed-Income Trust (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. 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:

On July 20, 2006, the Board of Trustees approved a change in the fiscal year end of the Fund from April 30 to August 31. Accordingly, the Fund's financial statements and related notes include information as of the four month period ended August 31, 2006 and the one year period ended April 30, 2006.

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.

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.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among 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.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), 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, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements.

Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.

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, deferred trustees compensation, 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:

Unrealized appreciation

$ 16,450

Unrealized depreciation

(44,342)

Net unrealized appreciation (depreciation)

(27,892)

Undistributed ordinary income

1,153

Capital loss carryforward

(49,856)

Cost for federal income tax purposes

$ 6,728,489

Annual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

The tax character of distributions paid was as follows:

Four months ended
August 31, 2006

April 30, 2006

April 30, 2005

Ordinary Income

$ 90,346

$ 197,708

$ 138,443

New Accounting Pronouncements. 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, results of operations and financial statement disclosures.

In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.

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

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

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.

Swap Agreements. The Fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.

Annual Report

2. Operating Policies - continued

Swap Agreements - continued

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 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

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Operating Policies - continued

Mortgage Dollar Rolls - continued

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 $744,980 and $483,033, respectively, for the four month period ended August 31, 2006.

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% (.30% prior to June 1, 2005) 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 periods ended August 31, 2006 and April 30, 2006, the management fee was equivalent to an annualized rate of .32% and an annual rate of .33%, respectively of the Fund's average net assets.

Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the Fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives an asset-based fee of .10% of the Fund's average net assets. Prior to June 1, 2005, FSC also received account fees in addition to the asset-based fee. FSC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the periods ended August 31, 2006 and April 30, 2006, the transfer agent fee was equivalent to an annualized rate of .10% of the Fund's average net assets.

Accounting and Security Lending Fees. FSC maintains the Fund's accounting records. Under a separate contract, FSC administers the security lending program. Effective June 1, 2005, FMR pays for these fees. Prior to June 1, 2005, the accounting fee was based on the level of average net assets for the month and the security lending fee was based on the number and duration of the lending transactions.

Annual Report

4. Fees and Other Transactions with Affiliates - continued

Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agreement (FWOE) which became effective on June 1, 2005, FMR has contractually 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 periods ended August 31, 2006 and April 30, 2006, the FWOE fee was equivalent to an annualized rate of .03% and .02%, respectively, of the Fund's average net assets.

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. 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 Fund does 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 for the periods ended August 31, 2006 and April 30, 2006, amounted to $4 and $10, respectively, and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

6. Security Lending.

The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the Fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of interest income. Net income from lending portfolio securities for the period ended August 31, 2006 and April 30, 2006, amounted to $281 and $13, respectively.

7. Expense Reductions.

Through arrangements with the Fund's custodian and transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period ended August 31, 2006, these credits reduced the Fund's management fee and transfer agent expense by $23 and $69, respectively. During the period ended April 30, 2006, these credits reduced the Fund's management fee, custody expenses, and transfer agent expense by $27, $11, and $65, respectively.

8. 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.

At the end of the period, Fidelity Freedom 2000 Fund, Fidelity Freedom 2010 Fund, and Fidelity Freedom Income Fund were the owners of record of approximately 20% of the outstanding shares of the Fund.

Annual Report

Report of Independent Registered Public Accounting Firm

To the Trustees of Fidelity Fixed-Income Trust and the Shareholders of Fidelity Short-Term 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 Short-Term Bond Fund (a fund of Fidelity Fixed-Income Trust) at August 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Short-Term Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 20, 2006

Annual Report

Trustees and Officers

The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 346 funds advised by FMR or an affiliate. Mr. McCoy oversees 348 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 fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (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 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 Short Term 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 Vice Chairman (2006-present), a Director (2003-present) and Chief Operating Officer of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd.

* 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 and a member of the Consumer Electronics Hall of Fame.

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 Sony Corporation (2006-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 Fixed-Income Trust. 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), 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).

Peter S. Lynch (62)

Year of Election or Appointment: 2003

Member of the Advisory Board of Fidelity Fixed-Income Trust. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund.

Boyce I. Greer (50)

Year of Election or Appointment: 2006

Vice President of Short Term 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 Short Term 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 Short Term 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 J. Dudley (41)

Year of Election or Appointment: 1997

Vice president of Short Term Bond. Mr. Dudley also serves as Vice President of other funds advised by FMR. Prior to his current responsibilities, Mr. Dudley worked as a portfolio manager.

Eric D. Roiter (57)

Year of Election or Appointment: 1998

Secretary of Short Term 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 of Fidelity Distributors Corporation (FDC) (1998-2005).

Stuart Fross (47)

Year of Election or Appointment: 2003

Assistant Secretary of Short Term 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 Short Term 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 Short Term 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 Short Term Bond. 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 Short Term 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 Short Term 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 Short Term 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 (37)

Year of Election or Appointment: 2005

Deputy Treasurer of Short Term 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 Short Term 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 (60)

Year of Election or Appointment: 1986

Assistant Treasurer of Short Term 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 Short Term 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 Short Term Bond. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR.

Gary W. Ryan (48)

Year of Election or Appointment: 2005

Assistant Treasurer of Short Term 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 Short Term 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

A total of 10.46% Government Obligations of the dividends distributed during the year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

The fund designates $88,457,219 of distributions paid during the fiscal year ended August 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

Board Approval of Investment Advisory Contracts and Management Fees

Fidelity Short-Term 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 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.

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, as well as the 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. 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 Short-Term Bond 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 compared favorably to 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 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.

The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 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.

Annual Report

Fidelity Short-Term 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 the 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 the fund compared to competitive fund median expenses. 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) at 35 basis points, (ii) lower and limit the "class-level" transfer agent fee to 10 basis points, and (iii) limit the fund's total expenses to 45 basis points. These contractual arrangements may not be increased without Board approval.

The Board noted that the fund's total expenses ranked below its competitive median for 2005. The Board considered that the fund's total expenses reflect the contractual arrangements for 2005, as if the contractual arrangements had been 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 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.

Based on its review, the Board concluded that the fund's total expenses were reasonable in light of the services that the fund and its shareholders receive and the other factors considered.

Annual Report

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. 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

Investment Adviser

Fidelity Management & Research Company Boston, MA

Investment Sub-Advisers

Fidelity Research & Analysis Company (formerly Fidelity Management &
Research (Far East) Inc.)

Fidelity Investments Japan Limited

Fidelity Investments Money
Management, Inc.

Fidelity International
Investment Advisors

Fidelity International
Investment Advisors (U.K.) Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Service Agents

Fidelity Service Company, Inc.

Boston, MA

Custodian

The Bank of New York

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
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Corporate Headquarters
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