N-30D 1 main.htm

Fidelity®

Asset ManagerSM 

Annual Report

for the year ending
September 30, 2002

and

Prospectus

dated November 25, 2002

(2_fidelity_logos) (Registered_Trademark)

Contents

President's Message

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Ned Johnson on investing strategies.

Performance

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How the fund has done over time.

Market Recap

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An overview of the market's performance and the factors driving it.

Fund Talk

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

Investment Changes

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

Independent Auditors' Report

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The auditors' opinion.

Trustees and Officers

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Distributions

<Click Here>

Prospectus

P-1

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

Other third party marks appearing herein are the property of their respective owners.

All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.

(Recycle graphic)   This report is printed on recycled paper using soy-based inks.

This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.

Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.

Neither the fund nor Fidelity Distributors Corporation is a bank.

For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.

Annual Report

President's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

The Dow Jones Industrial AverageSM - often used as a gauge of U.S. stock market performance - fell to its lowest point in four years during September 2002. The third quarter was the average's worst three-month stretch since the final quarter of 1987, and the Dow had its worst September since 1937. With equities in disarray, investors flocked to U.S. Treasury bonds, pushing yields of the bellwether 10-year Treasury note to 40-year lows.

While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs.

First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation.

Second, you can further manage your investing risk through diversification. Asset Manager funds are already diversified because they invest in stocks, bonds and short-term and money market instruments, both in the U.S. and overseas. If you have a shorter investment time horizon, you might want to consider moving some of your investment into Asset Manager: Income, which generally has a higher weighting in short-term investments compared with the other Asset Manager funds.

Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy.

If you have questions, please call us at 1-800-544-6666, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

There are several ways to evaluate a fund's historical performance. You can look at cumulative total returns, average annual returns, or the growth of a hypothetical investment. 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). 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.

Cumulative Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Past 10
years

Fidelity ® Asset Manager SM

-8.17%

15.19%

117.23%

Fidelity Asset Manager Composite

-7.08%

16.92%

108.97%

S&P 500®

-20.49%

-7.88%

136.69%

LB Aggregate Bond

8.60%

45.79%

103.70%

LB 3 Month T-Bill

2.01%

25.84%

57.53%

Flexible Portfolio Funds Average

-10.36%

1.11%

89.77%

Cumulative total returns show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Fidelity Asset Manager Composite Index, a hypothetical combination of unmanaged indices. The composite index combines the total returns of the Standard & Poor's 500 SM Index (S&P 500®), the Lehman Brothers® Aggregate Bond Index and the Lehman Brothers 3 Month Treasury Bill Index, weighted according to the fund's neutral mix. You can also compare the fund's performance to the performance of mutual funds tracked by Lipper Inc. and grouped by similar objectives. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges.

Average Annual Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Past 10
years

Fidelity Asset Manager

-8.17%

2.87%

8.07%

Fidelity Asset Manager Composite

-7.08%

3.18%

7.65%

Average annual total returns take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year.

Annual Report

Performance - continued

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity® Asset Manager SM on September 30, 1992. The chart shows how the value of your investment would have grown, and also shows how the S&P 500 Index, Lehman Brothers Aggregate Bond Index and Fidelity Asset Manager Composite Index did over the same period.



3

Understanding Performance

How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. When you sell your shares, they could be worth more or less than what you paid for them.

Annual Report

Market Recap

Investors favored the relative safety typically offered by bond investing during the 12-month period ending September 30, 2002, as a number of negative factors, such as ongoing economic weakness, declining corporate profitability and geopolitical unrest, raised the level of uncertainty about the near-term performance of stocks. Historically, heightened uncertainty has never been a positive influence on stocks, and once again it caused most of the major equity market indexes to decline significantly during the past year. In contrast, investment-grade bonds performed remarkably well.

Stocks: After a year and a half of losses, investors looking for some improvement in the stock market found little relief during the 12-month period. The Standard & Poor's 500SM Index, a benchmark of 500 larger companies, fell 20.49%, while the tech-heavy NASDAQ Composite® Index and the blue-chips' benchmark, the Dow Jones Industrial AverageSM, dropped 21.52% and 12.46%, respectively. Smaller-cap stocks fared slightly better but still proved disappointing, as evidenced by the 9.30% decline in the Russell 2000® Index. A year ago, the outlook for stocks looked particularly dismal in the aftermath of September 11, but the market rebounded surprisingly well as many investors stepped in to scoop up stocks at bargain prices. Expectations for an economic recovery also were heightened after the Federal Reserve Board lowered interest rates in the fourth quarter of 2001 to levels not seen since the 1960s. However, optimism for a sustained market rally was muted by a series of worries that arose in 2002 and lasted throughout the remainder of the period. Among the concerns were slow and uneven economic growth, disappointing corporate earnings, allegations of egregious corporate conduct at many high-profile firms and a series of corporate accounting investigations by the Securities and Exchange Commission that resulted in several earnings restatements, most of which were lower. Also weighing on the market was the possibility of a U.S. war with Iraq and potential future terrorist incidents.

Bonds: Investment-grade bonds sparkled during the one-year period, as the economic recovery stalled and the prospects firmed for a continued favorable interest rate environment. The Lehman Brothers® Aggregate Bond Index, a proxy for taxable-bond performance, returned 8.60%, well ahead of flagging stock markets that incurred yet another round of double-digit declines. Negative sentiment infesting the equity markets boosted demand for bonds, as risk-averse investors sought out safer havens offering some return on their assets. A strong flight to quality in Treasuries and high-quality, higher-yielding government agency securities resulted, as reflected in the stellar performance of the Lehman Brothers U.S. Agency and Treasury indexes, which registered gains of 9.38% and 10.45%, respectively. Meanwhile, the Lehman Brothers Credit Bond Index posted a distant third-place finish, returning 8.19%. While corporates benefited from some economic improvement, eroding investor confidence in the sector, along with widespread credit-quality downgrades and the resulting liquidity crisis, curbed their advances. The Lehman Brothers Mortgage-Backed Securities Index brought up the rear, returning 7.36%. While enjoying lower volatility and reduced prepayment risk for much of the period, mortgage securities retreated during the summer as record-low interest rates triggered another massive refinancing wave, far stronger than the one spawned during the fall of 2001.

Annual Report

Fund Talk: The Manager's Overview

(Portfolio Manager photograph)
An interview with Richard Habermann, Portfolio Manager of Fidelity Asset Manager

Q. How did the fund perform, Dick?

A. For the 12 months ending September 30, 2002, the fund returned -8.17%. During the same period, the flexible portfolio funds average tracked by Lipper Inc. fell 10.36%, while the Fidelity Asset Manager Composite Index declined 7.08%.

Q. How did your asset-allocation decisions influence fund results?

A. The fund's positioning in equities contributed to relative performance. After favoring stocks during last year's strong fourth-quarter rally, I scaled back early in 2002 to around a 50% neutral weighting, given continued erosion in business fundamentals and growing concerns about corporate mismanagement. The fund benefited from becoming more cautious on equities, as share prices cratered during the spring and summer. Consistent with this cautious stance, I became more overweighted in bonds. However, within the bond subportfolio, our commitment to high-yield securities hurt performance. While high-yield bonds benefited from optimism about a potential economic recovery early in the period, their advances were curbed by weak equity markets, widespread credit-quality downgrades and an influx of supply from fallen investment-grade issuers. Despite strong security selection and reducing the high-yield weighting as market conditions deteriorated, we still lost ground to the all-investment-grade bond allocation seen in our composite index, which benefited from the massive flight to quality in Treasuries. In hindsight, I should have moved more toward higher-quality issuers, but the high coupon income was attractive and I didn't expect high-yield bond prices to decline further from already historically low levels.

Q. What factors drove the equity portion of the fund during the period?

A. It was an extremely challenging year, one where nearly every major sector posted double-digit declines. Even companies with solid fundamentals only modestly outperformed the market. Against that backdrop, the fund's equity investments - managed by Charles Mangum - edged the S&P 500, largely due to favorable sector positioning. Shying away from the troubled technology sector helped the most. The fund benefited from underweighting large-cap hardware stocks, such as IBM and Intel, which suffered from high valuations and persistently weak capital spending. Avoiding many of the landmines within the sector also helped, as did an investment in Dell, which delivered positive returns. Several of our consumer-related holdings, including Coca-Cola, Philip Morris and Alberto-Culver, also fared well, due to their defensive nature. Finally, holding defensive financials with little exposure to the capital markets boosted returns, as did our stake in health care services stock Cardinal Health.

Annual Report

Fund Talk: The Manager's Overview - continued

Q. What moves didn't work as well?

A. Disappointing security selection among weak pharmaceutical stocks hurt. Bristol-Myers Squibb plunged on patent renewal rejections and a poor success rate for late-stage clinical products. Schering-Plough was another notable detractor in the drug space. We also suffered from becoming more aggressive prematurely, as valuations looked attractive and the economy showed signs of firming during the first quarter of 2002. However, a recovery in corporate earnings failed to materialize and investors continued to reward conservative names, while seemingly punishing everything else. As a result, we were underexposed to more stable consumer names, such as Wal-Mart and Procter & Gamble, which continued to outperform the market. We also dipped too early into the telecommunications waters. While we benefited from having minimal exposure to the WorldCom disaster, we overweighted regional Bell operating companies BellSouth and Verizon, which extended their yearlong declines.

Q. How did the fund's fixed-income investments fare?

A. Favorable interest rate conditions, a sluggish economy and robust demand translated into strong absolute returns for our investment-grade holdings, managed by Jeff Moore - who took over for Charlie Morrison in April. Despite good security selection overall and favorable yield-curve positioning, underweighting strong-performing government bonds hurt performance relative to the index. While we gained a yield advantage from emphasizing corporate bonds and mortgage securities, it couldn't outweigh the dramatic rally in Treasury prices. Good credit analysis and diversification helped us dodge some of the severe credit problems that plagued several corporate issuers. Overweighting real estate, bank and foreign government agency issues also helped. Within mortgages, we focused on securities less susceptible to prepayment, which helped amid the period's two massive refinancing waves. While they lagged the returns provided by investment-grade bonds, the fund's high-yield holdings also had a positive return and beat their benchmark. Managed by Matt Conti, the high-yield subportfolio avoided several key defaults and credit downgrades. It further benefited from emphasizing higher-quality bonds, while having only limited exposure to speculative securities. Solid security selection in the battered telecom and utilities sectors also helped. Finally, the strategic cash portion of the fund - managed by John Todd - was effective in providing reasonably steady returns to help offset capital market volatility.

Q. What's your outlook?

A. Although sentiment continues to be negative, many stocks are now more reasonably valued on several measures, and companies are entering a period of easier year-over-year earnings comparisons. In addition, the quality of earnings likely has improved. While this represents a more positive environment for higher-risk assets, it's potentially negative for extremely conservative assets, such as Treasuries, which have flourished of late with geopolitical concerns and the risk of war with Iraq weighing heavily on the market.

Annual Report

The views expressed in this report reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Fund Facts

Goal: high total return with reduced risk over the long term by investing in stocks, bonds and short-term instruments

Fund number: 314

Trading symbol: FASMX

Start date: December 28, 1988

Size: as of September 30, 2002, more than $9.5 billion

Manager: Richard Habermann, since 1996; manager, Fidelity Asset Manager: Aggressive, since 1999; Fidelity Asset Manager: Income and Fidelity Asset Manager: Growth, since 1996; Fidelity Trend Fund, 1977- 1982; Fidelity Magellan Fund, 1972-1977; joined Fidelity in 1968

3

Dick Habermann expands on his outlook:

"Where we go from here has a lot to do with what happens in the fixed-income markets. Despite sharply lower interest rates and an accommodative Federal Reserve Board, investment-grade corporate bonds have come under extreme pressure in recent months, with household-name issuers selling at very large premiums over Treasuries. While this environment has caused high-yield spreads to widen even further than expected, it has also dragged on equity performance. A stronger economy and improved earnings would be necessary to reverse this effect, as fund flows out of government bonds and into corporates could help alleviate the credit crunch and induce firms to invest and hire again, which could help equities. While continued cost cutting should help boost corporate earnings in 2003, it may take some time for demand-driven earnings to rebound. In the meantime, higher pension costs and other reforms, such as stock option expensing, could put a damper on earnings expectations.

"Rarely have bonds outperformed equities for such a prolonged period of time, as investors have sought safe havens. Our approach is to lean against such trends when they become overstretched and when market valuations seem to have reached extreme levels."

Annual Report

Investment Changes

Top Five Stocks as of September 30, 2002

% of fund's
net assets

% of fund's net assets
6 months ago

Cardinal Health, Inc.

3.9

3.7

Clear Channel Communications, Inc.

2.8

2.4

American International Group, Inc.

2.5

1.9

General Electric Co.

2.4

2.3

Fannie Mae

1.8

2.2

13.4

Top Five Bond Issuers as of September 30, 2002

(with maturities greater than one year)

% of fund's
net assets

% of fund's net assets
6 months ago

Fannie Mae

8.7

8.7

U.S. Treasury Obligations

3.6

5.7

Government National Mortgage Association

2.9

2.8

Freddie Mac

0.9

0.5

Nextel Communications, Inc.

0.4

0.3

16.5

Top Five Market Sectors as of September 30, 2002

% of fund's
net assets

% of fund's net assets
6 months ago

Financials

17.5

16.8

Consumer Discretionary

10.9

12.3

Health Care

10.6

10.5

Industrials

5.6

6.3

Information Technology

5.5

7.3

Asset Allocation (% of fund's net assets)

As of September 30, 2002 *

As of March 31, 2002 **

Stock Class and
Equity futures 50.1%

Stock Class 49.1%

Bond Class 44.7%

Bond Class 42.9%

Short-term Class 5.2%

Short-term Class 8.0%

* Foreign investments

4.3%

** Foreign investments

3.3%



Asset allocations in the pie charts reflect the categorization of assets as defined in the fund's prospectus in effect as of the time periods indicated above. Financial statement categorizations conform to accounting standards and will differ from the pie chart. Percentages are adjusted for the effect of futures contracts, if applicable.

Annual Report

Investments September 30, 2002

Showing Percentage of Net Assets

Common Stocks - 45.1%

Shares

Value (Note 1)
(000s)

CONSUMER DISCRETIONARY - 5.2%

Auto Components - 0.0%

Dana Corp.

156,000

$ 2,040

Hotels, Restaurants & Leisure - 0.3%

McDonald's Corp.

1,571,500

27,753

Household Durables - 0.1%

Leggett & Platt, Inc.

229,000

4,532

Media - 3.7%

AOL Time Warner, Inc. (a)

7,612,450

89,066

Clear Channel Communications, Inc. (a)

7,661,091

266,223

Cox Communications, Inc. Class A (a)

144,200

3,546

358,835

Multiline Retail - 0.2%

Target Corp.

528,700

15,607

Specialty Retail - 0.9%

Home Depot, Inc.

1,621,400

42,319

Limited Brands, Inc.

703,780

10,092

Lowe's Companies, Inc.

864,300

35,782

Office Depot, Inc. (a)

184,100

2,272

90,465

Textiles Apparel & Luxury Goods - 0.0%

Arena Brands Holding Corp. Class B

130,444

2,511

TOTAL CONSUMER DISCRETIONARY

501,743

CONSUMER STAPLES - 3.5%

Beverages - 0.8%

PepsiCo, Inc.

1,180,170

43,607

The Coca-Cola Co.

739,250

35,454

79,061

Food & Drug Retailing - 1.3%

Albertson's, Inc.

1,076,600

26,011

CVS Corp.

2,681,600

67,979

Safeway, Inc. (a)

1,233,000

27,496

121,486

Food Products - 0.0%

McCormick & Co., Inc. (non-vtg.)

99,800

2,275

Common Stocks - continued

Shares

Value (Note 1)
(000s)

CONSUMER STAPLES - continued

Personal Products - 0.4%

Alberto-Culver Co. Class B

558,400

$ 27,378

Gillette Co.

471,700

13,962

41,340

Tobacco - 1.0%

Philip Morris Companies, Inc.

2,396,300

92,976

TOTAL CONSUMER STAPLES

337,138

ENERGY - 3.5%

Energy Equipment & Services - 0.4%

Cooper Cameron Corp. (a)

129,000

5,387

Diamond Offshore Drilling, Inc.

83,700

1,670

GlobalSantaFe Corp.

502,586

11,233

Halliburton Co.

583,500

7,533

Transocean, Inc.

507,800

10,562

36,385

Oil & Gas - 3.1%

ChevronTexaco Corp.

1,028,000

71,189

ConocoPhillips

2,935,051

135,717

Exxon Mobil Corp.

2,732,100

87,154

294,060

TOTAL ENERGY

330,445

FINANCIALS - 10.8%

Banks - 2.0%

Bank of America Corp.

421,200

26,873

Bank One Corp.

630,850

23,594

Comerica, Inc.

375,452

18,104

FleetBoston Financial Corp.

2,103,000

42,754

PNC Financial Services Group, Inc.

429,300

18,104

Synovus Financial Corp.

670,200

13,820

Wachovia Corp.

1,444,629

47,225

190,474

Diversified Financials - 5.9%

Citigroup, Inc.

5,716,666

169,499

Fannie Mae

2,963,000

176,417

Goldman Sachs Group, Inc.

183,300

12,103

J.P. Morgan Chase & Co.

768,500

14,594

Common Stocks - continued

Shares

Value (Note 1)
(000s)

FINANCIALS - continued

Diversified Financials - continued

Merrill Lynch & Co., Inc.

3,331,500

$ 109,773

Morgan Stanley

2,493,700

84,487

566,873

Insurance - 2.9%

ACE Ltd.

63,000

1,865

Allmerica Financial Corp.

757,300

9,088

American International Group, Inc.

4,322,169

236,423

Hartford Financial Services Group, Inc.

553,400

22,689

PartnerRe Ltd.

36,100

1,739

Travelers Property Casualty Corp.:

Class A

231,608

3,057

Class B (a)

475,851

6,438

281,299

TOTAL FINANCIALS

1,038,646

HEALTH CARE - 9.8%

Health Care Equipment & Supplies - 0.4%

Baxter International, Inc.

276,900

8,459

C.R. Bard, Inc.

225,100

12,297

Guidant Corp. (a)

496,100

16,029

36,785

Health Care Providers & Services - 3.9%

Cardinal Health, Inc.

6,103,680

379,626

Pharmaceuticals - 5.5%

Bristol-Myers Squibb Co.

4,116,600

97,975

Eli Lilly & Co.

42,818

2,370

Merck & Co., Inc.

2,355,420

107,666

Pfizer, Inc.

4,846,900

140,657

Pharmacia Corp.

918,100

35,696

Schering-Plough Corp.

4,903,407

104,541

Wyeth

1,181,200

37,562

526,467

TOTAL HEALTH CARE

942,878

INDUSTRIALS - 4.2%

Airlines - 0.1%

AMR Corp. (a)

257,200

1,075

Common Stocks - continued

Shares

Value (Note 1)
(000s)

INDUSTRIALS - continued

Airlines - continued

Delta Air Lines, Inc.

277,800

$ 2,581

Southwest Airlines Co.

327,000

4,271

7,927

Commercial Services & Supplies - 0.6%

Automatic Data Processing, Inc.

216,200

7,517

ChoicePoint, Inc. (a)

550,157

19,608

First Data Corp.

903,900

25,264

52,389

Industrial Conglomerates - 3.2%

General Electric Co.

9,443,400

232,780

Tyco International Ltd.

5,354,500

75,498

308,278

Machinery - 0.2%

Ingersoll-Rand Co. Ltd. Class A

589,700

20,309

Parker Hannifin Corp.

74,340

2,841

23,150

Road & Rail - 0.1%

Burlington Northern Santa Fe Corp.

235,510

5,633

TOTAL INDUSTRIALS

397,377

INFORMATION TECHNOLOGY - 3.7%

Communications Equipment - 0.4%

CIENA Corp. (a)

1,415,700

4,205

Cisco Systems, Inc. (a)

2,140,714

22,435

Comverse Technology, Inc. (a)

1,086,500

7,595

QUALCOMM, Inc. (a)

163,600

4,519

38,754

Computers & Peripherals - 0.9%

Dell Computer Corp. (a)

2,691,100

63,268

EMC Corp. (a)

1,376,700

6,292

Hewlett-Packard Co.

1,251,800

14,609

Sun Microsystems, Inc. (a)

1,640,900

4,250

88,419

Electronic Equipment & Instruments - 0.1%

Solectron Corp. (a)

2,960,600

6,247

Internet Software & Services - 0.1%

Yahoo!, Inc. (a)

1,119,400

10,713

Common Stocks - continued

Shares

Value (Note 1)
(000s)

INFORMATION TECHNOLOGY - continued

Semiconductor Equipment & Products - 1.1%

Altera Corp. (a)

532,700

$ 4,619

Analog Devices, Inc. (a)

559,000

11,012

Applied Materials, Inc. (a)

387,200

4,472

Intel Corp.

1,537,000

21,349

KLA-Tencor Corp. (a)

304,500

8,508

LAM Research Corp. (a)

409,200

3,642

Linear Technology Corp.

602,350

12,481

Micron Technology, Inc. (a)

1,070,600

13,243

Novellus Systems, Inc. (a)

104,600

2,177

Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR (a)

1,043,020

6,623

United Microelectronics Corp. sponsored ADR (a)

1,938,325

6,842

Xilinx, Inc. (a)

271,100

4,294

99,262

Software - 1.1%

Adobe Systems, Inc.

478,700

9,143

Computer Associates International, Inc.

1,524,300

14,633

Microsoft Corp. (a)

1,726,620

75,522

Network Associates, Inc. (a)

266,100

2,829

VERITAS Software Corp. (a)

454,700

6,670

108,797

TOTAL INFORMATION TECHNOLOGY

352,192

MATERIALS - 0.4%

Chemicals - 0.1%

E.I. du Pont de Nemours & Co.

88,100

3,178

Monsanto Co.

140,807

2,153

5,331

Metals & Mining - 0.3%

Alcoa, Inc.

1,400,300

27,026

TOTAL MATERIALS

32,357

TELECOMMUNICATION SERVICES - 2.9%

Diversified Telecommunication Services - 2.8%

AT&T Corp.

1,944,800

23,357

BellSouth Corp.

2,732,300

50,165

Qwest Communications International, Inc. (a)

12,504,400

28,510

Common Stocks - continued

Shares

Value (Note 1)
(000s)

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

SBC Communications, Inc.

3,829,400

$ 76,971

Verizon Communications, Inc.

3,442,300

94,457

273,460

Wireless Telecommunication Services - 0.1%

Nextel Communications, Inc. Class A (a)

1,072,000

8,094

TOTAL TELECOMMUNICATION SERVICES

281,554

UTILITIES - 1.1%

Electric Utilities - 1.1%

AES Corp. (a)

629,400

1,580

FirstEnergy Corp.

1,558,800

46,593

Southern Co.

894,700

25,749

TXU Corp.

819,800

34,194

108,116

TOTAL COMMON STOCKS

(Cost $5,456,285)

4,322,446

Preferred Stocks - 0.1%

Convertible Preferred Stocks - 0.0%

FINANCIALS - 0.0%

Diversified Financials - 0.0%

AES Trust VII $3.00

341,600

3,722

Nonconvertible Preferred Stocks - 0.1%

FINANCIALS - 0.1%

Insurance - 0.1%

American Annuity Group Capital Trust II $88.75

4,320

4,516

TOTAL PREFERRED STOCKS

(Cost $9,250)

8,238

Corporate Bonds - 24.6%

Principal
Amount (000s)

Value (Note 1)
(000s)

Convertible Bonds - 1.5%

CONSUMER DISCRETIONARY - 0.2%

Media - 0.1%

EchoStar Communications Corp.:

4.875% 1/1/07

$ 10,690

$ 8,124

5.75% 5/15/08 (g)

6,170

4,628

12,752

Specialty Retail - 0.1%

Gap, Inc. 5.75% 3/15/09 (g)

6,469

6,352

TOTAL CONSUMER DISCRETIONARY

19,104

HEALTH CARE - 0.2%

Biotechnology - 0.2%

Affymetrix, Inc. 4.75% 2/15/07

26,520

21,050

INFORMATION TECHNOLOGY - 0.7%

Communications Equipment - 0.3%

CIENA Corp. 3.75% 2/1/08

6,660

3,846

Juniper Networks, Inc. 4.75% 3/15/07

29,958

19,911

ONI Systems Corp. 5% 10/15/05

5,890

4,387

28,144

Electronic Equipment & Instruments - 0.2%

Sanmina-SCI Corp. 4.25% 5/1/04

20,630

17,897

Semiconductor Equipment & Products - 0.2%

Agere Systems, Inc. 6.5% 12/15/09

3,609

1,732

ASML Holding NV 4.25% 11/30/04 (g)

6,730

4,938

Atmel Corp. 0% 5/23/21

4,117

551

Teradyne, Inc. 3.75% 10/15/06

6,430

5,023

Vitesse Semiconductor Corp. 4% 3/15/05

11,530

8,302

20,546

Software - 0.0%

BEA Systems, Inc. 4% 12/15/06

1,030

794

TOTAL INFORMATION TECHNOLOGY

67,381

TELECOMMUNICATION SERVICES - 0.4%

Wireless Telecommunication Services - 0.4%

Nextel Communications, Inc.:

5.25% 1/15/10

20,210

13,666

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Convertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Nextel Communications, Inc.: - continued

6% 6/1/11 (g)

$ 6,740

$ 4,861

6% 6/1/11

22,420

16,169

34,696

TOTAL CONVERTIBLE BONDS

142,231

Nonconvertible Bonds - 23.1%

CONSUMER DISCRETIONARY - 5.5%

Auto Components - 0.2%

DaimlerChrysler North America Holding Corp. 7.2% 9/1/09

2,015

2,206

Dana Corp. 6.5% 3/1/09

1,570

1,335

Delco Remy International, Inc. 11% 5/1/09

2,160

1,447

Dura Operating Corp. 8.625% 4/15/12

2,140

2,108

Goodyear Tire & Rubber Co.:

6.625% 12/1/06

1,010

879

8.125% 3/15/03

1,000

960

Intermet Corp. 9.75% 6/15/09

4,980

4,681

Lear Corp. 8.11% 5/15/09

5,315

5,528

Stoneridge, Inc. 11.5% 5/1/12

2,655

2,688

21,832

Hotels, Restaurants & Leisure - 1.6%

Alliance Gaming Corp. 10% 8/1/07

5,435

5,680

Bally Total Fitness Holding Corp. 9.875% 10/15/07

6,954

6,120

Boyd Gaming Corp. 9.25% 10/1/03

3,695

3,843

Buffets, Inc. 11.25% 7/15/10 (g)

4,175

4,175

Capstar Hotel Co. 8.75% 8/15/07

375

304

Chumash Casino & Resort Enterprise 9% 7/15/10 (g)

2,750

2,846

Circus Circus Enterprises, Inc.:

6.45% 2/1/06

2,530

2,467

6.75% 7/15/03

1,740

1,744

Coast Hotels & Casinos, Inc. 9.5% 4/1/09

2,490

2,615

Courtyard by Marriott II LP/Courtyard II Finance Co. 10.75% 2/1/08

4,795

4,819

Domino's, Inc. 10.375% 1/15/09

7,745

8,287

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Hotels, Restaurants & Leisure - continued

Extended Stay America, Inc. 9.875% 6/15/11

$ 2,265

$ 2,197

Friendly Ice Cream Corp. 10.5% 12/1/07

4,030

3,889

Harrah's Operating Co., Inc. 7.875% 12/15/05

3,035

3,206

Herbst Gaming, Inc. 10.75% 9/1/08

4,720

4,897

Hilton Hotels Corp. 7.625% 5/15/08

3,410

3,461

HMH Properties, Inc. 7.875% 8/1/05

2,830

2,717

Hollywood Park, Inc. 9.25% 2/15/07

2,010

1,769

International Game Technology 8.375% 5/15/09

990

1,074

ITT Corp.:

6.75% 11/15/05

2,090

2,048

7.375% 11/15/15

4,205

3,827

Mandalay Resort Group 10.25% 8/1/07

3,000

3,225

MGM Mirage, Inc. 8.375% 2/1/11

465

481

Mirage Resorts, Inc. 7.25% 10/15/06

4,050

4,132

Mohegan Tribal Gaming Authority:

8% 4/1/12

4,120

4,202

8.125% 1/1/06

6,805

7,009

8.375% 7/1/11

515

528

8.75% 1/1/09

2,080

2,163

Park Place Entertainment Corp.:

7.875% 12/15/05

8,070

8,231

7.875% 3/15/10

2,810

2,852

9.375% 2/15/07

4,850

5,177

Penn National Gaming, Inc. 8.875% 3/15/10

1,730

1,721

Premier Parks, Inc. 0% 4/1/08 (e)

4,930

4,043

Resorts International Hotel & Casino, Inc. 11.5% 3/15/09

5,870

5,107

Royal Caribbean Cruises Ltd.:

7.25% 8/15/06

545

463

8.25% 4/1/05

365

329

8.75% 2/2/11

750

641

Starwood Hotels & Resorts Worldwide, Inc. 7.375% 5/1/07 (g)

2,705

2,631

Sun International Hotels Ltd./Sun International North America, Inc.:

8.875% 8/15/11

5,145

5,145

yankee 8.625% 12/15/07

625

628

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Hotels, Restaurants & Leisure - continued

Tricon Global Restaurants, Inc.:

8.5% 4/15/06

$ 4,125

$ 4,352

8.875% 4/15/11

6,310

6,909

Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 (g)

7,475

7,326

149,280

Household Durables - 0.6%

Beazer Homes USA, Inc. 8.375% 4/15/12

1,920

1,915

Champion Enterprises, Inc. 11.25% 4/15/07 (g)

3,335

2,418

D.R. Horton, Inc. 8% 2/1/09

8,895

8,717

Juno Lighting, Inc. 11.875% 7/1/09

4,895

4,797

K. Hovnanian Enterprises, Inc. 8.875% 4/1/12

5,895

5,306

Kaufman & Broad Home Corp. 7.75% 10/15/04

1,420

1,420

KB Home 8.625% 12/15/08

4,210

4,168

Kinetic Concepts, Inc. 9.625% 11/1/07

4,110

3,863

Lennar Corp.:

7.625% 3/1/09

1,890

1,914

9.95% 5/1/10

2,710

2,927

Ryland Group, Inc.:

8% 8/15/06

295

295

8.25% 4/1/08

1,070

1,070

9.125% 6/15/11

1,910

1,948

9.75% 9/1/10

3,300

3,548

Standard Pacific Corp. 9.25% 4/15/12

2,220

2,109

WCI Communities, Inc. 10.625% 2/15/11

11,435

11,092

57,507

Internet & Catalog Retail - 0.1%

Amazon.com, Inc. 0% 5/1/08 (e)

4,340

4,036

J. Crew Group, Inc. 0% 10/15/08 (e)

6,250

3,125

7,161

Leisure Equipment & Products - 0.1%

Hasbro, Inc.:

5.6% 11/1/05

2,870

2,669

6.15% 7/15/08

1,020

938

The Hockey Co. 11.25% 4/15/09

2,745

2,635

6,242

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - 2.2%

AMC Entertainment, Inc.:

9.5% 3/15/09

$ 450

$ 396

9.875% 2/1/12

5,390

4,797

American Media Operations, Inc. 10.25% 5/1/09

4,420

4,597

AOL Time Warner, Inc.:

7.625% 4/15/31

19,440

16,208

7.7% 5/1/32

11,635

9,861

British Sky Broadcasting Group PLC (BSkyB) yankee:

6.875% 2/23/09

1,950

1,882

7.3% 10/15/06

1,805

1,796

8.2% 7/15/09

8,350

8,475

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.:

0% 4/1/11 (e)

3,140

1,444

0% 5/15/11 (e)

11,480

3,788

8.25% 4/1/07

1,015

629

8.625% 4/1/09

4,735

2,936

10% 4/1/09

2,915

1,807

11.125% 1/15/11

1,065

682

Cinemark USA, Inc. 9.625% 8/1/08

5,990

5,691

Coaxial Communications of Central Ohio, Inc. 10% 8/15/06

3,730

3,208

Comcast Cable Communications, Inc.:

6.2% 11/15/08

720

666

6.375% 1/30/06

1,320

1,267

6.75% 1/30/11

715

665

6.875% 6/15/09

3,260

3,081

8.125% 5/1/04

445

441

Continental Cablevision, Inc.:

8.3% 5/15/06

17,500

17,036

Corus Entertainment, Inc. 8.75% 3/1/12

1,960

1,980

CSC Holdings, Inc.:

7.625% 4/1/11

2,220

1,765

9.875% 4/1/23

2,550

1,887

EchoStar DBS Corp.:

9.125% 1/15/09 (g)

2,860

2,688

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

EchoStar DBS Corp.: - continued

9.25% 2/1/06

$ 17,770

$ 17,059

9.375% 2/1/09

1,090

1,046

Entravision Communications Corp. 8.125% 3/15/09

1,180

1,204

Granite Broadcasting Corp.:

8.875% 5/15/08

710

600

10.375% 5/15/05

600

510

Insight Communications, Inc. 0% 2/15/11 (e)

8,895

3,113

Insight Midwest LP/Insight Capital, Inc. 10.5% 11/1/10

3,480

3,132

Lamar Media Corp. 9.25% 8/15/07

1,810

1,864

LBI Media, Inc. 10.125% 7/15/12 (g)

3,795

3,833

Lenfest Communications, Inc.:

8.375% 11/1/05

350

343

10.5% 6/15/06

4,315

4,250

Mediacom Broadband LLC/Mediacom Broadband Corp. 11% 7/15/13

3,740

3,478

Mediacom LLC/Mediacom Capital Corp. 9.5% 1/15/13

4,055

3,366

News America Holdings, Inc.:

7.7% 10/30/25

11,440

10,851

8% 10/17/16

7,250

7,844

PanAmSat Corp.:

6% 1/15/03

580

574

6.125% 1/15/05

2,160

1,987

6.375% 1/15/08

1,410

1,213

Pegasus Satellite Communications, Inc.:

0% 3/1/07 (e)

7,710

2,159

12.375% 8/1/06

1,430

629

Radio One, Inc. 8.875% 7/1/11

4,705

4,917

Regal Cinemas Corp. 9.375% 2/1/12

3,040

3,101

Satelites Mexicanos SA de CV 6.2569% 6/30/04 (g)(j)

3,561

3,027

Shaw Communications, Inc.:

7.2% 12/15/11

3,000

2,631

8.25% 4/11/10

8,000

7,591

Sinclair Broadcast Group, Inc.:

8% 3/15/12

7,200

7,236

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

Sinclair Broadcast Group, Inc.: - continued

8.75% 12/15/07

$ 2,515

$ 2,578

Spanish Broadcasting System, Inc. 9.625% 11/1/09

2,425

2,455

TCI Communications, Inc.:

8.25% 1/15/03

430

428

9.8% 2/1/12

3,135

3,121

TV Azteca SA de CV yankee 10.5% 2/15/07

3,875

3,623

Yell Finance BV:

0% 8/1/11 (e)

3,770

2,300

10.75% 8/1/11

2,740

2,767

214,503

Multiline Retail - 0.3%

Dillard's, Inc.:

6.125% 11/1/03

4,555

4,521

6.39% 8/1/03

4,640

4,570

Federated Department Stores, Inc. 6.79% 7/15/27

7,100

7,557

JCPenney Co., Inc. 9% 8/1/12 (g)

6,090

5,816

Saks, Inc.:

7.25% 12/1/04

380

372

8.25% 11/15/08

1,850

1,702

9.875% 10/1/11

2,800

2,716

27,254

Specialty Retail - 0.3%

Asbury Automotive Group, Inc. 9% 6/15/12

3,125

2,813

AutoNation, Inc. 9% 8/1/08

2,675

2,729

Gap, Inc.:

5.625% 5/1/03

5,165

5,062

9.9% 12/15/05

5,845

5,640

Hollywood Entertainment Corp. 10.625% 8/15/04

4,655

4,702

Michaels Stores, Inc. 9.25% 7/1/09

1,770

1,876

PETCO Animal Supplies, Inc. 10.75% 11/1/11

990

1,049

United Auto Group, Inc. 9.625% 3/15/12 (g)

3,000

2,985

United Rentals, Inc.:

8.8% 8/15/08

1,610

1,304

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Specialty Retail - continued

United Rentals, Inc.: - continued

9% 4/1/09

$ 390

$ 316

9.25% 1/15/09

3,400

2,822

31,298

Textiles Apparel & Luxury Goods - 0.1%

Russell Corp. 9.25% 5/1/10 (g)

3,895

4,012

The William Carter Co. 10.875% 8/15/11

2,910

3,186

7,198

TOTAL CONSUMER DISCRETIONARY

522,275

CONSUMER STAPLES - 0.9%

Beverages - 0.1%

Canandaigua Brands, Inc. 8.625% 8/1/06

890

939

Constellation Brands, Inc. 8.125% 1/15/12

5,150

5,240

Cott Beverages, Inc. 8% 12/15/11

4,190

4,295

10,474

Food & Drug Retailing - 0.2%

Delhaize America, Inc.:

7.375% 4/15/06

700

658

8.125% 4/15/11

1,600

1,464

Great Atlantic & Pacific Tea, Inc.:

7.75% 4/15/07

5,525

4,033

9.125% 12/15/11

2,000

1,510

Kroger Co. 6.8% 4/1/11

4,060

4,455

Rite Aid Corp.:

6.125% 12/15/08 (g)

1,770

974

6.875% 8/15/13

6,165

3,576

7.125% 1/15/07

3,575

2,431

7.7% 2/15/27

1,795

1,005

20,106

Food Products - 0.2%

Corn Products International, Inc. 8.25% 7/15/07

1,675

1,625

Dean Foods Co.:

6.75% 6/15/05

2,800

2,786

6.9% 10/15/17

3,500

3,098

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER STAPLES - continued

Food Products - continued

Dean Foods Co.: - continued

8.15% 8/1/07

$ 1,970

$ 2,000

Del Monte Corp. 9.25% 5/15/11

7,425

7,314

Dole Food Co., Inc.:

6.375% 10/1/05

335

312

7.25% 5/1/09

5,150

4,532

21,667

Tobacco - 0.4%

Philip Morris Companies, Inc. 7% 7/15/05

14,871

16,315

RJ Reynolds Tobacco Holdings, Inc.:

6.5% 6/1/07

7,980

8,410

7.25% 6/1/12

4,000

4,268

7.75% 5/15/06

3,280

3,626

32,619

TOTAL CONSUMER STAPLES

84,866

ENERGY - 0.9%

Energy Equipment & Services - 0.2%

DI Industries, Inc. 8.875% 7/1/07

5,680

5,794

Grant Prideco, Inc. 9.625% 12/1/07

3,710

3,896

Key Energy Services, Inc.:

8.375% 3/1/08

5,150

5,356

14% 1/15/09

3,406

3,866

Pride Petroleum Services, Inc. 9.375% 5/1/07

2,000

2,070

20,982

Oil & Gas - 0.7%

Barrett Resources Corp. 7.55% 2/1/07

1,245

1,169

Chesapeake Energy Corp.:

7.875% 3/15/04

4,980

5,117

8.125% 4/1/11

755

755

8.375% 11/1/08

5,905

5,935

9% 8/15/12 (g)

1,835

1,881

Clark Refining & Marketing, Inc.:

8.625% 8/15/08

765

650

8.875% 11/15/07

1,920

1,555

Encore Acquisition Co. 8.375% 6/15/12 (g)

880

889

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

ENERGY - continued

Oil & Gas - continued

Forest Oil Corp.:

8% 6/15/08

$ 2,570

$ 2,647

8% 12/15/11

990

1,017

Nexen, Inc. 7.875% 3/15/32

7,600

8,161

Nuevo Energy Co.:

9.375% 10/1/10

2,000

1,970

9.5% 6/1/08

2,370

2,370

Petro-Canada 7% 11/15/28

3,350

3,531

Plains Exploration & Production Co. LP 8.75% 7/1/12 (g)

3,770

3,770

Pogo Producing Co. 8.25% 4/15/11

5,870

6,164

Swift Energy Co. 9.375% 5/1/12

1,085

1,042

Teekay Shipping Corp. 8.875% 7/15/11

7,920

8,197

The Coastal Corp.:

6.2% 5/15/04

1,800

1,422

7.75% 10/15/35

475

299

9.625% 5/15/12

8,750

6,431

Western Oil Sands, Inc. 8.375% 5/1/12

3,900

3,881

68,853

TOTAL ENERGY

89,835

FINANCIALS - 6.4%

Banks - 0.9%

Capital One Bank:

6.5% 7/30/04

2,450

2,319

6.875% 2/1/06

1,100

1,033

Chevy Chase Savings Bank FSB 9.25% 12/1/08

2,310

2,310

Den Danske Bank AS 6.375% 6/15/08 (g)(j)

22,050

23,973

Fleet Financial Group, Inc. 7.125% 4/15/06

2,920

3,220

FleetBoston Financial Corp. 7.25% 9/15/05

5,620

6,149

MBNA Corp. 6.25% 1/17/07

4,375

4,530

PNC Funding Corp. 5.75% 8/1/06

4,975

5,303

Royal Bank of Scotland Group PLC:

7.648% 12/31/49 (j)

5,205

5,772

7.816% 11/29/49

9,570

10,757

Sovereign Bancorp, Inc.:

8.625% 3/15/04

6,765

6,993

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Banks - continued

Sovereign Bancorp, Inc.: - continued

10.5% 11/15/06

$ 4,916

$ 5,481

Western Financial Bank 9.625% 5/15/12

4,790

4,551

82,391

Diversified Financials - 4.5%

ABN AMRO NA Holding Pfd. Capital Repackage Trust I yankee 6.523% 12/29/49 (f)(g)

7,500

7,594

Ahmanson Capital Trust I 8.36% 12/1/26 (g)

13,000

14,215

Alliance Capital Management LP 5.625% 8/15/06

4,945

5,276

American Airlines pass thru trust certificate 7.8% 4/1/08

2,340

2,106

American Gen. Finance Corp. 5.875% 7/14/06

10,480

11,256

Amvescap PLC 6.6% 5/15/05

11,360

12,297

BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08

6,550

6,648

Capital One Financial Corp.:

7.25% 12/1/03

1,080

983

7.25% 5/1/06

2,720

2,346

8.75% 2/1/07

740

629

CIT Group, Inc. 7.75% 4/2/12

3,775

4,107

Citigroup, Inc. 7.25% 10/1/10

16,060

18,406

CMS Energy X-TRAS pass thru trust I 7% 1/15/05

700

539

Continental Airlines, Inc. pass thru trust certificate:

6.545% 2/2/19

1,341

1,193

6.9% 1/2/17

943

717

6.954% 2/2/11

113

74

7.033% 6/15/11

1,389

903

8.307% 4/2/18

5,427

4,287

8.312% 10/2/12

322

215

Credit Suisse First Boston (USA), Inc. 6.5% 1/15/12

5,465

5,835

Dana Credit Corp. 7.25% 12/6/02 (g)

4,010

3,950

Delta Air Lines, Inc. pass thru trust certificate:

7.57% 11/18/10

4,240

4,515

7.711% 9/18/11

575

535

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Deutsche Telekom International Finance BV 8.25% 6/15/05

$ 3,800

$ 4,075

El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11

5,075

4,847

Ford Motor Credit Co.:

5.8% 1/12/09

17,825

16,095

7.375% 10/28/09

3,600

3,423

7.875% 6/15/10

9,810

9,674

GATX Financial Corp. 8.875% 6/1/09

3,845

3,153

General Electric Capital Corp.:

4.625% 9/15/09

7,600

7,679

6% 6/15/12

3,500

3,771

General Motors Acceptance Corp.:

6.75% 1/15/06

4,120

4,270

6.875% 9/15/11

19,040

18,560

Goldman Sachs Group, Inc.:

5.7% 9/1/12

4,740

4,833

6.6% 1/15/12

4,775

5,242

Household Finance Corp.:

6.375% 10/15/11

9,800

9,110

8% 5/9/05

2,415

2,526

HSBC Capital Funding LP 9.547% 12/31/49 (f)(g)

16,390

19,847

ING Capital Funding Trust III 8.439% 12/31/10

4,210

4,853

IOS Capital, Inc. 9.75% 6/15/04

4,900

4,949

J.P. Morgan Chase & Co. 6.625% 3/15/12

5,000

5,438

John Hancock Global Funding II 5.625% 6/27/06 (g)

5,000

5,376

John Q. Hammons Hotels LP/John Q. Hammons Hotels Corp. III 8.875% 5/15/12

3,055

2,933

Lehman Brothers Holdings, Inc. 6.625% 1/18/12

3,500

3,835

Meditrust Exercisable Put Options Securities Trust 7.114% 8/15/04 (g)

390

388

Millennium America, Inc.:

9.25% 6/15/08

550

564

9.25% 6/15/08 (g)

4,055

4,156

Morgan Stanley 6.6% 4/1/12

11,865

12,907

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

NiSource Finance Corp.:

7.625% 11/15/05

$ 1,500

$ 1,532

7.875% 11/15/10

19,400

19,945

Northwest Airlines pass thru trust certificate:

7.691% 4/1/17

230

202

9.179% 10/1/11

985

788

Pemex Project Funding Master Trust 9.125% 10/13/10

8,800

9,394

Petronas Capital Ltd. 7% 5/22/12 (g)

14,900

16,576

Powergen US Funding LLC 4.5% 10/15/04

4,670

4,821

Prime Property Funding II 6.25% 5/15/07

3,990

4,260

Qwest Capital Funding, Inc.:

5.875% 8/3/04

1,865

1,306

7% 8/3/09

2,430

1,106

7.25% 2/15/11

1,095

504

7.75% 8/15/06

3,810

2,038

Salomon Smith Barney Holdings, Inc. 5.875% 3/15/06

8,675

9,351

Sears Roebuck Acceptance Corp. 6.7% 4/15/12

7,745

8,205

SESI LLC 8.875% 5/15/11

4,930

4,905

Sprint Capital Corp.:

6.875% 11/15/28

5,600

3,228

8.75% 3/15/32

6,740

4,513

Stone Container Finance Co. yankee 11.5% 8/15/06 (g)

1,670

1,754

TIAA Global Markets, Inc. 5% 3/1/07 (g)

5,135

5,501

TXU Eastern Funding 6.75% 5/15/09

10,575

10,149

U.S. West Capital Funding, Inc. 6.875% 7/15/28

3,785

1,476

UBS Preferred Funding Trust 1 8.622% 12/29/49

9,200

11,000

Verizon Global Funding Corp.:

6.125% 6/15/07

11,925

12,415

7.375% 9/1/12

3,775

3,975

Verizon Wireless Capital LLC 5.375% 12/15/06 (g)

12,465

11,726

Xerox Capital (Europe) PLC 5.875% 5/15/04

5,145

3,962

Xerox Credit Corp. 6.1% 12/16/03

1,920

1,613

427,375

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Insurance - 0.2%

Principal Life Global Funding I:

5.125% 6/28/07 (g)

$ 16,000

$ 16,720

6.25% 2/15/12 (g)

4,335

4,666

21,386

Real Estate - 0.8%

AvalonBay Communities, Inc. 5% 8/1/07

4,105

4,213

BRE Properties, Inc. 5.95% 3/15/07

7,670

8,169

Camden Property Trust 5.875% 6/1/07

4,035

4,239

CenterPoint Properties Trust 6.75% 4/1/05

4,360

4,709

Corrections Corp. of America 9.875% 5/1/09 (g)

1,020

1,053

EOP Operating LP:

6.75% 2/15/08

4,520

4,953

6.75% 2/15/12

5,325

5,803

7.75% 11/15/07

16,695

19,093

Gables Realty LP 5.75% 7/15/07

1,000

1,044

iStar Financial, Inc. 8.75% 8/15/08

3,795

3,795

LNR Property Corp.:

9.375% 3/15/08

3,755

3,717

10.5% 1/15/09

2,995

3,055

Mack-Cali Realty LP 7.25% 3/15/09

2,350

2,632

Meditrust Corp. 7.82% 9/10/26

6,730

6,747

MeriStar Hospitality Corp. 9% 1/15/08

2,930

2,608

Senior Housing Properties Trust 8.625% 1/15/12

4,750

4,679

80,509

TOTAL FINANCIALS

611,661

HEALTH CARE - 0.6%

Health Care Equipment & Supplies - 0.0%

Sybron Dental Specialties, Inc. 8.125% 6/15/12 (g)

820

812

Health Care Providers & Services - 0.5%

Alderwoods Group, Inc.:

11% 1/2/07

1,353

1,343

12.25% 1/2/09

2,960

2,783

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

HEALTH CARE - continued

Health Care Providers & Services - continued

Columbia/HCA Healthcare Corp. 6.73% 7/15/45

$ 3,425

$ 3,472

Hanger Orthopedic Group, Inc. 10.375% 2/15/09

1,150

1,225

HCA, Inc.:

7.875% 2/1/11

1,445

1,546

8.75% 9/1/10

2,275

2,548

HealthSouth Corp.:

6.875% 6/15/05

5,290

3,862

7% 6/15/08

1,830

1,190

Owen & Minor, Inc. 8.5% 7/15/11

6,950

7,228

PacifiCare Health Systems, Inc. 10.75% 6/1/09

6,970

6,796

Rotech Healthcare, Inc. 9.5% 4/1/12 (g)

1,340

1,233

Triad Hospitals Holdings, Inc. 11% 5/15/09

835

919

Triad Hospitals, Inc. 8.75% 5/1/09

6,680

7,014

Vanguard Health Systems, Inc. 9.75% 8/1/11

8,380

8,464

49,623

Pharmaceuticals - 0.1%

aaiPharma, Inc. 11% 4/1/10

7,495

6,596

Biovail Corp. 7.875% 4/1/10

3,810

3,772

10,368

TOTAL HEALTH CARE

60,803

INDUSTRIALS - 1.4%

Aerospace & Defense - 0.2%

Alliant Techsystems, Inc. 8.5% 5/15/11

2,555

2,702

BE Aerospace, Inc.:

8% 3/1/08

1,635

1,161

8.875% 5/1/11

605

430

9.5% 11/1/08

830

635

Raytheon Co. 8.2% 3/1/06

4,900

5,367

Sequa Corp.:

8.875% 4/1/08

2,990

2,676

9% 8/1/09

2,200

1,991

Transdigm, Inc. 10.375% 12/1/08

1,280

1,318

16,280

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Airlines - 0.1%

Continental Airlines, Inc. 8% 12/15/05

$ 1,215

$ 608

Delta Air Lines, Inc.:

6.65% 3/15/04

2,540

1,778

7.7% 12/15/05

1,280

845

8.3% 12/15/29

1,780

801

8.54% 1/2/07

845

634

10.14% 8/14/12

540

394

Northwest Airlines, Inc.:

7.625% 3/15/05

2,460

1,353

9.875% 3/15/07

1,730

934

7,347

Building Products - 0.0%

Nortek, Inc. 9.125% 9/1/07

2,440

2,452

Commercial Services & Supplies - 0.4%

Allied Waste North America, Inc.:

7.375% 1/1/04

2,320

2,297

7.625% 1/1/06

3,845

3,653

7.875% 1/1/09

3,225

2,999

10% 8/1/09

5,015

4,614

Browning-Ferris Industries, Inc. 6.375% 1/15/08

3,360

2,923

Coinmach Corp. 9% 2/1/10

4,940

5,039

Iron Mountain, Inc.:

8.25% 7/1/11

480

475

8.625% 4/1/13

5,050

5,050

8.75% 9/30/09

5,545

5,573

JohnsonDiversey, Inc. 9.625% 5/15/12 (g)

3,530

3,495

36,118

Construction & Engineering - 0.0%

Williams Scotsman, Inc. 9.875% 6/1/07

4,960

4,216

Industrial Conglomerates - 0.3%

Tyco International Group SA:

6.125% 11/1/08

490

402

6.25% 6/15/13

1,980

1,891

6.875% 1/15/29

1,110

849

yankee:

5.8% 8/1/06

10,585

8,891

5.875% 11/1/04

1,090

970

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Industrial Conglomerates - continued

Tyco International Group SA: - continued

6.375% 6/15/05

$ 735

$ 636

6.375% 2/15/06

2,000

1,720

6.375% 10/15/11

2,820

2,312

6.75% 2/15/11

19,050

15,716

33,387

Machinery - 0.4%

AGCO Corp.:

8.5% 3/15/06

510

500

9.5% 5/1/08

2,640

2,772

Dresser, Inc. 9.375% 4/15/11

5,865

5,660

Dunlop Standard Aerospace Holdings PLC 11.875% 5/15/09

10,145

10,297

Navistar International Corp. 9.375% 6/1/06

5,700

5,501

NMHG Holding Co. 10% 5/15/09

2,110

2,131

Terex Corp.:

Series D, 8.875% 4/1/08

1,250

1,194

8.875% 4/1/08

2,850

2,708

TriMas Corp. 9.875% 6/15/12 (g)

3,270

3,303

34,066

Road & Rail - 0.0%

TFM SA de CV 12.5% 6/15/12 (g)

2,020

1,964

TOTAL INDUSTRIALS

135,830

INFORMATION TECHNOLOGY - 1.1%

Communications Equipment - 0.2%

Avaya, Inc. 11.125% 4/1/09

5,275

3,323

L-3 Communications Corp. 8% 8/1/08

3,510

3,650

Lucent Technologies, Inc.:

6.5% 1/15/28

1,800

549

7.25% 7/15/06

2,725

1,158

Motorola, Inc.:

6.5% 11/15/28

3,900

2,952

8% 11/1/11

3,880

3,831

15,463

Computers & Peripherals - 0.1%

Compaq Computer Corp. 7.65% 8/1/05

4,900

5,412

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Computers & Peripherals - continued

Hewlett-Packard Co. 5.5% 7/1/07

$ 5,250

$ 5,431

Seagate Technology HDD Holdings 8% 5/15/09 (g)

4,320

4,061

14,904

Electronic Equipment & Instruments - 0.4%

ChipPAC International Ltd. 12.75% 8/1/09

2,485

2,435

Fisher Scientific International, Inc.:

8.125% 5/1/12

3,105

3,105

9% 2/1/08

6,375

6,598

Flextronics International Ltd.:

9.875% 7/1/10

7,020

7,125

yankee 8.75% 10/15/07

5,430

5,294

Ingram Micro, Inc. 9.875% 8/15/08

3,310

3,376

Millipore Corp. 7.5% 4/1/07

1,755

1,650

Solectron Corp.:

7.375% 3/1/06

6,030

4,703

9.625% 2/15/09

4,590

3,672

37,958

IT Consulting & Services - 0.1%

Anteon Corp. 12% 5/15/09

3,788

4,015

Unisys Corp.:

7.875% 4/1/08

515

494

8.125% 6/1/06

7,700

7,488

11,997

Office Electronics - 0.1%

Xerox Corp.:

5.5% 11/15/03

3,105

2,608

7.15% 8/1/04

2,430

1,871

9.75% 1/15/09 (g)

2,840

2,244

6,723

Semiconductor Equipment & Products - 0.2%

Amkor Technology, Inc. 9.25% 5/1/06

2,960

2,013

Fairchild Semiconductor Corp.:

10.375% 10/1/07

8,100

8,262

10.5% 2/1/09

760

783

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Semiconductor Equipment & Products - continued

Micron Technology, Inc. 6.5% 9/30/05 (k)

$ 8,000

$ 6,840

ON Semiconductor Corp./Semiconductor Components Industries LLC 12% 5/15/08 (g)

2,960

1,865

19,763

Software - 0.0%

Computer Associates International, Inc. 6.375% 4/15/05

3,055

2,627

TOTAL INFORMATION TECHNOLOGY

109,435

MATERIALS - 1.8%

Chemicals - 0.5%

Berry Plastics Corp. 10.75% 7/15/12

5,975

6,154

Foamex LP/Foamex Capital Corp. 10.75% 4/1/09 (g)

4,130

3,676

Georgia Gulf Corp. 10.375% 11/1/07

3,805

4,071

Huntsman International LLC 9.875% 3/1/09 (g)

6,170

6,170

IMC Global, Inc.:

6.55% 1/15/05

2,880

2,722

7.3% 1/15/28

2,760

2,125

7.375% 8/1/18

560

403

7.625% 11/1/05

1,485

1,403

10.875% 6/1/08

780

842

11.25% 6/1/11

890

961

International Specialty Holdings, Inc. 10.625% 12/15/09

4,240

3,816

Lyondell Chemical Co.:

9.625% 5/1/07

3,660

3,367

9.875% 5/1/07

1,670

1,545

10.875% 5/1/09

1,915

1,570

Methanex Corp. yankee 7.75% 8/15/05

5,080

5,029

OM Group, Inc. 9.25% 12/15/11

6,290

6,196

50,050

Containers & Packaging - 0.4%

Applied Extrusion Technologies, Inc. 10.75% 7/1/11

6,515

4,756

Graphic Packaging Corp. 8.625% 2/15/12

900

918

Jefferson Smurfit Corp. U.S. 8.25% 10/1/12 (g)

3,700

3,682

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

MATERIALS - continued

Containers & Packaging - continued

Owens-Brockway Glass Container, Inc. 8.875% 2/15/09

$ 8,860

$ 8,882

Owens-Illinois, Inc.:

7.15% 5/15/05

2,080

1,903

7.35% 5/15/08

720

626

7.5% 5/15/10

890

757

7.8% 5/15/18

6,900

5,520

7.85% 5/15/04

2,400

2,280

8.1% 5/15/07

2,590

2,383

Riverwood International Corp.:

10.625% 8/1/07

2,270

2,315

10.875% 4/1/08

1,190

1,190

Silgan Holdings, Inc. 9% 6/1/09 (g)

2,640

2,732

37,944

Metals & Mining - 0.5%

AK Steel Corp. 7.875% 2/15/09

3,090

3,032

Century Aluminum Co. 11.75% 4/15/08

3,795

3,567

Falconbridge Ltd. 7.35% 6/5/12

6,450

6,907

Freeport-McMoRan Copper & Gold, Inc. 7.5% 11/15/06

5,180

4,662

Luscar Coal Ltd. 9.75% 10/15/11

3,310

3,509

Oregon Steel Mills, Inc. 10% 7/15/09 (g)

5,720

5,720

P&L Coal Holdings Corp. 9.625% 5/15/08

15,895

16,650

Phelps Dodge Corp.:

8.75% 6/1/11

4,730

4,730

9.5% 6/1/31

2,010

1,970

Steel Dynamics, Inc. 9.5% 3/15/09 (g)

1,690

1,682

52,429

Paper & Forest Products - 0.4%

Boise Cascade Corp. 7.68% 3/29/06

7,590

7,809

Georgia-Pacific Group:

7.5% 5/15/06

3,995

3,316

8.125% 5/15/11

5,050

4,040

8.875% 5/15/31

4,115

2,963

9.625% 3/15/22

1,520

1,338

Louisiana-Pacific Corp.:

8.5% 8/15/05

1,400

1,407

10.875% 11/15/08

950

1,000

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

MATERIALS - continued

Paper & Forest Products - continued

Stone Container Corp.:

8.375% 7/1/12 (g)

$ 4,680

$ 4,657

9.75% 2/1/11

6,430

6,719

33,249

TOTAL MATERIALS

173,672

TELECOMMUNICATION SERVICES - 1.8%

Diversified Telecommunication Services - 1.3%

American Cellular Corp. 9.5% 10/15/09

1,935

363

AT&T Corp.:

6% 3/15/09

11,545

10,391

6.5% 3/15/29

23,905

19,841

Centennial Cellular Operating Co. LLC/Centennial Finance Corp. 10.75% 12/15/08

6,215

3,108

Cincinnati Bell Telephone Co. 6.3% 12/1/28

3,340

1,937

Citizens Communications Co.:

8.5% 5/15/06

7,270

6,979

9.25% 5/15/11

4,945

4,896

France Telecom SA:

8.7% 3/1/06

2,349

2,499

9.25% 3/1/11

1,300

1,418

Koninklijke KPN NV yankee:

8% 10/1/10

11,390

12,586

8.375% 10/1/30

1,500

1,660

Qwest Corp. 8.875% 3/15/12 (g)

3,735

3,249

Rogers Cantel, Inc. yankee 9.375% 6/1/08

1,210

883

Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06

14,005

14,036

Telefonica Europe BV 7.75% 9/15/10

3,500

3,778

Telefonos de Mexico SA de CV 8.25% 1/26/06

13,640

14,237

Teleglobe Canada, Inc. yankee:

7.2% 7/20/09 (d)

5,350

134

7.7% 7/20/29 (d)

755

19

TELUS Corp. 8% 6/1/11

15,725

12,030

Tritel PCS, Inc. 10.375% 1/15/11

1,019

917

Triton PCS, Inc.:

8.75% 11/15/11

2,280

1,516

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

Triton PCS, Inc.: - continued

9.375% 2/1/11

$ 5,420

$ 3,794

U.S. West Communications:

5.65% 11/1/04

1,245

1,071

6.875% 9/15/33

3,705

2,519

7.2% 11/1/04

3,765

3,426

127,287

Wireless Telecommunication Services - 0.5%

AirGate PCS, Inc. 0% 10/1/09 (e)

4,530

317

American Tower Corp. 9.375% 2/1/09

2,685

1,611

AT&T Wireless Services, Inc.:

7.875% 3/1/11

1,550

1,194

8.125% 5/1/12

6,690

5,151

8.75% 3/1/31

4,595

3,308

Crown Castle International Corp.:

9.375% 8/1/11

5,570

3,565

10.75% 8/1/11

1,435

961

Dobson Communications Corp. 10.875% 7/1/10

2,365

1,726

Echostar Broadband Corp. 10.375% 10/1/07

7,095

7,024

Millicom International Cellular SA 13.5% 6/1/06

4,390

1,284

Nextel Communications, Inc.:

0% 10/31/07 (e)

1,095

862

9.375% 11/15/09

955

740

9.5% 2/1/11

1,340

1,025

Nextel Partners, Inc. 0% 2/1/09 (e)

5,215

2,712

Rogers Wireless, Inc. 9.625% 5/1/11

7,210

5,191

Rural Cellular Corp.:

9.625% 5/15/08

520

286

9.75% 1/15/10

1,115

602

VoiceStream Wireless Corp.:

0% 11/15/09 (e)

4,102

3,343

10.375% 11/15/09

1,950

1,999

42,901

TOTAL TELECOMMUNICATION SERVICES

170,188

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

UTILITIES - 2.7%

Electric Utilities - 1.6%

Allegheny Energy Supply Co. LLC 8.25% 4/15/12 (g)

$ 10,130

$ 5,901

Avon Energy Partners Holdings:

6.46% 3/4/08 (g)

10,920

11,313

6.73% 12/11/02 (g)

13,550

13,607

CMS Energy Corp.:

6.75% 1/15/04

5,890

4,889

7.5% 1/15/09

2,860

2,174

7.625% 11/15/04

830

681

8.5% 4/15/11

625

469

8.9% 7/15/08

2,175

1,675

9.875% 10/15/07

1,825

1,497

Constellation Energy Group, Inc. 6.35% 4/1/07

6,020

6,203

Dominion Resources, Inc.:

6.25% 6/30/12

6,800

7,361

8.125% 6/15/10

3,750

4,359

Duke Capital Corp. 6.75% 2/15/32

3,800

3,266

FirstEnergy Corp. 6.45% 11/15/11

11,645

10,951

Illinois Power Co. 7.5% 6/15/09

5,330

4,344

Israel Electric Corp. Ltd. 7.75% 12/15/27 (g)

6,570

6,180

Pacific Gas & Electric Co.:

6.25% 8/1/03

2,825

2,783

6.25% 3/1/04

5,375

5,241

6.75% 10/1/23

2,310

2,033

8.25% 11/1/22

4,150

3,860

9.625% 11/1/05 (g)

5,870

5,635

PSI Energy, Inc. 6.65% 6/15/06

7,780

8,255

Public Service Co. of Colorado 7.875% 10/1/12 (g)

3,815

3,819

Reliant Energy Resources Corp. 8.125% 7/15/05

6,600

5,960

Southern California Edison Co.:

5.625% 10/1/02

1,320

1,294

6.25% 6/15/03

300

296

8.95% 11/3/03

6,660

6,494

Southern Power Co. 6.25% 7/15/12 (g)

4,855

5,275

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

3,600

3,355

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

UTILITIES - continued

Electric Utilities - continued

TECO Energy, Inc.:

6.125% 5/1/07

$ 6,625

$ 6,138

7% 5/1/12

10,405

9,328

Texas Utilities Co. 6.375% 1/1/08

1,105

1,060

155,696

Gas Utilities - 0.6%

CMS Panhandle Holding Co. 6.125% 3/15/04

1,810

1,756

Columbia Energy Group 6.8% 11/28/05

1,500

1,488

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

2,615

2,860

El Paso Energy Corp. 7.75% 1/15/32

2,820

1,805

Ras Laffan Liquid Natural Gas Co. Ltd. yankee 8.294% 3/15/14 (g)

5,560

6,220

Sempra Energy 7.95% 3/1/10

17,050

18,457

Tennessee Gas Pipeline Co. 7.625% 4/1/37

10,790

8,200

Texas Eastern Transmission Corp.:

5.25% 7/15/07

1,655

1,729

7% 7/15/32

8,175

8,642

Transcontinental Gas Pipe Line:

6.125% 1/15/05

910

837

6.25% 1/15/08

455

400

8.875% 7/15/12 (g)

3,175

3,048

55,442

Multi-Utilities & Unregulated Power - 0.5%

Aquila, Inc. 11.875% 7/1/12 (g)

2,480

2,182

Calpine Corp. 8.5% 2/15/11

5,375

2,258

Utilicorp United, Inc.:

6.875% 10/1/04

925

805

7.95% 2/1/11

2,345

1,735

Western Resources, Inc.:

7.875% 5/1/07

5,485

5,375

9.75% 5/1/07

6,955

6,433

Williams Companies, Inc.:

6.5% 8/1/06

4,980

3,187

7.125% 9/1/11

18,730

11,613

7.5% 1/15/31

6,480

3,499

7.875% 9/1/21

2,215

1,263

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

UTILITIES - continued

Multi-Utilities & Unregulated Power - continued

Williams Companies, Inc.: - continued

8.125% 3/15/12 (g)

$ 5,295

$ 3,389

9.25% 3/15/04

5,315

3,986

45,725

TOTAL UTILITIES

256,863

TOTAL NONCONVERTIBLE BONDS

2,215,428

TOTAL CORPORATE BONDS

(Cost $2,427,001)

2,357,659

U.S. Government and Government Agency Obligations - 6.1%

U.S. Government Agency Obligations - 1.4%

Fannie Mae:

3% 6/15/04

5,435

5,530

5.25% 6/15/06

16,055

17,411

6.25% 2/1/11

22,500

24,988

7.25% 5/15/30

11,490

14,463

Financing Corp. - coupon STRIPS:

0% 8/8/05

5,482

5,094

0% 11/30/05

1,666

1,537

Freddie Mac:

3.75% 4/15/04

47,750

49,083

7.35% 3/22/05

5,000

5,623

U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1996-A,
7.57% 8/1/13

10,090

11,121

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

134,850

U.S. Treasury Obligations - 4.7%

U.S. Treasury Bills, yield at date of purchase 1.58% to 1.69% 10/3/02 to 11/7/02 (i)

40,000

39,991

U.S. Treasury Bonds:

5.25% 2/15/29

60,320

64,210

8.125% 8/15/19

86,125

121,705

U.S. Government and Government Agency Obligations - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

U.S. Treasury Obligations - continued

U.S. Treasury Bonds: - continued

11.75% 2/15/10

$ 42,750

$ 52,312

U.S. Treasury Notes:

4.375% 5/15/07

10,004

10,798

5.5% 1/31/03

61,761

62,576

5.5% 5/15/09

86,348

98,572

TOTAL U.S. TREASURY OBLIGATIONS

450,164

TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $548,152)

585,014

U.S. Government Agency - Mortgage Securities - 11.0%

Fannie Mae - 7.8%

5.5% 2/1/11 to 9/1/32

11,558

11,830

5.5% 10/1/17 (h)

70,000

72,056

6% 4/1/09 to 8/1/32

151,179

156,368

6.5% 4/1/13 to 8/1/32

170,415

176,929

6.5% 10/1/32 (h)

189,175

195,914

7% 9/1/21 to 5/1/32

80,360

84,084

7.5% 2/1/22 to 9/1/30

33,060

34,939

7.5% 10/1/32 (h)

12,036

12,709

8% 6/1/29

14

15

TOTAL FANNIE MAE

744,844

Freddie Mac - 0.3%

6% 10/1/23 to 9/1/25

7,400

7,684

7.5% 11/1/16 to 11/1/30

21,650

22,905

8% 10/1/27

99

106

8.5% 2/1/19 to 8/1/22

75

81

TOTAL FREDDIE MAC

30,776

Government National Mortgage Association - 2.9%

6% 10/15/08 to 12/15/10

11,077

11,734

6.5% 12/15/07 to 8/15/27

68,740

72,110

7% 6/15/24 to 7/15/32

146,141

153,543

U.S. Government Agency - Mortgage Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Government National Mortgage Association - continued

7.5% 3/15/22 to 8/15/28

$ 21,498

$ 22,911

8% 4/15/24 to 6/15/31

12,498

13,426

8.5% 2/15/05 to 11/15/31

4,520

4,895

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

278,619

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $1,014,119)

1,054,239

Asset-Backed Securities - 1.4%

ACE Securities Corp. Nim Trust 8.85% 7/25/12

901

899

Amortizing Residential Collateral Trust:

2.16% 8/25/32 (j)

9,912

9,901

2.6138% 10/25/32 (j)

14,953

14,878

7% 6/25/32

1,811

1,794

BankAmerica Manufactured Housing Contract Trust V 6.2% 4/10/09

1,063

1,064

Capital One Master Trust:

4.55% 2/15/08

16,000

16,587

4.9% 3/15/10

6,460

6,817

Capital One Multi-Asset Execution Trust 2.48% 7/15/08 (h)(j)

5,780

5,751

CIT Marine Trust 5.8% 4/15/10

4,557

4,604

Citibank Credit Card Master Trust I 5.75% 2/15/06

6,230

6,541

CSFB Nims Trust:

8% 8/1/32

8,983

8,785

8% 8/27/32

1,880

1,824

Ford Credit Auto Owner Trust 5.71% 9/15/05

3,415

3,618

Household Private Label Credit Card Master Note Trust I 5.5% 1/18/11

4,100

4,472

JCPenney Master Credit Card Trust 5.5% 6/15/07

3,300

3,422

Long Beach Asset Holdings Corp. Nim Trust 9.05% 5/25/32 (g)

5,297

5,244

MBNA Credit Card Master Note Trust 3.9% 11/15/07

16,000

16,577

Morgan Stanley Dean Witter Capital I Trust:

10% 1/25/32 (g)

3,434

3,440

10% 2/25/32 (g)

4,883

4,892

10% 4/25/32 (g)

2,633

2,638

Asset-Backed Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Morgan Stanley Dean Witter Capital I Trust: - continued

10% 5/25/32 (g)

$ 2,606

$ 2,611

Sears Credit Account Master Trust II:

6.75% 9/16/09

2,500

2,782

7.5% 11/15/07

4,350

4,597

UAF Auto Grantor Trust 6.1% 1/15/03 (g)

734

734

TOTAL ASSET-BACKED SECURITIES

(Cost $131,657)

134,472

Collateralized Mortgage Obligations - 0.4%

Private Sponsor - 0.0%

Credit-Based Asset Servicing and Securitization LLC weighted average coupon Series 1997-2 Class 2B, 7.0245% 12/29/25 (g)(j)

738

364

U.S. Government Agency - 0.4%

Fannie Mae:

planned amortization class Series 1999-54 Class PH, 6.5% 11/18/29

8,575

9,119

REMIC planned amortization class Series 1999-57 Class PH, 6.5% 12/25/29

6,978

7,474

Freddie Mac Multi-class Mortgage Ctfs. of Prtn. guaranteed REMIC planned amoritization class Series 2444 Class PF, 6.5% 8/15/27

18,114

18,961

TOTAL U.S. GOVERNMENT AGENCY

35,554

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $33,517)

35,918

Commercial Mortgage Securities - 2.1%

Asset Securitization Corp.:

sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29

4,238

4,670

Series 1997-D5 Class PS1, 1.481% 2/14/43 (j)(b)

56,775

4,358

Atherton Franchise Loan Funding LLP Series 1998-A Class E, 8.25% 5/15/20 (g)

2,047

409

Berkeley Federal Bank & Trust FSB Series 1994-1 Class B, 4.3797% 8/1/24 (g)(j)

3,280

2,329

Commercial Mortgage Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

CBM Funding Corp. sequential pay Series 1996-1:

Class A3PI, 7.08% 11/1/07

$ 7,824

$ 8,520

Class B, 7.48% 2/1/08

9,885

11,209

COMM sequential pay Series 1999-1 Class A2, 6.455% 5/15/32

4,225

4,746

CS First Boston Mortgage Securities Corp.:

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

10,560

11,686

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

1,825

1,988

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

11,800

12,530

DLJ Commercial Mortgage Corp. sequential pay Series 1999-CG2 Class A1A, 6.88% 6/10/32

10,541

11,625

Equitable Life Assurance Society of the United States Series 174:

Class B1, 7.33% 5/15/06 (g)

10,400

11,704

Class C1, 7.52% 5/15/06 (g)

8,000

8,943

Class D1, 7.77% 5/15/06 (g)

6,800

7,459

First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 8.169% 4/29/39 (g)(j)

3,800

3,282

FMAC Loan Receivables Trust weighted average coupon Series 1997-A Class E, 0% 4/15/19 (d)(g)(j)

1,471

0

GAFCO Franchisee Loan Trust Series 1998-1 Class D, 13.5% 6/1/16 (g)(j)

4,600

3,476

General Motors Acceptance Corp. Commercial Mortgage Securities, Inc. Series 1996-C1 Class F, 7.86% 11/15/06 (g)

1,250

1,298

Ginnie Mae guaranteed Multi-family REMIC pass thru securities sequential pay Series 2002-26 Class C, 6.0213% 2/16/24 (j)

4,700

5,113

GS Mortgage Securities Corp. II Series 1998-GLII Class E, 6.97% 4/13/31 (j)

13,588

13,414

J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 1998-C6 Class A3, 6.613% 1/15/30

8,950

10,024

LB-UBS Commercial Mortgage Trust sequential pay Series 2001-C3 Class A1, 6.058% 6/15/20

14,756

16,011

LTC Commercial Mortgage pass thru certificates sequential pay Series 1998-1 Class A, 6.029% 5/30/30 (g)

7,707

8,172

Commercial Mortgage Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Penn Mutual Life Insurance Co./Penn Insurance & Annuity Co. Series 1996-PML:

Class K, 7.9% 11/15/26 (g)

$ 750

$ 579

Class L, 7.9% 11/15/26 (g)

600

372

Structured Asset Securities Corp. Series 1996-CFL:

Class E, 7.75% 2/25/28

4,159

4,252

Class H, 7.75% 2/25/28 (g)

1,000

1,063

Thirteen Affiliates of General Growth Properties, Inc.:

sequential pay Series 1 Class A2, 6.602% 11/15/07 (g)

11,530

12,950

Series 1:

Class D2, 6.992% 11/15/07 (g)

11,380

12,443

Class E2, 7.224% 11/15/07 (g)

6,760

7,322

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $190,850)

201,947

Foreign Government and Government Agency Obligations - 0.5%

Chilean Republic:

5.625% 7/23/07

11,470

11,965

7.125% 1/11/12

8,160

8,782

Polish Government 6.25% 7/3/12

13,245

14,371

United Mexican States:

7.5% 1/14/12

8,320

8,424

8% 9/24/22

5,900

5,611

TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $47,105)

49,153

Supranational Obligations - 0.0%

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $3,814)

3,855

4,121

Floating Rate Loans - 0.2%

Principal
Amount (000s)

Value (Note 1)
(000s)

FINANCIALS - 0.2%

Diversified Financials - 0.2%

Nextel Finance Co.:

Tranche B term loan 5.1875% 6/30/08 (j)

$ 10,370

$ 8,970

Tranche C term loan 5.4375% 12/31/08 (j)

10,370

8,970

17,940

INDUSTRIALS - 0.0%

Commercial Services & Supplies - 0.0%

Allied Waste North America, Inc.:

Tranche B term loan 4.6095% 7/21/06 (j)

1,453

1,409

Tranche C term loan 4.8548% 7/21/07 (j)

1,744

1,691

3,100

MATERIALS - 0.0%

Chemicals - 0.0%

Lyondell Chemical Co. sr. secured Tranche E term loan 6.185% 5/17/06 (j)

670

667

TELECOMMUNICATION SERVICES - 0.0%

Diversified Telecommunication Services - 0.0%

Broadwing, Inc. Tranche B term loan 4.5529% 12/30/06 (j)

2,268

1,815

TOTAL FLOATING RATE LOANS

(Cost $24,507)

23,522

Money Market Funds - 11.5%

Shares

Fidelity Cash Central Fund, 1.86% (c)

674,399,024

674,399

Fidelity Money Market Central Fund, 1.91% (c)

425,013,442

425,013

Fidelity Securities Lending Cash Central Fund, 1.88% (c)

5,637,445

5,637

TOTAL MONEY MARKET FUNDS

(Cost $1,105,049)

1,105,049

Cash Equivalents - 0.0%

Maturity
Amount (000s)

Value (Note 1)
(000s)

Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.73%, dated 9/30/02 due 10/1/02)
(Cost $3,815)

$ 3,815

$ 3,815

TOTAL INVESTMENT PORTFOLIO - 103.0%

(Cost $10,995,121)

9,885,593

NET OTHER ASSETS - (3.0)%

(291,437)

NET ASSETS - 100%

$ 9,594,156

Futures Contracts

Expiration
Date

Underlying
Face Amount
at Value (000s)

Unrealized
Gain/(Loss)
(000s)

Purchased

Equity Index Contracts

2,439 S&P 500 Index Contracts

Dec. 2002

$ 496,946

$ (43,968)

The face value of futures purchased as a percentage of net assets - 5.2%

Legend

(a) Non-income producing

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

(c) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(d) Non-income producing - issuer filed for bankruptcy or is in default of interest payments.

(e) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end.

(f) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end.

(g) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $426,383,000 or 4.4% of net assets.

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

(i) 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 $36,602,000.

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

(k) Restricted securities - Investment in securities not registered under the Securities Act of 1933.

Additional information on each holding is as follows:

Security

Acquisition
Date

Acquisition
Cost (000s)

Micron Technology, Inc. 6.5% 9/30/05

7/15/99 - 8/8/02

$ 6,618

Other Information

The composition of credit quality ratings as a percentage of total value of investments in securities is as follows (ratings are unaudited):

Ratings

U.S. Governments

16.6%

AAA, AA, A

6.7%

BBB

6.9%

BB

5.7%

B

7.3%

CCC, CC, C

0.9%

Not rated

0.5%

Equities

48.8%

Short Term

6.6%

We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Percentages are adjusted for the effect of futures contracts, if applicable.

The fund invested in loans and loan participations, trade claims or other receivables. At period end the value of these investments amounted to $23,522,000 or 0.2% of net assets.

Purchases and sales of securities, other than short-term securities, aggregated $13,213,088,000 and $13,097,644,000, respectively, of which long-term U.S. government and government agency obligations aggregated $5,237,489,000 and $5,467,884,000, respectively.

The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $340,000 for the period.

The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $6,840,000 or 0.1% of net assets.

The fund participated in the bank borrowing program. The average daily loan balance during the period for which the loans were outstanding amounted to $16,377,000. The weighted average interest rate was 2.23%. At period end there were no bank borrowings outstanding.

Income Tax Information

At September 30, 2002, the fund had a capital loss carryforward of approximately $174,079,000 of which $74,769,000 and $99,310,000 will expire on September 30, 2009 and 2010, respectively.

The fund intends to elect to defer to its fiscal year ending September 30, 2003 approximately $262,280,000 of losses recognized during the period November 1, 2001 to September 30, 2002.

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)

September 30, 2002

Assets

Investment in securities, at value (including securities loaned of $5,177 and repurchase agreements of $3,815) (cost $10,995,121) - See accompanying schedule

$ 9,885,593

Cash

217

Receivable for investments sold

21,448

Receivable for fund shares sold

4,331

Dividends receivable

6,520

Interest receivable

70,501

Other receivables

43

Total assets

9,988,653

Liabilities

Payable for investments purchased
Regular delivery

$ 66,934

Delayed delivery

284,608

Payable for fund shares redeemed

25,058

Accrued management fee

4,457

Payable for daily variation on futures contracts

6,280

Other payables and accrued expenses

1,523

Collateral on securities loaned, at value

5,637

Total liabilities

394,497

Net Assets

$ 9,594,156

Net Assets consist of:

Paid in capital

$ 11,143,204

Undistributed net investment income

27,660

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(423,356)

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

(1,153,352)

Net Assets, for 737,596 shares outstanding

$ 9,594,156

Net Asset Value, offering price and redemption price per share ($9,594,156 ÷ 737,596 shares)

$ 13.01

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

Annual Report

Financial Statements - continued

Statement of Operations

Amounts in thousands

Year ended September 30, 2002

Investment Income

Dividends

$ 85,105

Interest

368,522

Security lending

33

Total income

453,660

Expenses

Management fee

$ 59,701

Transfer agent fees

22,199

Accounting and security lending fees

982

Non-interested trustees' compensation

35

Custodian fees and expenses

247

Registration fees

69

Audit

144

Legal

78

Interest

2

Miscellaneous

346

Total expenses before reductions

83,803

Expense reductions

(2,263)

81,540

Net investment income (loss)

372,120

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investments

(236,393)

Foreign currency transactions

(7)

Futures contracts

(18,062)

Total net realized gain (loss)

(254,462)

Change in net unrealized appreciation (depreciation) on:

Investment securities

(915,245)

Assets and liabilities in foreign currencies

10

Futures contracts

(47,773)

Delayed delivery commitments

(84)

Total change in net unrealized appreciation (depreciation)

(963,092)

Net gain (loss)

(1,217,554)

Net increase (decrease) in net assets resulting from operations

$ (845,434)

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

Annual Report

Statement of Changes in Net Assets

Amounts in thousands

Year ended
September 30,
2002

Year ended
September 30,
2001

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 372,120

$ 440,844

Net realized gain (loss)

(254,462)

(167,168)

Change in net unrealized appreciation (depreciation)

(963,092)

(2,094,098)

Net increase (decrease) in net assets resulting
from operations

(845,434)

(1,820,422)

Distributions to shareholders from net investment income

(438,059)

(452,720)

Distributions to shareholders from net realized gain

-

(947,460)

Total distributions

(438,059)

(1,400,180)

Share transactions
Net proceeds from sales of shares

1,185,428

1,462,471

Reinvestment of distributions

425,057

1,361,768

Cost of shares redeemed

(1,909,817)

(1,997,106)

Net increase (decrease) in net assets resulting from share transactions

(299,332)

827,133

Total increase (decrease) in net assets

(1,582,825)

(2,393,469)

Net Assets

Beginning of period

11,176,981

13,570,450

End of period (including undistributed net investment income of $27,660 and undistributed net investment income of $109,649, respectively)

$ 9,594,156

$ 11,176,981

Other Information

Shares

Sold

79,835

87,562

Issued in reinvestment of distributions

28,192

82,949

Redeemed

(129,948)

(121,002)

Net increase (decrease)

(21,921)

49,509

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

Annual Report

Financial Highlights

Years ended September 30,

2002

2001

2000

1999

1998

Selected Per-Share Data

Net asset value, beginning of period

$ 14.72

$ 19.11

$ 17.28

$ 18.24

$ 19.01

Income from Investment Operations

Net investment income (loss) B

.49 D

.59

.61

.54

.61

Net realized and
unrealized gain (loss)

(1.62) D

(3.03)

2.53

2.23

.37

Total from investment operations

(1.13)

(2.44)

3.14

2.77

.98

Distributions from net investment income

(.58)

(.61)

(.58)

(.56)

(.64)

Distributions from net realized gain

-

(1.34)

(.73)

(3.17)

(1.11)

Total distributions

(.58)

(1.95)

(1.31)

(3.73)

(1.75)

Net asset value, end of period

$ 13.01

$ 14.72

$ 19.11

$ 17.28

$ 18.24

Total Return A

(8.17)%

(13.63)%

18.73%

16.12%

5.34%

Ratios to Average Net Assets C

Expenses before expense reductions

.75%

.73%

.73%

.75%

.76%

Expenses net of voluntary waivers, if any

.75%

.73%

.73%

.75%

.76%

Expenses net of all reductions

.73%

.71%

.71%

.73%

.74%

Net investment income (loss)

3.31% D

3.51%

3.32%

3.01%

3.19%

Supplemental Data

Net assets, end of period (in millions)

$ 9,594

$ 11,177

$ 13,570

$ 12,223

$ 11,576

Portfolio turnover rate

129%

133%

109%

104%

136%

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

B Calculated based on average shares outstanding during the period.

C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from directed brokerage or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflects expenses after reimbursement by the investment adviser but prior to reductions from directed brokerage or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

D Effective October 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The effect of this change during the period was to increase net investment income (loss) per share by $.02 and decrease net realized and unrealized gain (loss) per share by $.02. Without this change the ratio of net investment income (loss) to average net assets would have been 3.21%. Per share data, ratios and supplemental data for prior periods have not been restated to reflect this change.

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

Annual Report

Notes to Financial Statements

For the period ended September 30, 2002

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Fidelity Asset Manager (the fund) is a fund of Fidelity Charles Street 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 financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:

Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Foreign Currency - continued

Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 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, under the general supervision of the Board of Trustees . 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 the funds in the trust.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan.

Annual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Distributions are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, prior period premium and discount on debt securities, market discount, non-taxable dividends, 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 was as follows:

Unrealized appreciation

$ 460,308

Unrealized depreciation

(1,587,520)

Net unrealized appreciation (depreciation)

(1,127,212)

Undistributed ordinary income

14,522

Capital loss carryforward

(174,079)

Total Distributable earnings

$ (1,286,769)

Cost for federal income tax purposes

$ 11,012,805

The tax character of distributions paid during the year was as follows:

Ordinary Income

$ 438,059

Change in Accounting Principle. Effective October 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $5,135 increase to the cost of securities held and a corresponding increase to accumulated net undistributed realized gain (loss), based on securities held by the fund on October 1, 2001.

The effect of this change during the period, was to increase net investment income (loss) by $11,683; decrease net unrealized appreciation/depreciation by $8,603; and decrease net realized gain (loss) by $3,080. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Operating Policies.

Repurchase Agreements. Fidelity Management and Research Company (FMR) has received an Exemptive order from the Securities and Exchange Commission which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is "marked to market" daily and equivalent deliverable securities are held for the transaction. The values of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.

Futures Contracts. The fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase the fund's exposure to the underlying instrument, while selling futures tends to decrease the fund's exposure to the underlying instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption Futures Contracts. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counter-parties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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

Annual Report

2. Operating Policies - continued

Restricted Securities - continued

these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included under the captions "Legend" and/or "Other Information" at the end of the fund's Schedule of Investments.

Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee.

The management fee is the sum of an individual fund fee rate of .25% of the fund's average net assets and a group fee rate that averaged .28% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .53% of the fund's average net assets.

Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .20% of average net assets.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Accounting and Security Lending Fees. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $25,194 for the period.

Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The fund lends portfolio securities from time to time in order to earn additional income. 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. Cash collateral 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.

Annual Report

7. Bank Borrowings.

The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. The interest rate on the borrowings is the bank's base rate, as revised from time to time. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

8. Expense Reductions.

Certain security trades were directed to brokers who paid $2,049 of the fund's expenses. In addition, 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, these credits reduced the fund's custody and transfer agent expenses by $20 and $194, respectively.

Annual Report

Independent Auditors' Report

To the Trustees of Fidelity Charles Street Trust and Shareholders of Fidelity Asset Manager:

We have audited the accompanying statement of assets and liabilities of Fidelity Asset Manager (the Fund), a fund of Fidelity Charles Street Trust, including the portfolio of investments, as of September 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Asset Manager as of September 30, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Boston, Massachusetts

November 8, 2002

Annual Report

Trustees and Officers

The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and William S. Stavropoulos, each of the Trustees oversees 266 funds advised by FMR or an affiliate. Mr. McCoy oversees 268 funds advised by FMR or an affiliate, and Mr. Stavropoulos oversees 231 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (72)**

Year of Election or Appointment: 1981

President of Asset ManagerSM. Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; a Director of Fidelity Management & Research (U.K.) Inc.; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc.

Abigail P. Johnson (40)**

Year of Election or Appointment: 2001
Senior Vice President of Asset Manager (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds.

Peter S. Lynch (59)

Year of Election or Appointment: 1990
Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

** Edward C. Johnson 3d, Trustee and President of the funds, is Abigail P. Johnson's father.

Annual Report

Non-Interested Trustees:

Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation

J. Michael Cook (60)

Year of Election or Appointment: 2001

Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/
consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of AT&T (2001), International Flavors & Fragrances, Inc. (2000), Rockwell Automation International (2000), The Dow Chemical Company (2000), and HCA - The Healthcare Company (1999). He is a Member of the Advisory Board of the Securities Regulation Institute and of the Directorship Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Panel to the Comptroller General of the United States. He also serves as a member of the Board of Overseers of the Columbia Business School and a Member of the Advisory Board of the Graduate School of Business of the University of Florida his alma mater.

Ralph F. Cox (70)

Year of Election or Appointment: 1991
 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.

Phyllis Burke Davis (70)

Year of Election or Appointment: 1992
Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Toshiba International Advisory Group of Toshiba Corporation (2001) and a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc.

Robert M. Gates (59)

Year of Election or Appointment: 1997
Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), TRW Inc. (automotive, space, defense, and information technology), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines) and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy.

Donald J. Kirk (69)

Year of Election or Appointment: 1987
Mr. Kirk is a Public Governor of the National Association of Securities Dealers, Inc., and of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, and a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Stabilization Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations).

Marie L. Knowles (55)

Year of Election or Appointment: 2001

Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (58)

Year of Election or Appointment: 2000
Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously,
Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and Chief Executive Officer (1999) and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman and C.E.O. of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.

Marvin L. Mann (69)

Year of Election or Appointment: 1993
Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage, 1997) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition,
Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama.

William O. McCoy (68)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).

William S. Stavropoulos (63)

Year of Election or Appointment: 2001

Mr. Stavropoulos also serves as a Trustee (2001) or Member of the Advisory Board (2000) of other investment companies advised by FMR. He is Chairman of the Board and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions, 1997), BellSouth Corporation (telecommunications, 1997), and the Chemical Financial Corporation. He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research and Fordham University. In addition, Mr. Stavropoulos is a member of the American Chemical Society, The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science.

Executive Officers:

Correspondence intended for each executive officer may be sent to 82 Devonshire Street, Boston, Massachusetts, 02109.

Name, Age; Principal Occupation

Bart A. Grenier (43)

Year of Election or Appointment: 2001

Vice President of Asset Manager. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and Group Leader of Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), and Fidelity's Value Group (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Bond Funds (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000).

Name, Age; Principal Occupation

Charles S. Morrison (41)

Year of Election or Appointment: 2002
Vice President of Asset Manager. Mr Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division.

Richard C. Habermann (62)

Year of Election or Appointment: 1996
Vice President of Asset Manager. Mr. Habermann is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Habermann managed a variety of Fidelity funds.

Charles Mangum (38)

Year of Election or Appointment: 2001
Vice President of Asset Manager. Mr. Mangum is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Mangum managed a variety of Fidelity funds.

Jeffrey Moore (36)

Year of Election or Appointment: 2002
Vice President of Asset Manager. Prior to assuming his current responsibilities, Mr. Moore served as a fixed-income analyst and portfolio manager.

John Todd (53)

Year of Election or Appointment: 1996
Vice President of Asset Manager. Mr. Todd is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Todd managed a variety of Fidelity funds.

Eric D. Roiter (53)

Year of Election or Appointment: 1998

Secretary of Asset Manager. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).

Maria F. Dwyer (43)

Year of Election or Appointment: 2002

Treasurer of Asset Manager. She also serves as Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.

John H. Costello (56)

Year of Election or Appointment: 1988

Assistant Treasurer of Asset Manager. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

Francis V. Knox, Jr. (55)

Year of Election or Appointment: 2002

Assistant Treasurer of Asset Manager. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), Compliance Officer of FMR Corp., and Vice President and an employee of FMR. Previously,
Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002) and Fidelity Management & Research (Far East) (1991-2002).

Thomas J. Simpson (44)

Year of Election or Appointment: 2000

Assistant Treasurer of Asset Manager. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995).

Annual Report

Distributions

A total of 8.97% 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 15%, 25%, 25%, and 25% of the dividends distributed in December, March, June, and September, respectively during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.

The fund will notify shareholders in January 2003 of amounts for use in preparing 2002 income tax returns.

Annual Report

Annual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

Fidelity Investments Money
Management, Inc.

Fidelity Management & Research

(U.K.) Inc.

Fidelity Management & Research

(Far East) Inc.

Fidelity Investments Japan Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Shareholder
Servicing Agent

Fidelity Service Company, Inc.

Boston, MA

Custodian

JPMorgan Chase Bank

New York, NY

Fidelity's Asset Allocation Funds

Asset ManagerSM 

Asset Manager: Aggressive®

Asset Manager: Growth®

Asset Manager: Income®

Fidelity Freedom Funds® -
Income, 2000, 2010, 2020, 2030, 2040

The Fidelity Telephone Connection

Mutual Fund 24-Hour Service

Exchanges/Redemptions
and Account Assistance 1-800-544-6666

Product Information 1-800-544-6666

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(8 a.m. - 9 p.m.)

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(for the deaf and hearing impaired)
(9 a.m. - 9 p.m. Eastern time)

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Fidelity®

Asset Manager: Aggressive®

Annual Report

September 30, 2002

(2_fidelity_logos) (Registered_Trademark)

Contents

President's Message

<Click Here>

Ned Johnson on investing strategies.

Performance

<Click Here>

How the fund has done over time.

Market Recap

<Click Here>

An overview of the market's performance and the factors driving it.

Fund Talk

<Click Here>

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

Investment Changes

<Click Here>

A summary of the fund's investments.

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.

Independent Auditors' Report

<Click Here>

The auditors' opinion.

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

Other third party marks appearing herein are the property of their respective owners.

All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.

(Recycle graphic)   This report is printed on recycled paper using soy-based inks.

This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.

Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.

Neither the fund nor Fidelity Distributors Corporation is a bank.

For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.

Semiannual Report

President's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

The Dow Jones Industrial AverageSM - often used as a gauge of U.S. stock market performance - fell to its lowest point in four years during September 2002. The third quarter was the average's worst three-month stretch since the final quarter of 1987, and the Dow had its worst September since 1937. With equities in disarray, investors flocked to U.S. Treasury bonds, pushing yields of the bellwether 10-year Treasury note to 40-year lows.

While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs.

First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation.

Second, you can further manage your investing risk through diversification. Asset Manager funds are already diversified because they invest in stocks, bonds and short-term and money market instruments, both in the U.S. and overseas. If you have a shorter investment time horizon, you might want to consider moving some of your investment into Asset Manager: Income, which generally has a higher weighting in short-term investments compared with the other Asset Manager funds.

Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy.

If you have questions, please call us at 1-800-544-6666, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

There are several ways to evaluate a fund's historical performance. You can look at cumulative total returns, average annual returns, or the growth of a hypothetical investment. 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). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Cumulative Total Returns

Periods ended September 30, 2002

Past 1
year

Life of
fund

Fidelity ® Asset Manager: Aggressive ®

-27.58%

-26.29%

Fidelity Asset Manager: Aggressive Composite

-16.40%

-25.93%

S&P 500 ®

-20.49%

-33.61%

LB Aggregate Bond

8.60%

30.56%

Flexible Portfolio Funds Average

-10.36%

n/a*

Cumulative total returns show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on September 24, 1999. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Fidelity Asset Manager: Aggressive Composite Index, a hypothetical combination of unmanaged indices. The composite index combines the total returns of the Standard & Poor's 500SM Index (S&P 500®) and the Lehman Brothers® Aggregate Bond Index, weighted according to the fund's neutral mix. You can also compare the fund's performance to the performance of mutual funds tracked by Lipper Inc. and grouped by similar objectives. These benchmarks include reinvested dividends and capital gains, if any.

Average Annual Total Returns

Periods ended September 30, 2002

Past 1
year

Life of
fund

Fidelity Asset Manager: Aggressive

-27.58%

-9.61%

Fidelity Asset Manager: Aggressive Composite

-16.40%

-9.46%

Average annual total returns take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year.

* Not available

Annual Report

Performance - continued

$10,000 Over Life of Fund

Let's say hypothetically that $10,000 was invested in Fidelity® Asset Manager: Aggressive® on September 24, 1999, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the S&P 500 Index, Lehman Brothers Aggregate Bond Index and Fidelity Asset Manager: Aggressive Composite Index did over the same period.



3

Understanding Performance

How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. When you sell your shares, they could be worth more or less than what you paid for them.

Annual Report

Market Recap

Investors favored the relative safety typically offered by bond investing during the 12-month period ending September 30, 2002, as a number of negative factors, such as ongoing economic weakness, declining corporate profitability and geopolitical unrest, raised the level of uncertainty about the near-term performance of stocks. Historically, heightened uncertainty has never been a positive influence on stocks, and once again it caused most of the major equity market indexes to decline significantly during the past year. In contrast, investment-grade bonds performed remarkably well.

Stocks: After a year and a half of losses, investors looking for some improvement in the stock market found little relief during the 12-month period. The Standard & Poor's 500SM Index, a benchmark of 500 larger companies, fell 20.49%, while the tech-heavy NASDAQ Composite® Index and the blue-chips' benchmark, the Dow Jones Industrial AverageSM, dropped 21.52% and 12.46%, respectively. Smaller-cap stocks fared slightly better but still proved disappointing, as evidenced by the 9.30% decline in the Russell 2000® Index. A year ago, the outlook for stocks looked particularly dismal in the aftermath of September 11, but the market rebounded surprisingly well as many investors stepped in to scoop up stocks at bargain prices. Expectations for an economic recovery also were heightened after the Federal Reserve Board lowered interest rates in the fourth quarter of 2001 to levels not seen since the 1960s. However, optimism for a sustained market rally was muted by a series of worries that arose in 2002 and lasted throughout the remainder of the period. Among the concerns were slow and uneven economic growth, disappointing corporate earnings, allegations of egregious corporate conduct at many high-profile firms and a series of corporate accounting investigations by the Securities and Exchange Commission that resulted in several earnings restatements, most of which were lower. Also weighing on the market was the possibility of a U.S. war with Iraq and potential future terrorist incidents.

Bonds: Investment-grade bonds sparkled during the one-year period, as the economic recovery stalled and the prospects firmed for a continued favorable interest rate environment. The Lehman Brothers® Aggregate Bond Index, a proxy for taxable-bond performance, returned 8.60%, well ahead of flagging stock markets that incurred yet another round of double-digit declines. Negative sentiment infesting the equity markets boosted demand for bonds, as risk-averse investors sought out safer havens offering some return on their assets. A strong flight to quality in Treasuries and high-quality, higher-yielding government agency securities resulted, as reflected in the stellar performance of the Lehman Brothers U.S. Agency and Treasury indexes, which registered gains of 9.38% and 10.45%, respectively. Meanwhile, the Lehman Brothers Credit Bond Index posted a distant third-place finish, returning 8.19%. While corporates benefited from some economic improvement, eroding investor confidence in the sector, along with widespread credit-quality downgrades and the resulting liquidity crisis, curbed their advances. The Lehman Brothers Mortgage-Backed Securities Index brought up the rear, returning 7.36%. While enjoying lower volatility and reduced prepayment risk for much of the period, mortgage securities retreated during the summer as record-low interest rates triggered another massive refinancing wave, far stronger than the one spawned during the fall of 2001.

Annual Report

Fund Talk: The Manager's Overview

(Portfolio Manager photograph)
An interview with Richard Habermann, Portfolio Manager of Fidelity Asset Manager: Aggressive

Q. How did the fund perform, Dick?

A. For the 12 months ending September 30, 2002, the fund fell 27.58%, while the Fidelity Asset Manager: Aggressive Composite Index declined 16.40% and the Lipper Inc. flexible portfolio funds average lost 10.36%.

Q. Why did the fund struggle during the past year?

A. Disappointing stock and sector selection within the equity subportfolio was primarily responsible for the fund's underperformance, despite having a decent first half of the period. Asset allocation, on the other hand, only detracted slightly from returns. Holding equities to around an 85% neutral weighting on average helped, as stock prices cratered during the spring and summer on disappointing economic and earnings results, as well as growing concerns about corporate mismanagement and geopolitical unrest. Consistent with this cautious stance, I became more heavily invested in bonds. However, within the bond subportfolio, our commitment to high-yield securities hurt fund results. While high-yield bonds benefited from optimism about a potential economic recovery early in the period, their advances were curbed by weak equity markets, widespread credit-quality downgrades and an influx of supply from fallen investment-grade issuers. Despite strong security selection and reducing the high-yield weighting as market conditions deteriorated, we still lost ground to the all-investment-grade bond allocation seen in our composite index, which benefited from the massive flight to quality in Treasuries. In hindsight, I should have moved more toward higher-quality issuers, but the high coupon income was attractive and I didn't expect high-yield bond prices to decline further from already historically low levels.

Q. What factors drove the fund's equity holdings?

A. It was an extremely challenging year, one where nearly every major sector posted double-digit declines. Against that backdrop, the equity subportfolio - managed by Bahaa Fam - trailed the S&P 500 by a considerable margin. Given the fund's aggressive orientation, it tends to have a larger exposure to the more volatile stocks in growth-oriented sectors that Bahaa feels will perform well over an 18- to 24-month horizon. However, that style was ineffective during the second half of the period amid the extreme rotation out of growth stocks. The fund's focus on technology hardware stocks, particularly mid-cap semiconductor companies, hurt the most. We held on to many of our positions given that the economy looked to be improving, semiconductor orders were picking up and the stocks appeared reasonably valued. Uncertainty about the economic recovery re-emerged during the spring and summer, though, as the pickup in end-demand proved weaker than expected. In response, investors sold down chip-related holdings NVIDIA, Teradyne, ASML and Cypress Semiconductor, as well as component maker Vishay Intertechnology. At the same time, we suffered from underweighting more stable, large-cap names, such as Microsoft, which held up relatively well.

Annual Report

Fund Talk: The Manager's Overview - continued

Q. What other strategies influenced performance?

A. The other major source of underperformance came from our positioning in health care. Given his concerns about the outlook for many of the large pharmaceutical companies, Bahaa added to the biotechnology holdings he felt presented stronger growth prospects at more reasonable valuations. Unfortunately, even such stocks as MedImmune and IDEC Pharmaceuticals weren't spared amid the ImClone insider-trading scandal and continued downturn in the NASDAQ. The only real bright spot during the period was our strong position in several energy services stocks - particularly oil and natural gas drillers - that seemed undervalued given heightened interest in domestic energy exploration and higher oil prices. Nabors Industries, Noble, BJ Services and ENSCO were top contributors. Some stocks I've mentioned thus far were no longer held at period end.

Q. How did the fund's fixed-income investments fare?

A. Favorable interest rate conditions, a sluggish economy and robust demand translated into strong positive absolute returns for investment-grade bonds. However, since the fund's bond exposure was limited to high yield, the investment-grade portion - managed by Jeff Moore, who took over for Charlie Morrison in April - was not utilized during the period. That said, while lagging the returns provided by the Lehman Brothers Aggregate Bond Index, the fund's high-yield holdings had a positive return and beat their benchmark. Managed by Matt Conti, the high-yield subportfolio avoided several major defaults and credit downgrades. It further benefited from emphasizing higher-quality bonds, while having only limited exposure to speculative securities. Solid security selection in the battered telecommunications and utilities sectors also helped. Still, the performance of the high-yield market paled in comparison to that of investment-grade securities. Finally, as a conservative vehicle, the strategic cash portion of the fund - managed by John Todd - was effective in providing reasonably steady returns to help offset capital market volatility.

Q. What's your outlook?

A. Although sentiment continues to be negative, many stocks are now more reasonably valued on several measures, and companies are entering a period of easier year-over-year earnings comparisons. In addition, the quality of earnings likely has improved. While this represents a more positive environment for higher-risk assets, it's potentially negative for extremely conservative assets, which have flourished of late with geopolitical concerns and the risk of war with Iraq weighing heavily on the market.

The views expressed in this report reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

Note to shareholders: Effective November 8, 2002, Harry Lange assumed responsibility for managing the fund's equity subportfolio.

Fund Facts

Goal: seeks to maximize total return over the long term by allocating its assets among stocks, bonds, short-term instruments and other investments

Fund number: 347

Trading symbol: FAMRX

Start date: September 24, 1999

Size: as of September 30, 2002, more than $150 million

Manager: Richard Habermann, since inception; manager, Fidelity Asset Manager, Fidelity Asset Manager: Growth and Fidelity Asset Manager: Income, since 1996; Fidelity Trend Fund, 1977-1982; Fidelity Magellan Fund, 1972-1977; joined Fidelity in 1968

3

Dick Habermann expands on his outlook:

"Where we go from here has a lot to do with what happens in the fixed-income markets. Despite sharply lower interest rates and an accommodative Federal Reserve Board, investment-grade corporate bonds have come under extreme pressure in recent months, with household-name issuers selling at very large premiums over Treasuries. While this environment has caused high-yield spreads to widen even further than expected, it has also dragged on equity performance. A stronger economy and improved earnings would be necessary to reverse this effect, as fund flows out of government bonds and into corporates could help alleviate the credit crunch and induce firms to invest and hire again, which could help equities. While continued cost cutting should help boost corporate earnings in 2003, it may take some time for demand-driven earnings to rebound. In the meantime, higher pension costs and other reforms, such as stock option expensing, could put a damper on earnings expectations.

"Rarely have bonds outperformed equities for such a prolonged period of time, as investors have sought safe havens. Our approach is to lean against such trends when they become overstretched and when market valuations seem to have reached extreme levels."

Annual Report

Investment Changes

Top Ten Stocks as of September 30, 2002

% of fund's
net assets

% of fund's net assets
6 months ago

Noble Corp.

3.2

4.4

Nabors Industries Ltd.

3.1

4.6

Lehman Brothers Holdings, Inc.

2.9

1.8

Lowe's Companies, Inc.

2.9

4.0

Best Buy Co., Inc.

2.9

3.9

Northrop Grumman Corp.

2.8

0.0

MedImmune, Inc.

2.5

3.9

Teradyne, Inc.

2.4

5.9

Clear Channel Communications, Inc.

2.4

0.0

Vishay Intertechnology, Inc.

2.3

4.3

27.4

Market Sectors as of September 30, 2002

(stocks only)

% of fund's
net assets

% of fund's net assets
6 months ago

Consumer Discretionary

22.8

13.9

Financials

15.8

11.7

Health Care

12.3

11.4

Information Technology

11.9

25.9

Energy

7.3

10.5

Industrials

4.8

3.5

Telecommunication Services

3.2

4.1

Consumer Staples

2.9

4.2

Utilities

1.7

0.0

Materials

0.0

0.9

Asset Allocation (% of fund's net assets)

As of September 30, 2002 *

As of March 31, 2002 **

Stock Class and
Equity Futures 85.3%

Stock Class 87.0%

Bond Class 13.5%

Bond Class 11.4%

Short-term Class 1.2%

Short-term Class 1.6%

* Foreign investments

5.3%

** Foreign investments

4.5%



Asset allocations in the pie charts reflect the categorization of assets as defined in the fund's prospectus in effect as of the time periods indicated above. Financial statement categorizations conform to accounting standards and will differ from the pie chart. Percentages are adjusted for the effect of futures contracts, if applicable.

Annual Report

Investments September 30, 2002

Showing Percentage of Net Assets

Common Stocks - 82.7%

Shares

Value (Note 1)

CONSUMER DISCRETIONARY - 22.8%

Hotels, Restaurants & Leisure - 2.3%

Harrah's Entertainment, Inc. (a)

64,100

$ 3,090,261

International Game Technology (a)

5,800

401,012

3,491,273

Household Durables - 5.8%

KB Home

29,500

1,440,780

Lennar Corp.

31,500

1,757,070

Ryland Group, Inc.

88,500

3,289,545

Toll Brothers, Inc. (a)

100,700

2,189,218

8,676,613

Media - 5.3%

Clear Channel Communications, Inc. (a)

102,200

3,551,450

Comcast Corp. Class A (special) (a)

85,100

1,775,186

EchoStar Communications Corp. Class A (a)

36,000

622,800

Fox Entertainment Group, Inc. Class A (a)

91,700

2,020,151

7,969,587

Specialty Retail - 9.4%

Best Buy Co., Inc. (a)

194,400

4,337,064

Chico's FAS, Inc. (a)

128,800

2,051,784

Circuit City Stores, Inc. - Circuit City Group

52,100

789,315

Lowe's Companies, Inc.

106,600

4,413,240

Williams-Sonoma, Inc. (a)

107,500

2,540,225

14,131,628

TOTAL CONSUMER DISCRETIONARY

34,269,101

CONSUMER STAPLES - 2.9%

Food & Drug Retailing - 0.7%

Rite Aid Corp. (a)

39,000

81,900

Safeway, Inc. (a)

43,800

976,740

1,058,640

Food Products - 0.4%

Tyson Foods, Inc. Class A

58,700

682,681

Personal Products - 0.4%

Gillette Co.

20,900

618,640

Tobacco - 1.4%

Philip Morris Companies, Inc.

53,300

2,068,040

TOTAL CONSUMER STAPLES

4,428,001

Common Stocks - continued

Shares

Value (Note 1)

ENERGY - 7.3%

Energy Equipment & Services - 7.3%

ENSCO International, Inc.

60,000

$ 1,502,400

Nabors Industries Ltd. (a)

140,700

4,607,925

Noble Corp. (a)

154,400

4,786,398

10,896,723

FINANCIALS - 15.8%

Banks - 1.6%

Bank of America Corp.

26,700

1,703,460

Silicon Valley Bancshares (a)

44,200

748,306

2,451,766

Diversified Financials - 12.7%

Bear Stearns Companies, Inc.

61,000

3,440,400

Citigroup, Inc.

86,000

2,549,900

Eaton Vance Corp. (non-vtg.)

22,000

608,080

Goldman Sachs Group, Inc.

42,400

2,799,672

Household International, Inc.

112,600

3,187,706

J.P. Morgan Chase & Co.

43,900

833,661

Lehman Brothers Holdings, Inc.

90,200

4,424,310

MBNA Corp.

66,500

1,222,270

19,065,999

Insurance - 1.5%

American International Group, Inc.

13,300

727,510

Radian Group, Inc.

24,600

803,436

XL Capital Ltd. Class A

9,900

727,650

2,258,596

TOTAL FINANCIALS

23,776,361

HEALTH CARE - 12.3%

Biotechnology - 3.0%

Gilead Sciences, Inc. (a)

22,700

761,131

MedImmune, Inc. (a)

182,100

3,809,532

4,570,663

Health Care Equipment & Supplies - 2.5%

Baxter International, Inc.

94,700

2,893,085

Biomet, Inc.

28,300

753,629

Boston Scientific Corp. (a)

1,100

34,716

3,681,430

Common Stocks - continued

Shares

Value (Note 1)

HEALTH CARE - continued

Pharmaceuticals - 6.8%

Barr Laboratories, Inc. (a)

54,100

$ 3,369,889

Johnson & Johnson

62,000

3,352,960

Merck & Co., Inc.

66,400

3,035,144

Pharmacia Corp.

12,400

482,112

10,240,105

TOTAL HEALTH CARE

18,492,198

INDUSTRIALS - 4.8%

Aerospace & Defense - 3.3%

Lockheed Martin Corp.

11,100

717,837

Northrop Grumman Corp.

33,900

4,204,956

4,922,793

Machinery - 1.5%

Illinois Tool Works, Inc.

13,400

781,622

Ingersoll-Rand Co. Ltd. Class A

43,400

1,494,696

2,276,318

TOTAL INDUSTRIALS

7,199,111

INFORMATION TECHNOLOGY - 11.9%

Electronic Equipment & Instruments - 3.2%

Flextronics International Ltd. (a)

185,900

1,296,095

Vishay Intertechnology, Inc. (a)

400,400

3,523,520

4,819,615

Internet Software & Services - 0.1%

Overture Services, Inc. (a)

5,200

122,564

Semiconductor Equipment & Products - 7.9%

Analog Devices, Inc. (a)

63,700

1,254,890

Cypress Semiconductor Corp. (a)

337,100

2,211,376

Fairchild Semiconductor International, Inc. Class A (a)

132,800

1,257,616

Intel Corp.

53,100

737,559

Micron Technology, Inc. (a)

114,800

1,420,076

Novellus Systems, Inc. (a)

65,000

1,352,650

Teradyne, Inc. (a)

375,700

3,606,720

11,840,887

Common Stocks - continued

Shares

Value (Note 1)

INFORMATION TECHNOLOGY - continued

Software - 0.7%

Cadence Design Systems, Inc. (a)

86,600

$ 880,722

Network Associates, Inc. (a)

16,800

178,584

1,059,306

TOTAL INFORMATION TECHNOLOGY

17,842,372

TELECOMMUNICATION SERVICES - 3.2%

Diversified Telecommunication Services - 2.4%

AT&T Corp.

212,200

2,548,522

BellSouth Corp.

53,900

989,604

3,538,126

Wireless Telecommunication Services - 0.8%

Nextel Communications, Inc. Class A (a)

164,100

1,238,955

TOTAL TELECOMMUNICATION SERVICES

4,777,081

UTILITIES - 1.7%

Electric Utilities - 1.7%

Edison International (a)

48,500

485,000

FirstEnergy Corp.

37,500

1,120,875

FPL Group, Inc.

12,500

672,500

TXU Corp.

5,300

221,063

2,499,438

TOTAL COMMON STOCKS

(Cost $161,100,875)

124,180,386

Corporate Bonds - 14.0%

Principal
Amount

Convertible Bonds - 0.2%

TELECOMMUNICATION SERVICES - 0.2%

Wireless Telecommunication Services - 0.2%

Nextel Communications, Inc. 5.25% 1/15/10

$ 395,000

267,099

Nonconvertible Bonds - 13.8%

CONSUMER DISCRETIONARY - 4.7%

Auto Components - 0.3%

Dana Corp. 6.5% 3/1/09

40,000

34,000

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Auto Components - continued

Delco Remy International, Inc. 11% 5/1/09

$ 110,000

$ 73,700

Dura Operating Corp. 8.625% 4/15/12

50,000

49,250

Goodyear Tire & Rubber Co. 6.625% 12/1/06

20,000

17,400

Intermet Corp. 9.75% 6/15/09

110,000

103,400

Lear Corp. 8.11% 5/15/09

75,000

78,000

Stoneridge, Inc. 11.5% 5/1/12

60,000

60,750

416,500

Hotels, Restaurants & Leisure - 1.5%

Alliance Gaming Corp. 10% 8/1/07

30,000

31,350

Bally Total Fitness Holding Corp. 9.875% 10/15/07

165,000

145,200

Buffets, Inc. 11.25% 7/15/10 (e)

80,000

80,000

Capstar Hotel Co. 8.75% 8/15/07

10,000

8,100

Chumash Casino & Resort Enterprise 9% 7/15/10 (e)

85,000

87,975

Circus Circus Enterprises, Inc.:

6.45% 2/1/06

70,000

68,250

6.75% 7/15/03

40,000

40,100

Coast Hotels & Casinos, Inc. 9.5% 4/1/09

60,000

63,000

Domino's, Inc. 10.375% 1/15/09

110,000

117,700

Extended Stay America, Inc. 9.875% 6/15/11

50,000

48,500

Friendly Ice Cream Corp. 10.5% 12/1/07

110,000

106,150

Herbst Gaming, Inc. 10.75% 9/1/08

75,000

77,813

HMH Properties, Inc. 7.875% 8/1/05

110,000

105,600

Hollywood Park, Inc. 9.25% 2/15/07

70,000

61,600

ITT Corp.:

6.75% 11/15/05

100,000

98,000

7.375% 11/15/15

120,000

109,200

MGM Mirage, Inc. 8.375% 2/1/11

10,000

10,350

Mirage Resorts, Inc. 7.25% 10/15/06

80,000

81,618

Mohegan Tribal Gaming Authority:

8.125% 1/1/06

120,000

123,600

8.375% 7/1/11

15,000

15,375

8.75% 1/1/09

50,000

52,000

Park Place Entertainment Corp. 7.875% 12/15/05

140,000

142,800

Penn National Gaming, Inc. 8.875% 3/15/10

35,000

34,825

Premier Parks, Inc. 0% 4/1/08 (d)

140,000

114,800

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Hotels, Restaurants & Leisure - continued

Resorts International Hotel & Casino, Inc. 11.5% 3/15/09

$ 130,000

$ 113,100

Royal Caribbean Cruises Ltd.:

7.25% 8/15/06

15,000

12,750

8.25% 4/1/05

10,000

9,000

8.75% 2/2/11

20,000

17,100

Sun International Hotels Ltd./Sun International North America, Inc.:

8.875% 8/15/11

75,000

75,000

yankee 8.625% 12/15/07

10,000

10,050

Tricon Global Restaurants, Inc. 8.5% 4/15/06

90,000

94,950

Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 (e)

155,000

151,900

2,307,756

Household Durables - 0.5%

Beazer Homes USA, Inc. 8.375% 4/15/12

40,000

39,900

Champion Enterprises, Inc. 11.25% 4/15/07 (e)

65,000

47,125

D.R. Horton, Inc. 8% 2/1/09

90,000

88,200

Juno Lighting, Inc. 11.875% 7/1/09

125,000

122,500

K. Hovnanian Enterprises, Inc. 8.875% 4/1/12

130,000

117,000

Kaufman & Broad Home Corp. 7.75% 10/15/04

70,000

70,000

Kinetic Concepts, Inc. 9.625% 11/1/07

130,000

122,200

Ryland Group, Inc.:

8% 8/15/06

10,000

10,000

8.25% 4/1/08

25,000

25,000

9.75% 9/1/10

50,000

53,750

Standard Pacific Corp. 9.25% 4/15/12

45,000

42,750

WCI Communities, Inc. 10.625% 2/15/11

70,000

67,900

806,325

Internet & Catalog Retail - 0.1%

Amazon.com, Inc. 0% 5/1/08 (d)

115,000

106,950

J. Crew Group, Inc. 0% 10/15/08 (d)

140,000

70,000

176,950

Leisure Equipment & Products - 0.1%

The Hockey Co. 11.25% 4/15/09

65,000

62,400

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - 1.5%

AMC Entertainment, Inc.:

9.5% 3/15/09

$ 20,000

$ 17,600

9.875% 2/1/12

110,000

97,900

American Media Operations, Inc. 10.25% 5/1/09

150,000

156,000

British Sky Broadcasting Group PLC (BSkyB) yankee:

6.875% 2/23/09

45,000

43,425

7.3% 10/15/06

45,000

44,775

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.:

0% 4/1/11 (d)

80,000

36,800

0% 5/15/11 (d)

85,000

28,050

8.25% 4/1/07

10,000

6,200

8.625% 4/1/09

100,000

62,000

10% 4/1/09

10,000

6,200

Cinemark USA, Inc. 9.625% 8/1/08

205,000

194,750

Comcast Cable Communications, Inc.:

6.2% 11/15/08

20,000

18,500

6.375% 1/30/06

35,000

33,600

6.75% 1/30/11

20,000

18,600

6.875% 6/15/09

80,000

75,600

8.125% 5/1/04

15,000

14,850

Continental Cablevision, Inc. 8.3% 5/15/06

35,000

33,600

Corus Entertainment, Inc. 8.75% 3/1/12

50,000

50,500

CSC Holdings, Inc.:

7.625% 4/1/11

50,000

39,750

9.875% 4/1/23

100,000

74,000

EchoStar DBS Corp.:

9.125% 1/15/09 (e)

60,000

56,400

9.25% 2/1/06

20,000

19,200

9.375% 2/1/09

25,000

24,000

Granite Broadcasting Corp.:

8.875% 5/15/08

20,000

16,900

10.375% 5/15/05

20,000

17,000

Insight Midwest LP/Insight Capital, Inc. 10.5% 11/1/10

60,000

54,000

LBI Media, Inc. 10.125% 7/15/12 (e)

75,000

75,750

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

Lenfest Communications, Inc.:

8.375% 11/1/05

$ 10,000

$ 9,800

10.5% 6/15/06

95,000

93,575

Mediacom Broadband LLC/Mediacom Broadband Corp. 11% 7/15/13

80,000

74,400

PanAmSat Corp.:

6% 1/15/03

20,000

19,800

6.125% 1/15/05

70,000

64,400

Pegasus Satellite Communications, Inc.:

0% 3/1/07 (d)

55,000

15,400

12.375% 8/1/06

70,000

30,800

Radio One, Inc. 8.875% 7/1/11

105,000

109,725

Regal Cinemas Corp. 9.375% 2/1/12

110,000

112,200

Satelites Mexicanos SA de CV 6.2569% 6/30/04 (e)(f)

101,000

85,850

Sinclair Broadcast Group, Inc. 8.75% 12/15/07

60,000

61,500

Spanish Broadcasting System, Inc. 9.625% 11/1/09

90,000

91,125

TV Azteca SA de CV yankee 10.5% 2/15/07

85,000

79,475

Yell Finance BV 10.75% 8/1/11

120,000

121,200

2,285,200

Multiline Retail - 0.1%

Dillard's, Inc.:

6.125% 11/1/03

50,000

49,625

6.39% 8/1/03

120,000

118,200

Saks, Inc. 7.25% 12/1/04

20,000

19,600

187,425

Specialty Retail - 0.5%

Asbury Automotive Group, Inc. 9% 6/15/12

60,000

54,000

AutoNation, Inc. 9% 8/1/08

70,000

71,400

Gap, Inc.:

5.625% 5/1/03

230,000

225,400

9.9% 12/15/05

35,000

33,775

Hollywood Entertainment Corp. 10.625% 8/15/04

100,000

101,000

Michaels Stores, Inc. 9.25% 7/1/09

70,000

74,200

United Auto Group, Inc. 9.625% 3/15/12 (e)

85,000

84,575

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Specialty Retail - continued

United Rentals, Inc.:

8.8% 8/15/08

$ 50,000

$ 40,500

9% 4/1/09

20,000

16,200

701,050

Textiles Apparel & Luxury Goods - 0.1%

The William Carter Co. 10.875% 8/15/11

90,000

98,550

TOTAL CONSUMER DISCRETIONARY

7,042,156

CONSUMER STAPLES - 0.6%

Beverages - 0.2%

Canandaigua Brands, Inc. 8.625% 8/1/06

70,000

73,850

Constellation Brands, Inc. 8.125% 1/15/12

100,000

101,750

Cott Beverages, Inc. 8% 12/15/11

90,000

92,250

267,850

Food & Drug Retailing - 0.2%

Great Atlantic & Pacific Tea, Inc. 7.75% 4/15/07

135,000

98,550

Rite Aid Corp.:

6.125% 12/15/08 (e)

45,000

24,750

6.875% 8/15/13

140,000

81,200

7.125% 1/15/07

80,000

54,400

258,900

Food Products - 0.2%

Corn Products International, Inc. 8.25% 7/15/07

35,000

33,950

Dean Foods Co.:

6.75% 6/15/05

90,000

89,550

6.9% 10/15/17

110,000

97,350

8.15% 8/1/07

80,000

81,200

Del Monte Corp. 9.25% 5/15/11

20,000

19,700

Dole Food Co., Inc.:

6.375% 10/1/05

10,000

9,300

7.25% 5/1/09

40,000

35,200

366,250

TOTAL CONSUMER STAPLES

893,000

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

ENERGY - 0.9%

Energy Equipment & Services - 0.3%

DI Industries, Inc. 8.875% 7/1/07

$ 125,000

$ 127,500

Grant Prideco, Inc. 9.625% 12/1/07

100,000

105,000

Key Energy Services, Inc. 8.375% 3/1/08

200,000

208,000

440,500

Oil & Gas - 0.6%

Chesapeake Energy Corp.:

7.875% 3/15/04

220,000

226,050

8.375% 11/1/08

70,000

70,350

Encore Acquisition Co. 8.375% 6/15/12 (e)

20,000

20,200

Forest Oil Corp. 8% 6/15/08

85,000

87,550

Plains Exploration & Production Co. LP 8.75% 7/1/12 (e)

100,000

100,000

Pogo Producing Co. 8.25% 4/15/11

130,000

136,500

Swift Energy Co. 9.375% 5/1/12

25,000

24,000

Teekay Shipping Corp. 8.875% 7/15/11

270,000

279,450

944,100

TOTAL ENERGY

1,384,600

FINANCIALS - 1.3%

Banks - 0.1%

Sovereign Bancorp, Inc. 10.5% 11/15/06

70,000

78,050

Western Financial Bank 9.625% 5/15/12

110,000

104,500

182,550

Diversified Financials - 0.7%

BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08

165,000

167,475

Capital One Financial Corp.:

7.25% 12/1/03

30,000

27,300

7.25% 5/1/06

70,000

60,365

8.75% 2/1/07

20,000

17,000

CMS Energy X-TRAS pass thru trust I 7% 1/15/05

20,000

15,400

Continental Airlines, Inc. pass thru trust certificate 6.9% 1/2/17

38,102

28,957

Dana Credit Corp. 7.25% 12/6/02 (e)

100,000

98,500

Delta Air Lines, Inc. pass thru trust certificate 7.711% 9/18/11

15,000

13,950

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11

$ 105,000

$ 100,275

GATX Financial Corp. 8.875% 6/1/09

75,000

61,500

IOS Capital, Inc. 9.75% 6/15/04

110,000

111,100

Meditrust Exercisable Put Options Securities Trust 7.114% 8/15/04 (e)

20,000

19,875

Millennium America, Inc.:

9.25% 6/15/08

15,000

15,375

9.25% 6/15/08 (e)

80,000

82,000

Northwest Airlines pass thru trust certificate 9.179% 10/1/11

25,482

20,386

SESI LLC 8.875% 5/15/11

100,000

99,500

Stone Container Finance Co. yankee 11.5% 8/15/06 (e)

15,000

15,750

Xerox Capital (Europe) PLC 5.875% 5/15/04

125,000

96,250

Xerox Credit Corp. 6.1% 12/16/03

40,000

33,600

1,084,558

Real Estate - 0.5%

Corrections Corp. of America 9.875% 5/1/09 (e)

30,000

30,975

iStar Financial, Inc. 8.75% 8/15/08

125,000

125,000

LNR Property Corp.:

9.375% 3/15/08

55,000

54,450

10.5% 1/15/09

30,000

30,600

Meditrust Corp. 7.82% 9/10/26

315,000

315,788

MeriStar Hospitality Corp. 9% 1/15/08

100,000

89,000

Senior Housing Properties Trust 8.625% 1/15/12

110,000

108,350

754,163

TOTAL FINANCIALS

2,021,271

HEALTH CARE - 0.7%

Health Care Equipment & Supplies - 0.0%

Sybron Dental Specialties, Inc. 8.125% 6/15/12 (e)

20,000

19,800

Health Care Providers & Services - 0.5%

Alderwoods Group, Inc.:

11% 1/2/07

37,700

37,417

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

HEALTH CARE - continued

Health Care Providers & Services - continued

Alderwoods Group, Inc.: - continued

12.25% 1/2/09

$ 75,000

$ 70,500

Columbia/HCA Healthcare Corp. 6.73% 7/15/45

165,000

167,288

Hanger Orthopedic Group, Inc. 10.375% 2/15/09

40,000

42,600

HealthSouth Corp.:

6.875% 6/15/05

60,000

43,800

7% 6/15/08

50,000

32,500

Owen & Minor, Inc. 8.5% 7/15/11

60,000

62,400

PacifiCare Health Systems, Inc. 10.75% 6/1/09

125,000

121,875

Rotech Healthcare, Inc. 9.5% 4/1/12 (e)

40,000

36,800

Vanguard Health Systems, Inc. 9.75% 8/1/11

130,000

131,300

746,480

Pharmaceuticals - 0.2%

aaiPharma, Inc. 11% 4/1/10

150,000

132,000

Biovail Corp. 7.875% 4/1/10

90,000

89,100

221,100

TOTAL HEALTH CARE

987,380

INDUSTRIALS - 1.2%

Aerospace & Defense - 0.2%

Alliant Techsystems, Inc. 8.5% 5/15/11

80,000

84,600

BE Aerospace, Inc.:

8% 3/1/08

30,000

21,300

9.5% 11/1/08

40,000

30,600

Sequa Corp.:

8.875% 4/1/08

75,000

67,125

9% 8/1/09

30,000

27,150

Transdigm, Inc. 10.375% 12/1/08

30,000

30,900

261,675

Airlines - 0.1%

Continental Airlines, Inc. 8% 12/15/05

5,000

2,500

Delta Air Lines, Inc.:

6.65% 3/15/04

55,000

38,500

7.7% 12/15/05

40,000

26,400

8.3% 12/15/29

15,000

6,750

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Airlines - continued

Northwest Airlines, Inc.:

7.625% 3/15/05

$ 50,000

$ 27,500

9.875% 3/15/07

30,000

16,200

117,850

Building Products - 0.0%

Nortek, Inc. 9.125% 9/1/07

60,000

60,300

Commercial Services & Supplies - 0.3%

Allied Waste North America, Inc.:

7.375% 1/1/04

145,000

143,550

7.625% 1/1/06

30,000

28,500

7.875% 1/1/09

35,000

32,550

10% 8/1/09

40,000

36,800

Browning-Ferris Industries, Inc. 6.375% 1/15/08

25,000

21,750

Iron Mountain, Inc. 8.75% 9/30/09

75,000

75,375

JohnsonDiversey, Inc. 9.625% 5/15/12 (e)

30,000

29,700

368,225

Industrial Conglomerates - 0.2%

Tyco International Group SA:

6.125% 11/1/08

15,000

12,300

6.875% 1/15/29

25,000

19,125

yankee:

5.8% 8/1/06

230,000

193,200

5.875% 11/1/04

30,000

26,700

6.375% 6/15/05

20,000

17,300

6.375% 2/15/06

55,000

47,300

6.375% 10/15/11

60,000

49,200

365,125

Machinery - 0.4%

AGCO Corp. 9.5% 5/1/08

100,000

105,000

Dresser, Inc. 9.375% 4/15/11

130,000

125,450

Dunlop Standard Aerospace Holdings PLC 11.875% 5/15/09

160,000

162,400

Navistar International Corp. 9.375% 6/1/06

40,000

38,600

NMHG Holding Co. 10% 5/15/09

50,000

50,500

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Machinery - continued

Terex Corp. 8.875% 4/1/08

$ 110,000

$ 104,500

TriMas Corp. 9.875% 6/15/12 (e)

70,000

70,700

657,150

Road & Rail - 0.0%

TFM SA de CV 12.5% 6/15/12 (e)

50,000

48,625

TOTAL INDUSTRIALS

1,878,950

INFORMATION TECHNOLOGY - 0.9%

Communications Equipment - 0.1%

Avaya, Inc. 11.125% 4/1/09

145,000

91,350

L-3 Communications Corp. 8% 8/1/08

75,000

78,000

Lucent Technologies, Inc.:

6.5% 1/15/28

35,000

10,675

7.25% 7/15/06

60,000

25,500

205,525

Computers & Peripherals - 0.1%

Seagate Technology HDD Holdings 8% 5/15/09 (e)

95,000

89,300

Electronic Equipment & Instruments - 0.5%

ChipPAC International Ltd. 12.75% 8/1/09

65,000

63,700

Fisher Scientific International, Inc.:

8.125% 5/1/12

60,000

60,000

9% 2/1/08

125,000

129,375

Flextronics International Ltd.:

9.875% 7/1/10

65,000

65,975

yankee 8.75% 10/15/07

165,000

160,875

Ingram Micro, Inc. 9.875% 8/15/08

130,000

132,600

Solectron Corp.:

7.375% 3/1/06

105,000

81,900

9.625% 2/15/09

105,000

84,000

778,425

IT Consulting & Services - 0.0%

Unisys Corp.:

7.875% 4/1/08

40,000

38,400

8.125% 6/1/06

15,000

14,588

52,988

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Office Electronics - 0.1%

Xerox Corp.:

5.5% 11/15/03

$ 80,000

$ 67,200

7.15% 8/1/04

70,000

53,900

9.75% 1/15/09 (e)

75,000

59,250

180,350

Software - 0.1%

Computer Associates International, Inc. 6.375% 4/15/05

70,000

60,200

TOTAL INFORMATION TECHNOLOGY

1,366,788

MATERIALS - 1.7%

Chemicals - 0.5%

Berry Plastics Corp. 10.75% 7/15/12

125,000

128,750

Georgia Gulf Corp. 10.375% 11/1/07

85,000

90,950

Huntsman International LLC 9.875% 3/1/09 (e)

105,000

105,000

IMC Global, Inc.:

6.55% 1/15/05

75,000

70,875

7.3% 1/15/28

65,000

50,050

7.375% 8/1/18

15,000

10,800

7.625% 11/1/05

40,000

37,800

10.875% 6/1/08

30,000

32,400

11.25% 6/1/11

30,000

32,400

Lyondell Chemical Co.:

9.875% 5/1/07

15,000

13,875

10.875% 5/1/09

45,000

36,900

Methanex Corp. yankee 7.75% 8/15/05

130,000

128,700

OM Group, Inc. 9.25% 12/15/11

50,000

49,250

787,750

Containers & Packaging - 0.4%

Applied Extrusion Technologies, Inc. 10.75% 7/1/11

95,000

69,350

Graphic Packaging Corp. 8.625% 2/15/12

30,000

30,600

Owens-Illinois, Inc.:

7.15% 5/15/05

65,000

59,475

7.35% 5/15/08

10,000

8,700

7.5% 5/15/10

20,000

17,000

7.8% 5/15/18

180,000

144,000

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

MATERIALS - continued

Containers & Packaging - continued

Owens-Illinois, Inc.: - continued

7.85% 5/15/04

$ 40,000

$ 38,000

8.1% 5/15/07

25,000

23,000

Riverwood International Corp. 10.875% 4/1/08

90,000

90,000

Silgan Holdings, Inc. 9% 6/1/09 (e)

55,000

56,925

537,050

Metals & Mining - 0.5%

AK Steel Corp. 7.875% 2/15/09

75,000

73,594

Freeport-McMoRan Copper & Gold, Inc. 7.5% 11/15/06

100,000

90,000

Luscar Coal Ltd. 9.75% 10/15/11

60,000

63,600

Oregon Steel Mills, Inc. 10% 7/15/09 (e)

110,000

110,000

P&L Coal Holdings Corp. 9.625% 5/15/08

285,000

298,538

Phelps Dodge Corp.:

8.75% 6/1/11

50,000

50,000

9.5% 6/1/31

95,000

93,100

Steel Dynamics, Inc. 9.5% 3/15/09 (e)

50,000

49,750

828,582

Paper & Forest Products - 0.3%

Georgia-Pacific Group:

7.5% 5/15/06

55,000

45,650

8.875% 5/15/31

105,000

75,600

9.625% 3/15/22

30,000

26,400

Louisiana-Pacific Corp.:

8.5% 8/15/05

40,000

40,200

10.875% 11/15/08

30,000

31,575

Stone Container Corp.:

8.375% 7/1/12 (e)

90,000

89,550

9.75% 2/1/11

105,000

109,725

418,700

TOTAL MATERIALS

2,572,082

TELECOMMUNICATION SERVICES - 0.8%

Diversified Telecommunication Services - 0.2%

American Cellular Corp. 9.5% 10/15/09

40,000

7,500

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

Centennial Cellular Operating Co. LLC/Centennial Finance Corp. 10.75% 12/15/08

$ 195,000

$ 97,500

Cincinnati Bell Telephone Co. 6.3% 12/1/28

70,000

40,600

Tritel PCS, Inc. 10.375% 1/15/11

58,000

52,200

Triton PCS, Inc.:

8.75% 11/15/11

20,000

13,300

9.375% 2/1/11

160,000

112,000

U.S. West Communications 7.2% 11/1/04

40,000

36,400

359,500

Wireless Telecommunication Services - 0.6%

AirGate PCS, Inc. 0% 10/1/09 (d)

105,000

7,350

American Tower Corp. 9.375% 2/1/09

75,000

45,000

AT&T Wireless Services, Inc. 8.125% 5/1/12

40,000

30,800

Crown Castle International Corp.:

9.375% 8/1/11

195,000

124,800

10.75% 8/1/11

20,000

13,400

Dobson Communications Corp. 10.875% 7/1/10

70,000

51,100

Echostar Broadband Corp. 10.375% 10/1/07

230,000

227,700

Millicom International Cellular SA 13.5% 6/1/06

110,000

32,175

Nextel Communications, Inc.:

0% 10/31/07 (d)

25,000

19,688

0% 2/15/08 (d)

45,000

33,863

9.375% 11/15/09

20,000

15,500

9.5% 2/1/11

35,000

26,775

Nextel Partners, Inc. 0% 2/1/09 (d)

80,000

41,600

Rogers Wireless, Inc. 9.625% 5/1/11

90,000

64,800

Rural Cellular Corp.:

9.625% 5/15/08

20,000

11,000

9.75% 1/15/10

25,000

13,500

VoiceStream Wireless Corp. 0% 11/15/09 (d)

74,000

60,310

819,361

TOTAL TELECOMMUNICATION SERVICES

1,178,861

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - 1.0%

Electric Utilities - 0.4%

CMS Energy Corp.:

6.75% 1/15/04

$ 30,000

$ 24,900

7.5% 1/15/09

35,000

26,600

7.625% 11/15/04

20,000

16,400

8.9% 7/15/08

30,000

23,100

9.875% 10/15/07

100,000

82,000

Pacific Gas & Electric Co.:

6.25% 8/1/03

160,000

157,600

6.25% 3/1/04

85,000

82,875

Southern California Edison Co.:

5.625% 10/1/02

40,000

39,200

6.25% 6/15/03

20,000

19,750

8.95% 11/3/03

200,000

195,000

667,425

Gas Utilities - 0.1%

CMS Panhandle Holding Co. 6.125% 3/15/04

45,000

43,650

Transcontinental Gas Pipe Line:

6.125% 1/15/05

20,000

18,400

6.25% 1/15/08

15,000

13,200

8.875% 7/15/12 (e)

80,000

76,800

152,050

Multi-Utilities & Unregulated Power - 0.5%

Aquila, Inc. 11.875% 7/1/12 (e)

60,000

52,800

Utilicorp United, Inc.:

6.875% 10/1/04

20,000

17,400

7.95% 2/1/11

50,000

37,000

Western Resources, Inc.:

7.875% 5/1/07

140,000

137,200

9.75% 5/1/07

150,000

138,750

Williams Companies, Inc.:

6.5% 8/1/06

120,000

76,800

7.875% 9/1/21

60,000

34,200

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - continued

Multi-Utilities & Unregulated Power - continued

Williams Companies, Inc.: - continued

8.125% 3/15/12 (e)

$ 130,000

$ 83,200

9.25% 3/15/04

130,000

97,500

674,850

TOTAL UTILITIES

1,494,325

TOTAL NONCONVERTIBLE BONDS

20,819,413

TOTAL CORPORATE BONDS

(Cost $21,958,845)

21,086,512

U.S. Treasury Obligations - 0.3%

U.S. Treasury Bills, yield at date of purchase 1.65% to 1.66% 12/5/02 (b)
(Cost $448,640)

450,000

448,740

Money Market Funds - 4.4%

Shares

Fidelity Cash Central Fund, 1.86% (c)

3,285,820

3,285,820

Fidelity Securities Lending Cash Central Fund, 1.88% (c)

3,313,479

3,313,479

TOTAL MONEY MARKET FUNDS

(Cost $6,599,299)

6,599,299

TOTAL INVESTMENT PORTFOLIO - 101.4%

(Cost $190,107,659)

152,314,937

NET OTHER ASSETS - (1.4)%

(2,139,335)

NET ASSETS - 100%

$ 150,175,602

Futures Contracts

Expiration Date

Underlying Face Amount at Value

Unrealized Gain/(Loss)

Purchased

Equity Index Contracts

18 S&P 500 Index Contracts

Dec. 2002

$ 3,667,500

$ (333,559)

The face value of futures purchased as a percentage of net assets - 2.4%

Legend

(a) Non-income producing

(b) 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 $299,160.

(c) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end.

(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,039,825 or 1.4% of net assets.

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

Other Information

The composition of credit quality ratings as a percentage of total value of investments in securities is as follows (ratings are unaudited):

Ratings

AAA, AA, A

0.0%

BBB

0.6%

BB

5.3%

B

7.0%

CCC, CC, C

0.9%

Not rated

0.1%

Equities

83.9%

Short Term

2.2%

We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Percentages are adjusted for the effect of futures contracts, if applicable.

Purchases and sales of securities, other than short-term securities, aggregated $560,139,471 and $615,810,538, respectively.

The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $33,083 for the period.

Income Tax Information

At September 30, 2002, the fund had a capital loss carryforward of approximately $144,157,000 of which $153,000 and $144,004,000 will expire on September 30, 2009 and 2010, respectively.

The fund intends to elect to defer to its fiscal year ending September 30, 2003 approximately $47,698,000 of losses recognized during the period November 1, 2001 to September 30, 2002.

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

Annual Report

Financial Statements

Statement of Assets and Liabilities

September 30, 2002

Assets

Investment in securities, at value (including securities loaned of $3,283,250) (cost $190,107,659) - See accompanying schedule

$ 152,314,937

Receivable for investments sold

4,561,419

Receivable for fund shares sold

287,855

Dividends receivable

120,705

Interest receivable

565,575

Other receivables

24,553

Total assets

157,875,044

Liabilities

Payable to custodian bank

$ 12,779

Payable for investments purchased

3,602,930

Payable for fund shares redeemed

607,947

Accrued management fee

78,915

Payable for daily variation on futures contracts

46,350

Other payables and accrued expenses

37,042

Collateral on securities loaned, at value

3,313,479

Total liabilities

7,699,442

Net Assets

$ 150,175,602

Net Assets consist of:

Paid in capital

$ 379,992,299

Undistributed net investment income

1,135,394

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(192,825,816)

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

(38,126,275)

Net Assets, for 22,116,390 shares outstanding

$ 150,175,602

Net Asset Value, offering price and redemption price per share ($150,175,602 ÷ 22,116,390 shares)

$ 6.79

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

Annual Report

Financial Statements - continued

Statement of Operations

Year ended September 30, 2002

Investment Income

Dividends

$ 1,075,406

Interest

3,171,675

Security lending

9,737

Total income

4,256,818

Expenses

Management fee

$ 1,415,846

Transfer agent fees

750,781

Accounting and security lending fees

90,890

Non-interested trustees' compensation

864

Custodian fees and expenses

32,554

Registration fees

13,612

Audit

29,304

Legal

1,824

Miscellaneous

16,598

Total expenses before reductions

2,352,273

Expense reductions

(222,123)

2,130,150

Net investment income (loss)

2,126,668

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investments

(59,680,662)

Foreign currency transactions

(8,233)

Futures contracts

198,467

Total net realized gain (loss)

(59,490,428)

Change in net unrealized appreciation (depreciation) on:

Investment securities

708,693

Assets and liabilities in foreign currencies

172

Futures contracts

(333,559)

Total change in net unrealized appreciation (depreciation)

375,306

Net gain (loss)

(59,115,122)

Net increase (decrease) in net assets resulting from operations

$ (56,988,454)

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

Annual Report

Statement of Changes in Net Assets

Year ended
September 30,
2002

Year ended
September 30,
2001

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 2,126,668

$ 6,386,386

Net realized gain (loss)

(59,490,428)

(130,131,309)

Change in net unrealized appreciation (depreciation)

375,306

(44,978,534)

Net increase (decrease) in net assets resulting
from operations

(56,988,454)

(168,723,457)

Distributions to shareholders from net investment income

(5,795,162)

(4,182,506)

Distributions to shareholders from net realized gain

-

(19,297,262)

Total distributions

(5,795,162)

(23,479,768)

Share transactions
Net proceeds from sales of shares

49,739,631

268,634,415

Reinvestment of distributions

5,616,534

22,867,308

Cost of shares redeemed

(106,713,983)

(400,239,892)

Net increase (decrease) in net assets resulting from share transactions

(51,357,818)

(108,738,169)

Total increase (decrease) in net assets

(114,141,434)

(300,941,394)

Net Assets

Beginning of period

264,317,036

565,258,430

End of period (including undistributed net investment income of $1,135,394 and undistributed net investment income of $4,823,338, respectively)

$ 150,175,602

$ 264,317,036

Other Information

Shares

Sold

5,072,668

20,320,180

Issued in reinvestment of distributions

527,374

1,783,719

Redeemed

(11,106,926)

(31,385,745)

Net increase (decrease)

(5,506,884)

(9,281,846)

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

Annual Report

Financial Highlights

Years ended September 30,

2002

2001

2000

1999 E

Selected Per-Share Data

Net asset value, beginning of period

$ 9.57

$ 15.32

$ 10.22

$ 10.00

Income from Investment Operations

Net investment income (loss) D

.08 G

.20

.19

.01

Net realized and unrealized
gain (loss)

(2.64) G

(5.22)

4.98

.21

Total from investment operations

(2.56)

(5.02)

5.17

.22

Distributions from net investment income

(.22)

(.13)

(.02)

-

Distributions from net realized gain

-

(.60)

(.05)

-

Total distributions

(.22)

(.73)

(.07)

-

Net asset value, end of period

$ 6.79

$ 9.57

$ 15.32

$ 10.22

Total Return B, C

(27.58)%

(33.98)%

50.84%

2.20%

Ratios to Average Net Assets F

Expenses before expense reductions

.97%

.89%

.96%

57.49% A

Expenses net of voluntary waivers,
if any

.97%

.89%

.96%

1.20% A

Expenses net of all reductions

.88%

.85%

.90%

1.20% A

Net investment income (loss)

.87% G

1.55%

1.32%

4.06% A

Supplemental Data

Net assets, end of period
(000 omitted)

$ 150,176

$ 264,317

$ 565,258

$ 3,065

Portfolio turnover rate

240%

255%

338%

0% A

A Annualized

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

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

D Calculated based on average shares outstanding during the period.

E For the period September 24, 1999 (commencement of operations) to September 30, 1999.

F Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from directed brokerage or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflects expenses after reimbursement by the investment adviser but prior to reductions from directed brokerage or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

G Effective October 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The effect of this change during the period was to increase net investment income (loss) per share by $.01 and decrease net realized and unrealized gain (loss) per share by $.01. Without this change the ratio of net investment income (loss) to average net assets would have been .76%. Per share data, ratios and supplemental data for prior periods have not been restated to reflect this change.

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

Annual Report

Notes to Financial Statements

For the period ended September 30, 2002

1. Significant Accounting Policies.

Fidelity Asset Manager: Aggressive (the fund) is a fund of Fidelity Charles Street 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 financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:

Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.

Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

Annual Report

Notes to Financial Statements - continued

1. Significant Accounting Policies - continued

Foreign Currency - continued

The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.

Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Distributions are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to differing treatments for futures transactions, foreign currency transactions, prior period premium and discount on debt securities, defaulted bonds, market discount, non-taxable dividends, capital loss carryforwards, and losses deferred due to wash sales, and excise tax regulations.

Annual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

The tax-basis components of distributable earnings and the federal tax cost as of period end was as follows:

Unrealized appreciation

$ 3,101,947

Unrealized depreciation

(42,074,058)

Net unrealized appreciation (depreciation)

(38,972,111)

Undistributed ordinary income

1,009,837

Capital loss carryforward

(144,156,861)

Total Distributable earnings

$ (182,119,135)

Cost for federal income tax purposes

$ 191,287,048

The tax character of distributions paid during the year was as follows:

Ordinary Income

$ 5,795,162

Change in Accounting Principle. Effective October 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $212,966 increase to the cost of securities held and a corresponding increase to accumulated net undistributed realized gain (loss), based on securities held by the fund on October 1, 2001.

The effect of this change during the period, was to increase net investment income (loss) by $268,079; decrease net unrealized appreciation/depreciation by $117,367; and decrease net realized gain (loss) by $150,712. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

2. Operating Policies.

Repurchase Agreements. Fidelity Management and Research Company (FMR) has received an Exemptive order from the Securities and Exchange Commission which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

Futures Contracts. The fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase the fund's exposure to the underlying instrument, while selling futures tends to decrease the fund's exposure to the underlying

Annual Report

Notes to Financial Statements - continued

2. Operating Policies - continued

Futures Contracts - continued

instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption Futures Contracts. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counter-parties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee.

The management fee is the sum of an individual fund fee rate of .30% of the fund's average net assets and a group fee rate that averaged .28% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .58% of the fund's average net assets.

Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .31% of average net assets.

Annual Report

4. Fees and Other Transactions with Affiliates - continued

Accounting and Security Lending Fees. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $137,280 for the period.

Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The fund lends portfolio securities from time to time in order to earn additional income. 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. Cash collateral 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.

7. Expense Reductions.

Certain security trades were directed to brokers who paid $222,123 of the fund's expenses.

Annual Report

Independent Auditors' Report

To the Trustees of Fidelity Charles Street Trust and Shareholders of Fidelity Asset Manager: Aggressive:

We have audited the accompanying statement of assets and liabilities of Fidelity Asset Manager: Aggressive (the Fund), a fund of Fidelity Charles Street Trust, including the portfolio of investments, as of September 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Asset Manager: Aggressive as of September 30, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Boston, Massachusetts

November 8, 2002

Annual Report

Trustees and Officers

The Trustees and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and William S. Stavropoulos, each of the Trustees oversees 266 funds advised by FMR or an affiliate. Mr. McCoy oversees 268 funds advised by FMR or an affiliate, and Mr. Stavropoulos oversees 231 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (72)**

Year of Election or Appointment: 1981

President of Asset Manager: Aggressive® (1999). Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; a Director of Fidelity Management & Research (U.K.) Inc.; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc.

Abigail P. Johnson (40)**

Year of Election or Appointment: 2001
Senior Vice President of Asset Manager: Aggressive (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds.

Peter S. Lynch (59)

Year of Election or Appointment: 1990
Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

** Edward C. Johnson 3d, Trustee and President of the funds, is Abigail P. Johnson's father.

Annual Report

Non-Interested Trustees:

Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation

J. Michael Cook (60)

Year of Election or Appointment: 2001

Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/
consulting), Chairman of the Deloitte & Touche Foundation, and a
member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of AT&T (2001), International Flavors & Fragrances, Inc. (2000), Rockwell Automation International (2000), The Dow Chemical Company (2000), and HCA - The Healthcare Company (1999). He is a Member of the Advisory Board of the Securities Regulation Institute and of the Directorship Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Panel to the Comptroller General of the United States. He also serves as a member of the Board of Overseers of the Columbia Business School and a Member of the Advisory Board of the Graduate School of Business of the University of Florida his alma mater.

Ralph F. Cox (70)

Year of Election or Appointment: 1991
Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.

Phyllis Burke Davis (70)

Year of Election or Appointment: 1992
Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Toshiba International Advisory Group of Toshiba Corporation (2001) and a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc.

Robert M. Gates (59)

Year of Election or Appointment: 1997
Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), TRW Inc. (automotive, space, defense, and information technology), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines) and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy.

Donald J. Kirk (69)

Year of Election or Appointment: 1987
Mr. Kirk is a Public Governor of the National Association of Securities Dealers, Inc., and of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, and a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Stabilization Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations).

Marie L. Knowles (55)

Year of Election or Appointment: 2001

Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (58)

Year of Election or Appointment: 2000
Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and Chief Executive Officer (1999) and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman and C.E.O. of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.

Marvin L. Mann (69)

Year of Election or Appointment: 1993
Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage, 1997) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition,
Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama.

William O. McCoy (68)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).

William S. Stavropoulos (63)

Year of Election or Appointment: 2001

Mr. Stavropoulos also serves as a Trustee (2001) or Member of the Advisory Board (2000) of other investment companies advised by FMR. He is Chairman of the Board and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions, 1997), BellSouth Corporation (telecommunications, 1997), and the Chemical Financial Corporation. He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research and Fordham University. In addition, Mr. Stavropoulos is a member of the American Chemical Society, The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science.

Executive Officers:

Correspondence intended for each executive officer may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Bart A. Grenier (43)

Year of Election or Appointment: 2001

Vice President of Asset Manager: Aggressive. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001) and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000).

Name, Age; Principal Occupation

Charles S. Morrison (41)

Year of Election or Appointment: 2002
Vice President of Asset Manager: Aggressive. Mr Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division.

Bahaa Fam (45)

Year of Election or Appointment: 2001
Vice President of Asset Manager: Aggressive. Mr. Fam is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fam served as a senior quantitative equity analyst and director of quantitative research for FMR.

Richard C. Habermann (62)

Year of Election or Appointment: 1999
Vice President of Asset Manager: Aggressive. Mr. Habermann is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Habermann managed a variety of Fidelity funds.

Jeffrey Moore (36)

Year of Election or Appointment: 2002
Vice President of Asset Manager: Aggressive. Prior to assuming his current responsibilities, Mr. Moore served as a fixed-income analyst and portfolio manager.

Eric D. Roiter (53)

Year of Election or Appointment: 1999

Secretary of Asset Manager: Aggressive. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).

Maria F. Dwyer (43)

Year of Election or Appointment: 2002

Treasurer of Asset Manager: Aggressive. She also serves as Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.

John H. Costello (56)

Year of Election or Appointment: 1999

Assistant Treasurer of Asset Manager: Aggressive. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

Francis V. Knox, Jr. (55)

Year of Election or Appointment: 2002

Assistant Treasurer of Asset Manager: Aggressive. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), Compliance Officer of FMR Corp., and Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002) and Fidelity Management & Research (Far East) (1991-2002).

Thomas J. Simpson (44)

Year of Election or Appointment: 2000

Assistant Treasurer of Asset Manager: Aggressive. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995).

Annual Report

Distributions

The fund designates 30% of the dividends distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.

The fund will notify shareholders in January 2003 of amounts for use in preparing 2002 income tax returns.

Annual Report

Managing Your Investments

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

By Phone

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

(phone_graphic)

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

Press

1   For mutual fund and brokerage trading.

2   For quotes.*

3   For account balances and holdings.

4   To review orders and mutual
fund activity.

5   To change your PIN.

*0   To speak to a Fidelity representative.

By PC

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

(computer_graphic)

Fidelity's Web Site
www.fidelity.com

If you are not currently on the Internet, call EarthLink Sprint at 1-800-EarthLink, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider.

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

Annual Report

To Write Fidelity

We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.

(letter_graphic)

Making Changes
To Your Account

(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(letter_graphic)

For Non-Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Overnight Express
Fidelity Investments
2300 Litton Lane - KH2B
Hebron, KY 41048

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
2300 Litton Lane - KH2GC
Hebron, KY 41048-9397

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(letter_graphic)

For Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
2300 Litton Lane - KH2GC
Hebron, KY 41048-9397

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

Annual Report

To Visit Fidelity

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

Arizona

7001 West Ray Road
Chandler, AZ

7373 N. Scottsdale Road
Scottsdale, AZ

California

815 East Birch Street
Brea, CA

1411 Chapin Avenue
Burlingame, CA

851 East Hamilton Avenue
Campbell, CA

527 North Brand Boulevard
Glendale, CA

19200 Von Karman Avenue
Irvine, CA

601 Larkspur Landing Circle
Larkspur, CA

10100 Santa Monica Blvd.
Los Angeles, CA

27101 Puerta Real
Mission Viejo, CA

73-575 El Paseo
Palm Desert, CA

251 University Avenue
Palo Alto, CA

1760 Challenge Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

8 Montgomery Street
San Francisco, CA

21701 Hawthorne Boulevard
Torrance, CA

1400 Civic Drive
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

Colorado

1625 Broadway
Denver, CO

9185 East Westview Road
Littleton, CO

Connecticut

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

Delaware

222 Delaware Avenue
Wilmington, DE

Florida

4400 N. Federal Highway
Boca Raton, FL

121 Alhambra Plaza
Coral Gables, FL

2948 N. Federal Highway
Ft. Lauderdale, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

3501 PGA Boulevard
West Palm Beach, FL

8065 Beneva Road
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

Georgia

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

Illinois

One North LaSalle Street
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

Indiana

4729 East 82nd Street
Indianapolis, IN

Kansas

5400 College Boulevard
Overland Park, KS

Maine

Three Canal Plaza
Portland, ME

Maryland

7401 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

Massachusetts

801 Boylston Street
Boston, MA

155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

Annual Report

Michigan

280 Old N. Woodward Ave.
Birmingham, MI

43420 Grand River Avenue
Novi, MI

29155 Northwestern Hwy.
Southfield, MI

Minnesota

7600 France Avenue South
Edina, MN

Missouri

8885 Ladue Road
Ladue, MO

New Jersey

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
Paramus, NJ

New York

1055 Franklin Avenue
Garden City, NY

37 West Jericho Turnpike
Huntington Station, NY

1271 Avenue of the Americas
New York, NY

61 Broadway
New York, NY

350 Park Avenue
New York, NY

North Carolina

4611 Sharon Road
Charlotte, NC

Ohio

3805 Edwards Road
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

Oregon

16850 SW 72nd Avenue
Tigard, OR

Pennsylvania

600 West DeKalb Pike
King of Prussia, PA

1735 Market Street
Philadelphia, PA

12001 Perry Highway
Wexford, PA

Rhode Island

47 Providence Place
Providence, RI

Tennessee

6150 Poplar Avenue
Memphis, TN

Texas

10000 Research Boulevard
Austin, TX

4017 Northwest Parkway
Dallas, TX

12532 Memorial Drive
Houston, TX

2701 Drexel Drive
Houston, TX

400 East Las Colinas Blvd.
Irving, TX

14100 San Pedro
San Antonio, TX

19740 IH 45 North
Spring, TX

Utah

215 South State Street
Salt Lake City, UT

Virginia

1861 International Drive
McLean, VA

Washington

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

1518 6th Avenue
Seattle, WA

Washington, DC

1900 K Street, N.W.
Washington, DC

Wisconsin

595 North Barker Road
Brookfield, WI

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

Annual Report

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

Fidelity Investments Money
Management, Inc.

Fidelity Management & Research

(U.K.) Inc.

Fidelity Management & Research

(Far East) Inc.

Fidelity Investments Japan Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Shareholder
Servicing Agent

Fidelity Service Company, Inc.

Boston, MA

Custodian

JPMorgan Chase Bank

New York, NY

Fidelity's Asset Allocation Funds

Asset ManagerSM 

Asset Manager: Aggressive®

Asset Manager: Growth®

Asset Manager: Income®

Fidelity Freedom Funds® -
Income, 2000, 2010, 2020, 2030, 2040

The Fidelity Telephone Connection

Mutual Fund 24-Hour Service

Exchanges/Redemptions
and Account Assistance 1-800-544-6666

Product Information 1-800-544-6666

Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)

TDD Service 1-800-544-0118
(for the deaf and hearing impaired)
(9 a.m. - 9 p.m. Eastern time)

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

(automated graphic)    Automated line for quickest service

AGG-ANN-1102 158240
1.728722.103

(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

Fidelity®

Asset Manager: Growth®

Annual Report

September 30, 2002

(2_fidelity_logos) (Registered_Trademark)

Contents

President's Message

<Click Here>

Ned Johnson on investing strategies.

Performance

<Click Here>

How the fund has done over time.

Market Recap

<Click Here>

An overview of the market's performance and the factors driving it.

Fund Talk

<Click Here>

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

Investment Changes

<Click Here>

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

Independent Auditors' Report

<Click Here>

The auditors' opinion.

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

Other third party marks appearing herein are the property of their respective owners.

All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.

(Recycle graphic)   This report is printed on recycled paper using soy-based inks.

This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.

Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.

Neither the fund nor Fidelity Distributors Corporation is a bank.

For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.

Annual Report

President's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

The Dow Jones Industrial AverageSM - often used as a gauge of U.S. stock market performance - fell to its lowest point in four years during September 2002. The third quarter was the average's worst three-month stretch since the final quarter of 1987, and the Dow had its worst September since 1937. With equities in disarray, investors flocked to U.S. Treasury bonds, pushing yields of the bellwether 10-year Treasury note to 40-year lows.

While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs.

First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation.

Second, you can further manage your investing risk through diversification. Asset Manager funds are already diversified because they invest in stocks, bonds and short-term and money market instruments, both in the U.S. and overseas. If you have a shorter investment time horizon, you might want to consider moving some of your investment into Asset Manager: Income, which generally has a higher weighting in short-term investments compared with the other Asset Manager funds.

Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy.

If you have questions, please call us at 1-800-544-6666, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

There are several ways to evaluate a fund's historical performance. You can look at cumulative total returns, average annual returns, or the growth of a hypothetical investment. 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). If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Cumulative Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Past 10
years

Fidelity ® Asset Manager: Growth ®

-13.71%

-1.74%

112.98%

Fidelity Asset Manager: Growth Composite

-12.51%

7.06%

123.77%

S&P 500 ®

-20.49%

-7.88%

136.69%

LB Aggregate Bond

8.60%

45.79%

103.70%

LB 3 Month T-Bill

2.01%

25.84%

57.53%

Flexible Portfolio Funds Average

-10.36%

1.11%

89.77%

Cumulative total returns show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Fidelity Asset Manager: Growth Composite Index, a hypothetical combination of unmanaged indices. The composite index combines the total returns of the Standard & Poor's 500 SM  Index®, the Lehman Brothers® Aggregate Bond Index and the Lehman Brothers 3 Month Treasury Bill Index weighted according to the fund's neutral mix. You can also compare the fund's performance to the performance of mutual funds tracked by Lipper Inc. and grouped by similar objectives. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges.

Average Annual Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Past 10
years

Fidelity Asset Manager: Growth

-13.71%

-0.35%

7.85%

Fidelity Asset Manager: Growth Composite

-12.51%

1.37%

8.39%

Average annual total returns take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year.

Annual Report

Performance - continued

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in Fidelity® Asset Manager: Growth® Fund on September 30, 1992. The chart shows how the value of your investment would have grown, and also shows how the S&P 500® Index, Lehman Brothers Aggregate Bond Index and Fidelity Asset Manager: Growth Composite Index did over the same period.



3

Understanding Performance

How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. When you sell your shares, they could be worth more or less than what you paid for them.

Annual Report

Market Recap

Investors favored the relative safety typically offered by bond investing during the 12-month period ending September 30, 2002, as a number of negative factors, such as ongoing economic weakness, declining corporate profitability and geopolitical unrest, raised the level of uncertainty about the near-term performance of stocks. Historically, heightened uncertainty has never been a positive influence on stocks, and once again it caused most of the major equity market indexes to decline significantly during the past year. In contrast, investment-grade bonds performed remarkably well.

Stocks: After a year and a half of losses, investors looking for some improvement in the stock market found little relief during the 12-month period. The Standard & Poor's 500SM Index, a benchmark of 500 larger companies, fell 20.49%, while the tech-heavy NASDAQ Composite® Index and the blue-chips' benchmark, the Dow Jones Industrial AverageSM, dropped 21.52% and 12.46%, respectively. Smaller-cap stocks fared slightly better but still proved disappointing, as evidenced by the 9.30% decline in the Russell 2000® Index. A year ago, the outlook for stocks looked particularly dismal in the aftermath of September 11, but the market rebounded surprisingly well as many investors stepped in to scoop up stocks at bargain prices. Expectations for an economic recovery also were heightened after the Federal Reserve Board lowered interest rates in the fourth quarter of 2001 to levels not seen since the 1960s. However, optimism for a sustained market rally was muted by a series of worries that arose in 2002 and lasted throughout the remainder of the period. Among the concerns were slow and uneven economic growth, disappointing corporate earnings, allegations of egregious corporate conduct at many high-profile firms and a series of corporate accounting investigations by the Securities and Exchange Commission that resulted in several earnings restatements, most of which were lower. Also weighing on the market was the possibility of a U.S. war with Iraq and potential future terrorist incidents.

Bonds: Investment-grade bonds sparkled during the one-year period, as the economic recovery stalled and the prospects firmed for a continued favorable interest rate environment. The Lehman Brothers® Aggregate Bond Index, a proxy for taxable-bond performance, returned 8.60%, well ahead of flagging stock markets that incurred yet another round of double-digit declines. Negative sentiment infesting the equity markets boosted demand for bonds, as risk-averse investors sought out safer havens offering some return on their assets. A strong flight to quality in Treasuries and high-quality, higher-yielding government agency securities resulted, as reflected in the stellar performance of the Lehman Brothers U.S. Agency and Treasury indexes, which registered gains of 9.38% and 10.45%, respectively. Meanwhile, the Lehman Brothers Credit Bond Index posted a distant third-place finish, returning 8.19%. While corporates benefited from some economic improvement, eroding investor confidence in the sector, along with widespread credit-quality downgrades and the resulting liquidity crisis, curbed their advances. The Lehman Brothers Mortgage-Backed Securities Index brought up the rear, returning 7.36%. While enjoying lower volatility and reduced prepayment risk for much of the period, mortgage securities retreated during the summer as record-low interest rates triggered another massive refinancing wave, far stronger than the one spawned during the fall of 2001.

Annual Report

Fund Talk: The Manager's Overview

(Portfolio Manager photograph)
An interview with Richard Habermann, Portfolio Manager of Fidelity Asset Manager: Growth

Q. How did the fund perform, Dick?

A. For the 12 months ending September 30, 2002, the fund returned -13.71%. During the same period, the Fidelity Asset Manager: Growth Composite Index fell 12.51%, while the flexible portfolio funds average tracked by Lipper Inc. declined 10.36%.

Q. How did your asset-allocation decisions influence fund results?

A. The fund's positioning in equities contributed to relative performance. After favoring stocks during last year's strong fourth-quarter rally, I scaled back early in 2002 to around a 70% neutral weighting, given continued erosion in business fundamentals and growing concerns about corporate mismanagement. The fund benefited from becoming more cautious on equities, as share prices cratered during the spring and summer. Consistent with this cautious stance, I became more overweighted in bonds. However, within the bond subportfolio, our commitment to high-yield securities hurt performance, particularly versus the Lipper peer average. While high-yield bonds benefited from optimism about a potential economic recovery early in the period, their advances were curbed by weak equity markets, widespread credit-quality downgrades and an influx of supply from fallen investment-grade issuers. Despite strong security selection and reducing the high-yield weighting as market conditions deteriorated, we still lost ground to the all-investment-grade bond allocation seen in our composite index, which benefited from the massive flight to quality in Treasuries. In hindsight, I should have moved more toward higher-quality issuers, but the high coupon income was attractive and I didn't expect high-yield bond prices to decline further from already historically low levels.

Q. What factors drove the equity portion of the fund during the period?

A. It was an extremely challenging year, one where nearly every major sector posted double-digit declines. Even companies with solid fundamentals only modestly outperformed the market. Against that backdrop, the fund's equity investments - managed by Charles Mangum - edged the S&P 500, largely due to favorable sector positioning. Shying away from the troubled technology sector helped the most. The fund benefited from underweighting large-cap hardware stocks, such as IBM and Intel, which suffered from high valuations and persistently weak capital spending. Avoiding many of the landmines within the sector also helped, as did an investment in Dell, which delivered positive returns. Several of our consumer-related holdings, including Coca-Cola, Philip Morris and Alberto-Culver, also fared well, due to their defensive nature. Finally, holding defensive financials with little exposure to the capital markets boosted returns, as did our stake in health care services stock Cardinal Health.

Annual Report

Fund Talk: The Manager's Overview - continued

Q. What moves didn't work as well?

A. Disappointing security selection among weak pharmaceutical stocks hurt. Bristol-Myers Squibb plunged on patent renewal rejections and a poor success rate for late-stage clinical products. Schering-Plough was another notable detractor in the drug space. We also suffered from becoming more aggressive prematurely, as valuations looked attractive and the economy showed signs of firming during the first quarter of 2002. However, a recovery in corporate earnings failed to materialize and investors continued to reward conservative names, while seemingly punishing everything else. As a result, we were underexposed to more stable consumer names, such as Wal-Mart and Procter & Gamble, which continued to outperform the market. Neither stock was held at period end. We also dipped too early into the telecommunications waters. While we benefited from completely avoiding the WorldCom disaster, we owned regional Bell operating companies BellSouth and Verizon, which extended their yearlong declines.

Q. How did the fund's fixed-income investments fare?

A. Favorable interest rate conditions, a sluggish economy and robust demand from shaken equity investors translated into strong absolute returns for our investment-grade holdings, managed by Jeff Moore - who took over for Charlie Morrison in April. Despite good security selection overall and favorable yield-curve positioning, underweighting strong-performing government bonds hurt performance relative to the index. While we gained a yield advantage from emphasizing corporate bonds and mortgage securities, it couldn't outweigh the dramatic rally in Treasury prices. Owning the right mortgage securities was key, as was good credit analysis and diversification within corporates. While it lagged the returns provided by investment-grade bonds, the fund's high-yield holdings also had a positive return and beat their benchmark. Managed by Matt Conti, the high-yield subportfolio avoided several major defaults and credit downgrades. It further benefited from emphasizing higher-quality bonds, while having only limited exposure to speculative securities. Solid security selection in the battered telecom and utilities sectors also helped. Still, the performance of the high-yield market paled in comparison to that of investment-grade securities. Finally, the strategic cash portion of the fund - managed by John Todd - was effective in providing reasonably steady returns to help offset capital market volatility.

Q. What's your outlook?

A. Although sentiment continues to be negative, many stocks are now more reasonably valued on several measures, and companies are entering a period of easier year-over-year earnings comparisons. In addition, the quality of earnings likely has improved. While this represents a more positive environment for higher-risk assets, it's potentially negative for extremely conservative assets, such as Treasuries, which have flourished of late with geopolitical concerns and the risk of war with Iraq weighing heavily on the market.

The views expressed in this report reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

Fund Facts

Goal: maximum total return over the long term through investing in stocks, bonds and short-term and money market instruments

Fund number: 321

Trading symbol: FASGX

Start date: December 30, 1991

Size: as of September 30, 2002, more than $3.1 billion

Manager: Richard Habermann, since 1996; manager, Fidelity Asset Manager: Aggressive, since 1999; Fidelity Asset Manager and Fidelity Asset Manager: Income, since 1996; Fidelity Trend Fund, 1977- 1982; Fidelity Magellan Fund, 1972-1977; joined Fidelity in 1968

3

Dick Habermann expands on his outlook:

"Where we go from here has a lot to do with what happens in the fixed-income markets. Despite sharply lower interest rates and an accommodative Federal Reserve Board, investment-grade corporate bonds have come under extreme pressure in recent months, with household-name issuers selling at very large premiums over Treasuries. While this environment has caused high-yield spreads to widen even further than expected, it has also dragged on equity performance. A stronger economy and improved earnings would be necessary to reverse this effect, as fund flows out of government bonds and into corporates could help alleviate the credit crunch and induce firms to invest and hire again, which could help equities. While continued cost cutting should help boost corporate earnings in 2003, it may take some time for demand-driven earnings to rebound. In the meantime, higher pension costs and other reforms, such as stock option expensing, could put a damper on earnings expectations.

"Rarely have bonds outperformed equities for such a prolonged period of time, as investors have sought safe havens. Our approach is to lean against such trends when they become overstretched and when market valuations seem to have reached extreme levels."

Annual Report

Investment Changes

Top Ten Stocks as of September 30, 2002

% of fund's
net assets

% of fund's net assets
6 months ago

Cardinal Health, Inc.

5.8

5.1

Clear Channel Communications, Inc.

4.0

3.4

American International Group, Inc.

3.5

2.6

General Electric Co.

3.4

3.2

Fannie Mae

2.6

3.1

Citigroup, Inc.

2.5

2.4

Pfizer, Inc.

2.1

1.5

ConocoPhillips

2.0

1.8

Merrill Lynch & Co., Inc.

1.6

0.6

Merck & Co., Inc.

1.6

0.0

29.1

Market Sectors as of September 30, 2002

(stocks only)

% of fund's
net assets

% of fund's net assets
6 months ago

Financials

15.4

15.9

Health Care

14.2

13.2

Consumer Discretionary

7.5

8.4

Industrials

5.9

6.8

Information Technology

5.3

7.9

Consumer Staples

5.2

7.6

Energy

4.9

3.5

Telecommunication Services

4.2

4.7

Utilities

1.6

0.6

Materials

0.5

0.5

Asset Allocation (% of fund's net assets)

As of September 30, 2002* As of March 31, 2002 **

Asset allocations in the pie charts reflect the categorization of assets as defined in the fund's prospectus in effect as of the time periods indicated above. Financial Statement categorizations conform to accounting standards and will differ from the pie chart. Percentages are adjusted for the effect of futures contracts, if applicable.

Annual Report

Investments September 30, 2002

Showing Percentage of Net Assets

Common Stocks - 64.6%

Shares

Value (Note 1)
(000s)

CONSUMER DISCRETIONARY - 7.5%

Auto Components - 0.1%

Dana Corp.

187,800

$ 2,456

Hotels, Restaurants & Leisure - 0.4%

McDonald's Corp.

731,400

12,917

Household Durables - 0.1%

Leggett & Platt, Inc.

110,200

2,181

Media - 5.3%

AOL Time Warner, Inc. (a)

3,496,850

40,913

Clear Channel Communications, Inc. (a)

3,581,709

124,464

Cox Communications, Inc. Class A (a)

67,200

1,652

167,029

Multiline Retail - 0.2%

Target Corp.

241,700

7,135

Specialty Retail - 1.4%

Home Depot, Inc.

769,500

20,084

Limited Brands, Inc.

360,910

5,175

Lowe's Companies, Inc.

400,400

16,577

Office Depot, Inc. (a)

85,800

1,059

42,895

Textiles Apparel & Luxury Goods - 0.0%

Arena Brands Holding Corp. Class B

5,556

107

TOTAL CONSUMER DISCRETIONARY

234,720

CONSUMER STAPLES - 5.2%

Beverages - 1.2%

PepsiCo, Inc.

573,705

21,198

The Coca-Cola Co.

346,250

16,606

37,804

Food & Drug Retailing - 1.8%

Albertson's, Inc.

508,000

12,273

CVS Corp.

1,249,900

31,685

Safeway, Inc. (a)

573,900

12,798

56,756

Food Products - 0.0%

McCormick & Co., Inc. (non-vtg.)

48,300

1,101

Personal Products - 0.8%

Alberto-Culver Co. Class B

272,970

13,384

Common Stocks - continued

Shares

Value (Note 1)
(000s)

CONSUMER STAPLES - continued

Personal Products - continued

Estee Lauder Companies, Inc. Class A

148,100

$ 4,256

Gillette Co.

218,230

6,460

24,100

Tobacco - 1.4%

Philip Morris Companies, Inc.

1,105,200

42,882

TOTAL CONSUMER STAPLES

162,643

ENERGY - 4.9%

Energy Equipment & Services - 0.5%

Cooper Cameron Corp. (a)

60,000

2,506

Diamond Offshore Drilling, Inc.

38,400

766

GlobalSantaFe Corp.

230,643

5,155

Halliburton Co.

272,300

3,515

Transocean, Inc.

233,100

4,848

16,790

Oil & Gas - 4.4%

ChevronTexaco Corp.

480,800

33,295

ConocoPhillips

1,366,121

63,169

Exxon Mobil Corp.

1,249,280

39,852

136,316

TOTAL ENERGY

153,106

FINANCIALS - 15.3%

Banks - 2.9%

Bank of America Corp.

195,900

12,498

Bank One Corp.

298,400

11,160

Comerica, Inc.

175,100

8,443

FleetBoston Financial Corp.

994,700

20,222

PNC Financial Services Group, Inc.

200,900

8,472

Synovus Financial Corp.

313,900

6,473

Wachovia Corp.

661,277

21,617

88,885

Diversified Financials - 8.3%

Citigroup, Inc.

2,626,133

77,865

Fannie Mae

1,354,880

80,670

Goldman Sachs Group, Inc.

85,300

5,632

J.P. Morgan Chase & Co.

359,500

6,827

Common Stocks - continued

Shares

Value (Note 1)
(000s)

FINANCIALS - continued

Diversified Financials - continued

Merrill Lynch & Co., Inc.

1,536,500

$ 50,628

Morgan Stanley

1,144,600

38,779

260,401

Insurance - 4.1%

ACE Ltd.

29,400

871

Allmerica Financial Corp.

354,700

4,256

American International Group, Inc.

1,985,500

108,607

Hartford Financial Services Group, Inc.

252,600

10,357

PartnerRe Ltd.

17,800

858

Travelers Property Casualty Corp.:

Class A

108,517

1,432

Class B (a)

222,955

3,017

129,398

TOTAL FINANCIALS

478,684

HEALTH CARE - 14.2%

Health Care Equipment & Supplies - 0.5%

Baxter International, Inc.

128,900

3,938

C.R. Bard, Inc.

103,800

5,671

Guidant Corp. (a)

229,460

7,414

17,023

Health Care Providers & Services - 5.8%

Cardinal Health, Inc.

2,893,220

179,949

Pharmaceuticals - 7.9%

Bristol-Myers Squibb Co.

1,926,900

45,860

Eli Lilly & Co.

21,000

1,162

Merck & Co., Inc.

1,086,280

49,654

Pfizer, Inc.

2,291,400

66,496

Pharmacia Corp.

429,200

16,687

Schering-Plough Corp.

2,294,080

48,910

Wyeth

544,700

17,321

246,090

TOTAL HEALTH CARE

443,062

INDUSTRIALS - 5.9%

Airlines - 0.1%

AMR Corp. (a)

126,300

528

Common Stocks - continued

Shares

Value (Note 1)
(000s)

INDUSTRIALS - continued

Airlines - continued

Delta Air Lines, Inc.

136,200

$ 1,265

Southwest Airlines Co.

162,900

2,127

3,920

Commercial Services & Supplies - 0.8%

Automatic Data Processing, Inc.

102,200

3,553

ChoicePoint, Inc. (a)

269,667

9,611

First Data Corp.

412,500

11,529

24,693

Industrial Conglomerates - 4.5%

General Electric Co.

4,322,100

106,540

Tyco International Ltd.

2,451,200

34,562

141,102

Machinery - 0.4%

Ingersoll-Rand Co. Ltd. Class A

276,000

9,505

Parker Hannifin Corp.

35,300

1,349

10,854

Road & Rail - 0.1%

Burlington Northern Santa Fe Corp.

107,760

2,578

TOTAL INDUSTRIALS

183,147

INFORMATION TECHNOLOGY - 5.3%

Communications Equipment - 0.6%

CIENA Corp. (a)

652,900

1,939

Cisco Systems, Inc. (a)

995,695

10,435

Comverse Technology, Inc. (a)

483,000

3,376

QUALCOMM, Inc. (a)

76,300

2,107

17,857

Computers & Peripherals - 1.3%

Dell Computer Corp. (a)

1,235,300

29,042

EMC Corp. (a)

677,600

3,097

Hewlett-Packard Co.

575,000

6,710

Sun Microsystems, Inc. (a)

773,800

2,004

40,853

Electronic Equipment & Instruments - 0.1%

Solectron Corp. (a)

1,450,000

3,060

Internet Software & Services - 0.2%

Yahoo!, Inc. (a)

510,900

4,889

Common Stocks - continued

Shares

Value (Note 1)
(000s)

INFORMATION TECHNOLOGY - continued

Semiconductor Equipment & Products - 1.5%

Altera Corp. (a)

249,600

$ 2,164

Analog Devices, Inc. (a)

261,500

5,152

Applied Materials, Inc. (a)

177,700

2,052

Intel Corp.

754,500

10,480

KLA-Tencor Corp. (a)

139,800

3,906

LAM Research Corp. (a)

187,875

1,672

Linear Technology Corp.

293,700

6,085

Micron Technology, Inc. (a)

491,400

6,079

Novellus Systems, Inc. (a)

48,000

999

Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR (a)

507,980

3,226

United Microelectronics Corp. sponsored ADR (a)

958,640

3,384

Xilinx, Inc. (a)

127,000

2,011

47,210

Software - 1.6%

Adobe Systems, Inc.

218,500

4,173

Computer Associates International, Inc.

726,500

6,974

Microsoft Corp. (a)

789,600

34,537

Network Associates, Inc. (a)

131,000

1,393

VERITAS Software Corp. (a)

208,200

3,054

50,131

TOTAL INFORMATION TECHNOLOGY

164,000

MATERIALS - 0.5%

Chemicals - 0.1%

E.I. du Pont de Nemours & Co.

41,900

1,511

Monsanto Co.

66,292

1,014

2,525

Metals & Mining - 0.4%

Alcoa, Inc.

643,300

12,416

TOTAL MATERIALS

14,941

TELECOMMUNICATION SERVICES - 4.2%

Diversified Telecommunication Services - 4.1%

AT&T Corp.

935,600

11,237

BellSouth Corp.

1,257,300

23,084

Qwest Communications International, Inc. (a)

5,706,600

13,011

Common Stocks - continued

Shares

Value (Note 1)
(000s)

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

SBC Communications, Inc.

1,766,100

$ 35,499

Verizon Communications, Inc.

1,587,600

43,564

126,395

Wireless Telecommunication Services - 0.1%

Nextel Communications, Inc. Class A (a)

522,800

3,947

TOTAL TELECOMMUNICATION SERVICES

130,342

UTILITIES - 1.6%

Electric Utilities - 1.6%

AES Corp. (a)

308,600

775

FirstEnergy Corp.

725,500

21,685

Southern Co.

439,600

12,652

TXU Corp.

376,600

15,708

50,820

TOTAL COMMON STOCKS

(Cost $2,690,327)

2,015,465

Preferred Stocks - 0.1%

Convertible Preferred Stocks - 0.0%

FINANCIALS - 0.0%

Diversified Financials - 0.0%

AES Trust VII $3.00

167,400

1,824

Nonconvertible Preferred Stocks - 0.1%

FINANCIALS - 0.1%

Insurance - 0.1%

American Annuity Group Capital Trust II $88.75

1,800

1,882

TOTAL PREFERRED STOCKS

(Cost $4,208)

3,706

Corporate Bonds - 22.3%

Principal
Amount (000s)

Value (Note 1)
(000s)

Convertible Bonds - 2.2%

CONSUMER DISCRETIONARY - 0.3%

Media - 0.2%

EchoStar Communications Corp.:

4.875% 1/1/07

$ 5,180

$ 3,937

5.75% 5/15/08 (g)

2,990

2,243

6,180

Specialty Retail - 0.1%

Gap, Inc. 5.75% 3/15/09 (g)

3,000

2,946

TOTAL CONSUMER DISCRETIONARY

9,126

HEALTH CARE - 0.4%

Biotechnology - 0.4%

Affymetrix, Inc. 4.75% 2/15/07

13,480

10,700

INFORMATION TECHNOLOGY - 1.0%

Communications Equipment - 0.4%

CIENA Corp. 3.75% 2/1/08

3,340

1,929

Juniper Networks, Inc. 4.75% 3/15/07

14,032

9,326

ONI Systems Corp. 5% 10/15/05

3,110

2,316

13,571

Electronic Equipment & Instruments - 0.3%

Sanmina-SCI Corp. 4.25% 5/1/04

10,010

8,684

Semiconductor Equipment & Products - 0.3%

Agere Systems, Inc. 6.5% 12/15/09

1,754

842

ASML Holding NV 4.25% 11/30/04 (g)

3,070

2,253

Atmel Corp. 0% 5/23/21

1,910

256

Teradyne, Inc. 3.75% 10/15/06

2,940

2,297

Vitesse Semiconductor Corp. 4% 3/15/05

5,710

4,111

9,759

Software - 0.0%

BEA Systems, Inc. 4% 12/15/06

480

370

TOTAL INFORMATION TECHNOLOGY

32,384

TELECOMMUNICATION SERVICES - 0.5%

Wireless Telecommunication Services - 0.5%

Nextel Communications, Inc.:

5.25% 1/15/10

8,475

5,731

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Convertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Nextel Communications, Inc.: - continued

6% 6/1/11 (g)

$ 3,260

$ 2,351

6% 6/1/11

10,980

7,919

16,001

TOTAL CONVERTIBLE BONDS

68,211

Nonconvertible Bonds - 20.1%

CONSUMER DISCRETIONARY - 6.3%

Auto Components - 0.3%

DaimlerChrysler North America Holding Corp. 7.2% 9/1/09

195

213

Dana Corp. 6.5% 3/1/09

670

570

Delco Remy International, Inc. 11% 5/1/09

1,250

838

Dura Operating Corp. 8.625% 4/15/12

980

965

Goodyear Tire & Rubber Co. 6.625% 12/1/06

510

444

Intermet Corp. 9.75% 6/15/09

2,115

1,988

Lear Corp. 8.11% 5/15/09

3,055

3,177

Stoneridge, Inc. 11.5% 5/1/12

1,125

1,139

9,334

Hotels, Restaurants & Leisure - 2.0%

Alliance Gaming Corp. 10% 8/1/07

2,315

2,419

Bally Total Fitness Holding Corp. 9.875% 10/15/07

3,720

3,274

Boyd Gaming Corp. 9.25% 10/1/03

1,880

1,955

Buffets, Inc. 11.25% 7/15/10 (g)

1,765

1,765

Capstar Hotel Co. 8.75% 8/15/07

195

158

Chumash Casino & Resort Enterprise 9% 7/15/10 (g)

1,190

1,232

Circus Circus Enterprises, Inc.:

6.45% 2/1/06

710

692

6.75% 7/15/03

440

441

Coast Hotels & Casinos, Inc. 9.5% 4/1/09

1,250

1,313

Courtyard by Marriott II LP/Courtyard II Finance Co. 10.75% 2/1/08

2,285

2,296

Domino's, Inc. 10.375% 1/15/09

2,340

2,504

Extended Stay America, Inc. 9.875% 6/15/11

950

922

Friendly Ice Cream Corp. 10.5% 12/1/07

2,380

2,297

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Hotels, Restaurants & Leisure - continued

Harrah's Operating Co., Inc. 7.875% 12/15/05

$ 1,010

$ 1,067

Herbst Gaming, Inc. 10.75% 9/1/08

1,570

1,629

Hilton Hotels Corp. 7.625% 5/15/08

1,110

1,127

HMH Properties, Inc. 7.875% 8/1/05

1,820

1,747

Hollywood Park, Inc. 9.25% 2/15/07

1,045

920

ITT Corp.:

6.75% 11/15/05

1,090

1,068

7.375% 11/15/15

2,430

2,211

Mandalay Resort Group 10.25% 8/1/07

1,515

1,629

MGM Mirage, Inc. 8.375% 2/1/11

195

202

Mirage Resorts, Inc. 7.25% 10/15/06

1,510

1,541

Mohegan Tribal Gaming Authority:

8% 4/1/12

2,050

2,091

8.125% 1/1/06

3,435

3,538

Park Place Entertainment Corp.:

7.875% 12/15/05

2,130

2,173

7.875% 3/15/10

1,400

1,421

9.375% 2/15/07

1,410

1,505

Penn National Gaming, Inc. 8.875% 3/15/10

730

726

Premier Parks, Inc. 0% 4/1/08 (e)

2,095

1,718

Resorts International Hotel & Casino, Inc. 11.5% 3/15/09

3,030

2,636

Royal Caribbean Cruises Ltd.:

7.25% 8/15/06

235

200

8.25% 4/1/05

160

144

8.75% 2/2/11

315

269

Starwood Hotels & Resorts Worldwide, Inc. 7.375% 5/1/07 (g)

1,130

1,099

Sun International Hotels Ltd./Sun International North America, Inc.:

8.875% 8/15/11

3,435

3,435

yankee 8.625% 12/15/07

680

683

Tricon Global Restaurants, Inc.:

8.5% 4/15/06

2,385

2,516

8.875% 4/15/11

2,300

2,519

Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 (g)

3,140

3,077

64,159

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Household Durables - 0.7%

Beazer Homes USA, Inc. 8.375% 4/15/12

$ 805

$ 803

Champion Enterprises, Inc. 11.25% 4/15/07 (g)

1,385

1,004

D.R. Horton, Inc. 8% 2/1/09

3,810

3,734

Juno Lighting, Inc. 11.875% 7/1/09

2,315

2,269

K. Hovnanian Enterprises, Inc. 8.875% 4/1/12

3,040

2,736

Kaufman & Broad Home Corp. 7.75% 10/15/04

760

760

KB Home 8.625% 12/15/08

1,270

1,257

Kinetic Concepts, Inc. 9.625% 11/1/07

2,070

1,946

Ryland Group, Inc.:

8% 8/15/06

630

630

8.25% 4/1/08

455

455

9.75% 9/1/10

1,510

1,623

Standard Pacific Corp. 9.25% 4/15/12

925

879

WCI Communities, Inc. 10.625% 2/15/11

3,655

3,545

21,641

Internet & Catalog Retail - 0.1%

Amazon.com, Inc. 0% 5/1/08 (e)

1,940

1,804

J. Crew Group, Inc. 0% 10/15/08 (e)

3,390

1,695

3,499

Leisure Equipment & Products - 0.1%

Hasbro, Inc.:

5.6% 11/1/05

1,460

1,358

6.15% 7/15/08

520

478

The Hockey Co. 11.25% 4/15/09

1,415

1,358

3,194

Media - 2.1%

AMC Entertainment, Inc.:

9.5% 3/15/09

730

642

9.875% 2/1/12

2,660

2,367

American Media Operations, Inc. 10.25% 5/1/09

2,620

2,725

AOL Time Warner, Inc.:

6.15% 5/1/07

1,560

1,441

7.625% 4/15/31

2,360

1,968

7.7% 5/1/32

2,165

1,835

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

British Sky Broadcasting Group PLC (BSkyB) yankee:

6.875% 2/23/09

$ 825

$ 796

7.3% 10/15/06

770

766

8.2% 7/15/09

1,070

1,086

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.:

0% 4/1/11 (e)

1,330

612

0% 5/15/11 (e)

1,670

551

8.25% 4/1/07

1,720

1,066

8.625% 4/1/09

2,050

1,271

9.625% 11/15/09

1,380

856

10% 4/1/09

1,215

753

Cinemark USA, Inc. 9.625% 8/1/08

3,275

3,111

Comcast Cable Communications, Inc.:

6.2% 11/15/08

305

282

6.375% 1/30/06

565

542

6.75% 1/30/11

305

284

6.875% 6/15/09

1,380

1,304

8.125% 5/1/04

190

188

Continental Cablevision, Inc.:

8.3% 5/15/06

870

837

9% 9/1/08

900

873

Corus Entertainment, Inc. 8.75% 3/1/12

980

990

CSC Holdings, Inc.:

7.625% 4/1/11

940

747

7.875% 12/15/07

1,170

989

9.875% 4/1/23

1,435

1,062

EchoStar DBS Corp.:

9.125% 1/15/09 (g)

390

367

9.25% 2/1/06

6,945

6,667

9.375% 2/1/09

465

446

Granite Broadcasting Corp.:

8.875% 5/15/08

300

254

10.375% 5/15/05

310

264

Insight Communications, Inc. 0% 2/15/11 (e)

3,675

1,286

Insight Midwest LP/Insight Capital, Inc. 10.5% 11/1/10

1,340

1,206

Lamar Media Corp. 9.25% 8/15/07

1,040

1,071

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

LBI Media, Inc. 10.125% 7/15/12 (g)

$ 1,605

$ 1,621

Lenfest Communications, Inc.:

8.375% 11/1/05

150

147

10.5% 6/15/06

1,835

1,807

Mediacom Broadband LLC/Mediacom Broadband Corp. 11% 7/15/13

1,990

1,851

News America Holdings, Inc.:

7.7% 10/30/25

950

901

8% 10/17/16

720

779

PanAmSat Corp.:

6% 1/15/03

290

287

6.125% 1/15/05

1,090

1,003

Pegasus Satellite Communications, Inc.:

0% 3/1/07 (e)

4,180

1,170

12.375% 8/1/06

830

365

Radio One, Inc. 8.875% 7/1/11

2,060

2,153

Regal Cinemas Corp. 9.375% 2/1/12

1,520

1,550

Satelites Mexicanos SA de CV 6.2569% 6/30/04 (g)(j)

2,034

1,729

Shaw Communications, Inc.:

7.2% 12/15/11

800

702

8.25% 4/11/10

700

664

Sinclair Broadcast Group, Inc. 8.75% 12/15/07

1,250

1,281

Spanish Broadcasting System, Inc. 9.625% 11/1/09

1,130

1,144

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

465

463

TV Azteca SA de CV yankee 10.5% 2/15/07

1,615

1,510

Yell Finance BV:

0% 8/1/11 (e)

2,190

1,336

10.75% 8/1/11

1,590

1,606

65,574

Multiline Retail - 0.4%

Dillard's, Inc.:

6.125% 11/1/03

2,545

2,526

6.39% 8/1/03

2,470

2,433

Federated Department Stores, Inc. 6.79% 7/15/27

890

947

JCPenney Co., Inc. 9% 8/1/12 (g)

3,258

3,111

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Multiline Retail - continued

Saks, Inc.:

7.25% 12/1/04

$ 190

$ 186

8.25% 11/15/08

870

800

9.875% 10/1/11

1,412

1,370

11,373

Specialty Retail - 0.5%

Asbury Automotive Group, Inc. 9% 6/15/12

1,320

1,188

AutoNation, Inc. 9% 8/1/08

1,265

1,290

Gap, Inc.:

5.625% 5/1/03

4,690

4,596

9.9% 12/15/05

705

680

Hollywood Entertainment Corp. 10.625% 8/15/04

1,975

1,995

Michaels Stores, Inc. 9.25% 7/1/09

1,030

1,092

PETCO Animal Supplies, Inc. 10.75% 11/1/11

510

541

United Auto Group, Inc. 9.625% 3/15/12 (g)

1,430

1,423

United Rentals, Inc.:

8.8% 8/15/08

800

648

9% 4/1/09

190

154

9.25% 1/15/09

1,700

1,411

15,018

Textiles Apparel & Luxury Goods - 0.1%

Russell Corp. 9.25% 5/1/10 (g)

1,620

1,669

The William Carter Co. 10.875% 8/15/11

1,470

1,610

3,279

TOTAL CONSUMER DISCRETIONARY

197,071

CONSUMER STAPLES - 0.8%

Beverages - 0.2%

Canandaigua Brands, Inc. 8.625% 8/1/06

490

517

Constellation Brands, Inc. 8.125% 1/15/12

2,500

2,544

Cott Beverages, Inc. 8% 12/15/11

2,070

2,122

5,183

Food & Drug Retailing - 0.2%

Delhaize America, Inc.:

7.375% 4/15/06

150

141

8.125% 4/15/11

150

137

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

CONSUMER STAPLES - continued

Food & Drug Retailing - continued

Great Atlantic & Pacific Tea, Inc. 7.75% 4/15/07

$ 2,555

$ 1,865

Kroger Co. 6.8% 4/1/11

510

560

Rite Aid Corp.:

6.125% 12/15/08 (g)

745

410

6.875% 8/15/13

2,595

1,505

7.125% 1/15/07

1,495

1,017

7.7% 2/15/27

765

428

6,063

Food Products - 0.3%

Corn Products International, Inc. 8.25% 7/15/07

715

694

Dean Foods Co.:

6.75% 6/15/05

1,450

1,443

6.9% 10/15/17

1,930

1,708

8.15% 8/1/07

1,000

1,015

Del Monte Corp. 9.25% 5/15/11

3,435

3,383

Dole Food Co., Inc.:

6.375% 10/1/05

150

140

7.25% 5/1/09

1,080

950

9,333

Tobacco - 0.1%

Philip Morris Companies, Inc. 7% 7/15/05

2,000

2,194

RJ Reynolds Tobacco Holdings, Inc.:

6.5% 6/1/07

945

996

7.25% 6/1/12

400

427

7.75% 5/15/06

320

354

3,971

TOTAL CONSUMER STAPLES

24,550

ENERGY - 1.0%

Energy Equipment & Services - 0.3%

DI Industries, Inc. 8.875% 7/1/07

2,715

2,769

Grant Prideco, Inc. 9.625% 12/1/07

1,230

1,292

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

ENERGY - continued

Energy Equipment & Services - continued

Key Energy Services, Inc.:

8.375% 3/1/08

$ 2,750

$ 2,860

14% 1/15/09

682

774

7,695

Oil & Gas - 0.7%

Barrett Resources Corp. 7.55% 2/1/07

115

108

Chesapeake Energy Corp.:

7.875% 3/15/04

2,860

2,939

8.125% 4/1/11

420

420

8.375% 11/1/08

1,295

1,301

9% 8/15/12 (g)

780

800

Clark Refining & Marketing, Inc.:

8.625% 8/15/08

320

272

8.875% 11/15/07

805

652

Encore Acquisition Co. 8.375% 6/15/12 (g)

380

384

Forest Oil Corp.:

8% 6/15/08

1,505

1,550

8% 12/15/11

480

493

Nexen, Inc. 7.875% 3/15/32

900

966

Nuevo Energy Co. 9.5% 6/1/08

1,120

1,120

Petro-Canada 7% 11/15/28

520

548

Plains Exploration & Production Co. LP 8.75% 7/1/12 (g)

1,600

1,600

Pogo Producing Co. 8.25% 4/15/11

2,730

2,867

Swift Energy Co. 9.375% 5/1/12

455

437

Teekay Shipping Corp. 8.875% 7/15/11

4,100

4,244

The Coastal Corp.:

6.2% 5/15/04

200

158

7.75% 10/15/35

45

28

9.625% 5/15/12

535

393

Western Oil Sands, Inc. 8.375% 5/1/12

1,620

1,612

22,892

TOTAL ENERGY

30,587

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - 3.2%

Banks - 0.5%

Capital One Bank:

6.5% 7/30/04

$ 295

$ 279

6.875% 2/1/06

105

99

Chevy Chase Savings Bank FSB 9.25% 12/1/08

1,020

1,020

Den Danske Bank AS 6.375% 6/15/08 (g)(j)

1,590

1,729

FleetBoston Financial Corp. 7.25% 9/15/05

650

711

MBNA Corp. 6.25% 1/17/07

315

326

PNC Funding Corp. 5.75% 8/1/06

505

538

Royal Bank of Scotland Group PLC:

7.648% 12/31/49 (j)

500

554

7.816% 11/29/49

950

1,068

9.118% 3/31/49

235

296

Sovereign Bancorp, Inc.:

8.625% 3/15/04

4,780

4,941

10.5% 11/15/06

2,480

2,765

Western Financial Bank 9.625% 5/15/12

2,015

1,914

16,240

Diversified Financials - 2.0%

ABN AMRO NA Holding Pfd. Capital Repackage Trust I yankee 6.523% 12/29/49 (f)(g)

1,050

1,063

Ahmanson Capital Trust I 8.36% 12/1/26 (g)

800

875

American Airlines pass thru trust certificate 7.8% 4/1/08

1,200

1,080

American Gen. Finance Corp. 5.875% 7/14/06

1,010

1,085

BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08

2,635

2,675

Capital One Financial Corp.:

7.25% 12/1/03

535

487

7.25% 5/1/06

1,910

1,647

8.75% 2/1/07

390

332

CIT Group, Inc. 7.75% 4/2/12

400

435

Citigroup, Inc.:

5.625% 8/27/12

650

678

7.25% 10/1/10

2,200

2,521

CMS Energy X-TRAS pass thru trust I 7% 1/15/05

300

231

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Continental Airlines, Inc. pass thru trust certificate:

6.9% 1/2/17

$ 476

$ 362

6.954% 2/2/11

59

38

7.033% 6/15/11

718

467

8.307% 4/2/18

2,689

2,125

8.312% 10/2/12

161

108

Countrywide Home Loans, Inc. 5.5% 8/1/06

780

819

Dana Credit Corp. 7.25% 12/6/02 (g)

2,155

2,123

Delta Air Lines, Inc. pass thru trust certificate:

7.57% 11/18/10

380

405

7.711% 9/18/11

245

228

Deutsche Telekom International Finance BV 8.25% 6/15/05

400

429

El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11

2,750

2,626

Ford Motor Credit Co.:

5.8% 1/12/09

2,445

2,208

7.375% 10/28/09

450

428

GATX Financial Corp. 8.875% 6/1/09

1,610

1,320

General Electric Capital Corp.:

4.625% 9/15/09

800

808

6% 6/15/12

590

636

General Motors Acceptance Corp. 6.875% 9/15/11

2,085

2,032

Goldman Sachs Group, Inc.:

5.7% 9/1/12

485

495

6.6% 1/15/12

400

439

Household Finance Corp.:

6.375% 10/15/11

1,100

1,023

8% 5/9/05

205

214

HSBC Capital Funding LP 9.547% 12/31/49 (f)(g)

1,045

1,265

IOS Capital, Inc. 9.75% 6/15/04

2,850

2,879

J.P. Morgan Chase & Co. 6.625% 3/15/12

650

707

John Hancock Global Funding II 5.625% 6/27/06 (g)

600

645

John Q. Hammons Hotels LP/John Q. Hammons Hotels Corp. III 8.875% 5/15/12

1,290

1,238

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Lehman Brothers Holdings, Inc. 6.625% 1/18/12

$ 450

$ 493

Meditrust Exercisable Put Options Securities Trust 7.114% 8/15/04 (g)

200

199

Millennium America, Inc. 9.25% 6/15/08

235

241

Morgan Stanley 6.6% 4/1/12

1,140

1,240

NiSource Finance Corp.:

7.625% 11/15/05

190

194

7.875% 11/15/10

2,295

2,359

Northwest Airlines pass thru trust certificate:

7.691% 4/1/17

120

106

9.179% 10/1/11

484

387

Pemex Project Funding Master Trust 9.125% 10/13/10

300

320

Petronas Capital Ltd. 7% 5/22/12 (g)

1,420

1,580

Powergen US Funding LLC 4.5% 10/15/04

480

495

Prime Property Funding II 6.25% 5/15/07

370

395

Qwest Capital Funding, Inc.:

5.875% 8/3/04

820

574

7% 8/3/09

1,035

471

7.25% 2/15/11

470

216

7.75% 8/15/06

1,665

891

Sears Roebuck Acceptance Corp. 6.7% 4/15/12

520

551

SESI LLC 8.875% 5/15/11

1,630

1,622

Sprint Capital Corp.:

6% 1/15/07

780

536

6.875% 11/15/28

400

231

8.75% 3/15/32

560

375

Stone Container Finance Co. yankee 11.5% 8/15/06 (g)

875

919

TIAA Global Markets, Inc. 5% 3/1/07 (g)

345

370

TXU Eastern Funding 6.75% 5/15/09

1,115

1,070

U.S. West Capital Funding, Inc. 6.875% 7/15/28

1,620

632

UBS Preferred Funding Trust 1 8.622% 12/29/49

900

1,076

Verizon Global Funding Corp.:

6.125% 6/15/07

1,000

1,041

7.375% 9/1/12

385

405

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Verizon Wireless Capital LLC 5.375% 12/15/06 (g)

$ 1,120

$ 1,054

Xerox Capital (Europe) PLC 5.875% 5/15/04

3,630

2,795

Xerox Credit Corp. 6.1% 12/16/03

805

676

62,690

Insurance - 0.1%

Hartford Financial Services Group, Inc. 4.7% 9/1/07

145

149

Principal Life Global Funding I:

5.125% 6/28/07 (g)

1,600

1,672

6.25% 2/15/12 (g)

360

387

2,208

Real Estate - 0.6%

AvalonBay Communities, Inc. 5% 8/1/07

395

405

BRE Properties, Inc. 5.95% 3/15/07

895

953

Camden Property Trust 5.875% 6/1/07

455

478

CenterPoint Properties Trust 6.75% 4/1/05

530

572

Corrections Corp. of America 9.875% 5/1/09 (g)

430

444

EOP Operating LP:

6.75% 2/15/08

570

625

6.75% 2/15/12

215

234

7.75% 11/15/07

1,050

1,201

Gables Realty LP 5.75% 7/15/07

200

209

iStar Financial, Inc. 8.75% 8/15/08

2,120

2,120

LNR Property Corp.:

9.375% 3/15/08

2,170

2,148

10.5% 1/15/09

210

214

Mack-Cali Realty LP:

7% 3/15/04

325

343

7.25% 3/15/09

250

280

Meditrust Corp. 7.82% 9/10/26

3,910

3,920

MeriStar Hospitality Corp. 9% 1/15/08

1,490

1,326

Senior Housing Properties Trust 8.625% 1/15/12

2,350

2,315

17,787

TOTAL FINANCIALS

98,925

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

HEALTH CARE - 0.8%

Health Care Equipment & Supplies - 0.0%

Sybron Dental Specialties, Inc. 8.125% 6/15/12 (g)

$ 345

$ 342

Health Care Providers & Services - 0.6%

Alderwoods Group, Inc.:

11% 1/2/07

702

697

12.25% 1/2/09

1,320

1,241

Columbia/HCA Healthcare Corp. 6.73% 7/15/45

1,890

1,916

Hanger Orthopedic Group, Inc. 10.375% 2/15/09

585

623

HCA, Inc. 7.875% 2/1/11

400

428

HealthSouth Corp.:

6.875% 6/15/05

2,405

1,756

7% 6/15/08

785

510

Owen & Minor, Inc. 8.5% 7/15/11

2,110

2,194

PacifiCare Health Systems, Inc. 10.75% 6/1/09

3,410

3,325

Rotech Healthcare, Inc. 9.5% 4/1/12 (g)

690

635

Triad Hospitals, Inc. 8.75% 5/1/09

2,075

2,179

Vanguard Health Systems, Inc. 9.75% 8/1/11

3,790

3,828

19,332

Pharmaceuticals - 0.2%

aaiPharma, Inc. 11% 4/1/10

3,550

3,124

Biovail Corp. 7.875% 4/1/10

1,870

1,851

4,975

TOTAL HEALTH CARE

24,649

INDUSTRIALS - 1.5%

Aerospace & Defense - 0.2%

Alliant Techsystems, Inc. 8.5% 5/15/11

1,485

1,570

BE Aerospace, Inc.:

8% 3/1/08

530

376

9.5% 11/1/08

740

566

Raytheon Co. 8.2% 3/1/06

600

657

Sequa Corp.:

8.875% 4/1/08

1,725

1,544

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Aerospace & Defense - continued

Sequa Corp.: - continued

9% 8/1/09

$ 470

$ 425

Transdigm, Inc. 10.375% 12/1/08

540

556

5,694

Airlines - 0.1%

Continental Airlines, Inc. 8% 12/15/05

280

140

Delta Air Lines, Inc.:

6.65% 3/15/04

1,265

886

7.7% 12/15/05

660

436

8.3% 12/15/29

1,005

452

8.54% 1/2/07

427

321

10.14% 8/14/12

280

204

Northwest Airlines, Inc.:

7.625% 3/15/05

1,250

688

9.875% 3/15/07

550

297

3,424

Building Products - 0.0%

Nortek, Inc. 9.125% 9/1/07

1,040

1,045

Commercial Services & Supplies - 0.4%

Allied Waste North America, Inc.:

7.375% 1/1/04

1,390

1,376

7.625% 1/1/06

2,000

1,900

7.875% 1/1/09

670

623

10% 8/1/09

1,710

1,573

Browning-Ferris Industries, Inc. 6.375% 1/15/08

2,080

1,810

Iron Mountain, Inc. 8.75% 9/30/09

3,000

3,015

JohnsonDiversey, Inc. 9.625% 5/15/12 (g)

1,495

1,480

11,777

Industrial Conglomerates - 0.3%

Tyco International Group SA:

6.125% 11/1/08

210

172

6.25% 6/15/13

865

826

6.875% 1/15/29

470

360

yankee:

5.8% 8/1/06

3,515

2,953

5.875% 11/1/04

470

418

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Industrial Conglomerates - continued

Tyco International Group SA: - continued

yankee:

6.375% 6/15/05

$ 315

$ 272

6.375% 2/15/06

1,985

1,707

6.375% 10/15/11

1,180

968

6.75% 2/15/11

2,195

1,811

9,487

Machinery - 0.5%

AGCO Corp.:

8.5% 3/15/06

260

255

9.5% 5/1/08

1,530

1,607

Dresser, Inc. 9.375% 4/15/11

3,025

2,919

Dunlop Standard Aerospace Holdings PLC 11.875% 5/15/09

5,015

5,090

Navistar International Corp. 9.375% 6/1/06

1,280

1,235

NMHG Holding Co. 10% 5/15/09

880

889

Terex Corp.:

Series D, 8.875% 4/1/08

650

621

8.875% 4/1/08

1,600

1,520

TriMas Corp. 9.875% 6/15/12 (g)

1,370

1,384

15,520

Road & Rail - 0.0%

TFM SA de CV 12.5% 6/15/12 (g)

860

836

TOTAL INDUSTRIALS

47,783

INFORMATION TECHNOLOGY - 1.4%

Communications Equipment - 0.2%

Avaya, Inc. 11.125% 4/1/09

2,595

1,635

L-3 Communications Corp. 8% 8/1/08

1,710

1,778

Lucent Technologies, Inc.:

6.5% 1/15/28

750

229

7.25% 7/15/06

1,135

482

Motorola, Inc.:

6.5% 11/15/28

335

254

8% 11/1/11

345

341

4,719

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Computers & Peripherals - 0.1%

Compaq Computer Corp. 7.65% 8/1/05

$ 490

$ 541

Hewlett-Packard Co. 5.5% 7/1/07

525

543

NCR Corp. 7.125% 6/15/09 (g)

765

826

Seagate Technology HDD Holdings 8% 5/15/09 (g)

1,820

1,711

3,621

Electronic Equipment & Instruments - 0.5%

ChipPAC International Ltd. 12.75% 8/1/09

1,055

1,034

Fisher Scientific International, Inc.:

8.125% 5/1/12

1,295

1,295

9% 2/1/08

3,760

3,892

Flextronics International Ltd.:

9.875% 7/1/10

1,015

1,030

yankee 8.75% 10/15/07

3,605

3,515

Ingram Micro, Inc. 9.875% 8/15/08

1,630

1,663

Millipore Corp. 7.5% 4/1/07

1,030

968

Solectron Corp.:

7.375% 3/1/06

2,150

1,677

9.625% 2/15/09

2,160

1,728

16,802

IT Consulting & Services - 0.2%

Anteon Corp. 12% 5/15/09

2,346

2,487

Unisys Corp.:

7.875% 4/1/08

700

672

8.125% 6/1/06

2,000

1,945

5,104

Office Electronics - 0.1%

Xerox Corp.:

5.5% 11/15/03

1,305

1,096

7.15% 8/1/04

1,020

785

9.75% 1/15/09 (g)

1,210

956

2,837

Semiconductor Equipment & Products - 0.3%

Amkor Technology, Inc. 9.25% 5/1/06

1,970

1,340

Fairchild Semiconductor Corp.:

10.375% 10/1/07

2,955

3,014

10.5% 2/1/09

440

453

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Semiconductor Equipment & Products - continued

Micron Technology, Inc. 6.5% 9/30/05 (h)(k)

$ 5,000

$ 4,275

ON Semiconductor Corp./Semiconductor Components Industries LLC 12% 5/15/08 (g)

1,240

781

9,863

Software - 0.0%

Computer Associates International, Inc. 6.375% 4/15/05

1,295

1,114

TOTAL INFORMATION TECHNOLOGY

44,060

MATERIALS - 2.3%

Chemicals - 0.7%

Berry Plastics Corp. 10.75% 7/15/12

2,535

2,611

Foamex LP/Foamex Capital Corp. 10.75% 4/1/09 (g)

1,930

1,718

Georgia Gulf Corp. 10.375% 11/1/07

1,545

1,653

Huntsman International LLC 9.875% 3/1/09 (g)

2,130

2,130

IMC Global, Inc.:

6.55% 1/15/05

1,215

1,148

7.3% 1/15/28

1,170

901

7.375% 8/1/18

240

173

7.625% 11/1/05

625

591

10.875% 6/1/08

400

432

11.25% 6/1/11

440

475

International Specialty Holdings, Inc. 10.625% 12/15/09

2,090

1,881

Lyondell Chemical Co.:

9.625% 5/1/07

1,370

1,260

9.875% 5/1/07

400

370

10.875% 5/1/09

795

652

Methanex Corp. yankee 7.75% 8/15/05

2,430

2,406

OM Group, Inc. 9.25% 12/15/11

2,550

2,512

20,913

Containers & Packaging - 0.6%

Applied Extrusion Technologies, Inc. 10.75% 7/1/11

2,665

1,945

Graphic Packaging Corp. 8.625% 2/15/12

450

459

Jefferson Smurfit Corp. U.S. 8.25% 10/1/12 (g)

1,560

1,552

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

MATERIALS - continued

Containers & Packaging - continued

Owens-Brockway Glass Container, Inc. 8.875% 2/15/09

$ 2,165

$ 2,170

Owens-Illinois, Inc.:

7.15% 5/15/05

2,015

1,844

7.35% 5/15/08

390

339

7.5% 5/15/10

460

391

7.8% 5/15/18

3,360

2,688

7.85% 5/15/04

1,290

1,226

8.1% 5/15/07

845

777

Riverwood International Corp.:

10.625% 8/1/07

780

796

10.875% 4/1/08

2,500

2,500

Silgan Holdings, Inc. 9% 6/1/09 (g)

1,095

1,133

17,820

Metals & Mining - 0.6%

AK Steel Corp. 7.875% 2/15/09

1,570

1,541

Falconbridge Ltd. 7.35% 6/5/12

740

792

Freeport-McMoRan Copper & Gold, Inc. 7.5% 11/15/06

1,945

1,751

Luscar Coal Ltd. 9.75% 10/15/11

730

774

Oregon Steel Mills, Inc. 10% 7/15/09 (g)

2,420

2,420

P&L Coal Holdings Corp. 9.625% 5/15/08

7,670

8,034

Phelps Dodge Corp.:

8.75% 6/1/11

2,220

2,220

9.5% 6/1/31

1,820

1,784

Steel Dynamics, Inc. 9.5% 3/15/09 (g)

870

866

20,182

Paper & Forest Products - 0.4%

Boise Cascade Corp. 7.68% 3/29/06

705

725

Georgia-Pacific Group:

7.5% 5/15/06

1,700

1,411

8.125% 5/15/11

2,135

1,708

8.875% 5/15/31

2,740

1,973

9.625% 3/15/22

640

563

Louisiana-Pacific Corp.:

8.5% 8/15/05

690

693

10.875% 11/15/08

470

495

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

MATERIALS - continued

Paper & Forest Products - continued

Stone Container Corp.:

8.375% 7/1/12 (g)

$ 1,990

$ 1,980

9.75% 2/1/11

3,145

3,287

12,835

TOTAL MATERIALS

71,750

TELECOMMUNICATION SERVICES - 1.2%

Diversified Telecommunication Services - 0.7%

American Cellular Corp. 9.5% 10/15/09

805

151

AT&T Corp.:

6% 3/15/09

375

338

6.5% 3/15/29

2,915

2,419

Centennial Cellular Operating Co. LLC/Centennial Finance Corp. 10.75% 12/15/08

3,605

1,803

Cincinnati Bell Telephone Co. 6.3% 12/1/28

1,190

690

Citizens Communications Co.:

8.5% 5/15/06

700

672

9.25% 5/15/11

435

431

France Telecom SA:

8.7% 3/1/06

300

319

9.25% 3/1/11

200

218

Koninklijke KPN NV yankee:

8% 10/1/10

1,100

1,216

8.375% 10/1/30

250

277

Qwest Corp. 8.875% 3/15/12 (g)

1,620

1,409

Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06

1,385

1,388

Telefonica Europe BV 7.75% 9/15/10

450

486

Telefonos de Mexico SA de CV 8.25% 1/26/06

1,310

1,367

Teleglobe Canada, Inc. yankee:

7.2% 7/20/09 (d)

440

11

7.7% 7/20/29 (d)

85

2

TELUS Corp. 8% 6/1/11

1,790

1,369

Tritel PCS, Inc. 10.375% 1/15/11

562

506

Triton PCS, Inc.:

8.75% 11/15/11

1,110

738

9.375% 2/1/11

3,085

2,160

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

U.S. West Communications:

5.65% 11/1/04

$ 530

$ 456

6.875% 9/15/33

1,610

1,095

7.2% 11/1/04

1,635

1,488

21,009

Wireless Telecommunication Services - 0.5%

AirGate PCS, Inc. 0% 10/1/09 (e)

1,915

134

American Tower Corp. 9.375% 2/1/09

1,720

1,032

AT&T Wireless Services, Inc.:

7.875% 3/1/11

665

512

8.125% 5/1/12

2,790

2,148

8.75% 3/1/31

545

392

Crown Castle International Corp.:

9.375% 8/1/11

1,910

1,222

10.75% 8/1/11

560

375

Dobson Communications Corp. 10.875% 7/1/10

995

726

Echostar Broadband Corp. 10.375% 10/1/07

3,015

2,985

Millicom International Cellular SA 13.5% 6/1/06

1,845

540

Nextel Communications, Inc.:

0% 10/31/07 (e)

475

374

9.375% 11/15/09

400

310

9.5% 2/1/11

550

421

Nextel Partners, Inc. 0% 2/1/09 (e)

2,230

1,160

Rogers Wireless, Inc. 9.625% 5/1/11

4,005

2,884

Rural Cellular Corp.:

9.625% 5/15/08

225

124

9.75% 1/15/10

470

254

VoiceStream Wireless Corp.:

0% 11/15/09 (e)

1,284

1,046

10.375% 11/15/09

964

988

17,627

TOTAL TELECOMMUNICATION SERVICES

38,636

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

UTILITIES - 1.6%

Electric Utilities - 0.9%

Allegheny Energy Supply Co. LLC 8.25% 4/15/12 (g)

$ 1,275

$ 743

Avon Energy Partners Holdings 6.46% 3/4/08 (g)

1,320

1,368

CMS Energy Corp.:

6.75% 1/15/04

2,550

2,117

7.5% 1/15/09

1,115

847

7.625% 11/15/04

355

291

8.5% 4/15/11

340

255

8.9% 7/15/08

665

512

9.875% 10/15/07

1,825

1,497

Constellation Energy Group, Inc. 6.35% 4/1/07

405

417

Dominion Resources, Inc.:

6.25% 6/30/12

640

693

8.125% 6/15/10

450

523

Duke Capital Corp. 6.75% 2/15/32

500

430

FirstEnergy Corp. 6.45% 11/15/11

1,025

964

Illinois Power Co. 7.5% 6/15/09

550

448

Israel Electric Corp. Ltd. 7.75% 12/15/27 (g)

570

536

Pacific Gas & Electric Co.:

6.25% 8/1/03

1,535

1,512

6.25% 3/1/04

2,985

2,910

6.75% 10/1/23

1,190

1,047

8.25% 11/1/22

2,340

2,176

9.625% 11/1/05 (g)

1,700

1,632

PSI Energy, Inc. 6.65% 6/15/06

755

801

Public Service Co. of Colorado 7.875% 10/1/12 (g)

395

395

Reliant Energy Resources Corp. 8.125% 7/15/05

600

542

Southern California Edison Co.:

5.625% 10/1/02

670

657

6.25% 6/15/03

165

163

8.95% 11/3/03

3,545

3,456

Southern Power Co. 6.25% 7/15/12 (g)

455

494

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

500

466

TECO Energy, Inc.:

6.125% 5/1/07

615

570

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

UTILITIES - continued

Electric Utilities - continued

TECO Energy, Inc.: - continued

7% 5/1/12

$ 1,085

$ 973

Texas Utilities Co. 6.375% 1/1/08

130

125

29,560

Gas Utilities - 0.2%

CMS Panhandle Holding Co. 6.125% 3/15/04

725

703

Columbia Energy Group 6.8% 11/28/05

190

189

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

255

279

El Paso Energy Corp. 7.75% 1/15/32

265

170

Kinder Morgan Energy Partners LP 7.125% 3/15/12

260

290

Ras Laffan Liquid Natural Gas Co. Ltd. yankee 8.294% 3/15/14 (g)

575

643

Sempra Energy 7.95% 3/1/10

910

985

Tennessee Gas Pipeline Co. 7.625% 4/1/37

1,020

775

Texas Eastern Transmission Corp.:

5.25% 7/15/07

155

162

7% 7/15/32

765

809

Transcontinental Gas Pipe Line:

6.125% 1/15/05

385

354

6.25% 1/15/08

195

172

8.875% 7/15/12 (g)

1,350

1,296

6,827

Multi-Utilities & Unregulated Power - 0.5%

Aquila, Inc. 11.875% 7/1/12 (g)

1,055

928

Calpine Corp. 8.5% 2/15/11

2,285

960

Utilicorp United, Inc.:

6.875% 10/1/04

395

344

7.95% 2/1/11

1,005

744

Western Resources, Inc.:

7.875% 5/1/07

2,310

2,264

9.75% 5/1/07

2,905

2,687

Williams Companies, Inc.:

6.5% 8/1/06

2,110

1,350

7.125% 9/1/11

2,850

1,767

7.5% 1/15/31

815

440

7.875% 9/1/21

945

539

Corporate Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Nonconvertible Bonds - continued

UTILITIES - continued

Multi-Utilities & Unregulated Power - continued

Williams Companies, Inc.: - continued

8.125% 3/15/12 (g)

$ 2,250

$ 1,440

9.25% 3/15/04

2,260

1,695

15,158

TOTAL UTILITIES

51,545

TOTAL NONCONVERTIBLE BONDS

629,556

TOTAL CORPORATE BONDS

(Cost $726,663)

697,767

U.S. Government and Government Agency Obligations - 2.6%

U.S. Government Agency Obligations - 0.4%

Fannie Mae:

3% 6/15/04

4,160

4,233

5.25% 6/15/06

975

1,057

6.25% 2/1/11

4,700

5,220

7.25% 5/15/30

675

850

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

11,360

U.S. Treasury Obligations - 2.2%

U.S. Treasury Bills, yield at date of purchase 1.62% to 1.69% 10/3/02 (i)

10,925

10,924

U.S. Treasury Bonds:

5.25% 2/15/29

11,850

12,614

11.75% 2/15/10

1,000

1,224

U.S. Treasury Notes:

4.375% 5/15/07

19,202

20,725

5.5% 1/31/03

15,904

16,114

5.5% 5/15/09

6,820

7,785

TOTAL U.S. TREASURY OBLIGATIONS

69,386

TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS

(Cost $78,963)

80,746

U.S. Government Agency - Mortgage Securities - 3.3%

Principal
Amount (000s)

Value (Note 1)
(000s)

Fannie Mae - 1.6%

5.5% 10/1/17 (h)

$ 3,500

$ 3,603

5.5% 1/1/32

750

759

6% 1/1/09 to 9/1/32

15,167

15,724

6% 10/1/32 (h)

294

302

6.5% 5/1/23 to 7/1/32

14,636

15,189

6.5% 10/1/32 (h)

3,670

3,801

7% 12/1/24 to 12/1/28

4,846

5,075

7.5% 5/1/27 to 10/1/29

3,669

3,878

7.5% 10/1/32 (h)

1,356

1,432

8% 6/1/10

15

16

TOTAL FANNIE MAE

49,779

Freddie Mac - 0.1%

7.5% 4/1/22 to 11/1/30

1,613

1,705

8% 7/1/25 to 4/1/27

293

314

TOTAL FREDDIE MAC

2,019

Government National Mortgage Association - 1.6%

6% 6/15/08 to 9/15/10

567

601

6.5% 9/15/08 to 8/15/32

41,511

43,377

7% 1/15/28 to 7/15/32

5,295

5,565

7.5% 10/15/22 to 8/15/28

1,222

1,306

8% 5/15/25 to 3/15/30

367

395

8.5% 10/15/29 to 4/15/30

634

687

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

51,931

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $99,484)

103,729

Asset-Backed Securities - 0.5%

Amortizing Residential Collateral Trust:

2.16% 8/25/32 (j)

1,982

1,980

2.6138% 10/25/32 (j)

1,550

1,542

7% 6/25/32

169

168

BankAmerica Manufactured Housing Contract Trust V 6.2% 4/10/09

162

162

Asset-Backed Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Capital One Master Trust:

4.55% 2/15/08

$ 1,800

$ 1,866

4.9% 3/15/10

1,180

1,245

Capital One Multi-Asset Execution Trust 2.48% 7/15/08 (h)(j)

600

597

CIT Marine Trust 5.8% 4/15/10

352

356

Citibank Credit Card Master Trust I 5.75% 2/15/06

420

441

CSFB Nims Trust:

8% 8/1/32

840

821

8% 8/27/32

173

168

Ford Credit Auto Owner Trust 5.71% 9/15/05

335

355

Household Private Label Credit Card Master Note Trust I 5.5% 1/18/11

100

109

Long Beach Asset Holdings Corp. Nim Trust 9.05% 5/25/32 (g)

495

490

MBNA Credit Card Master Note Trust 3.9% 11/15/07

1,900

1,969

Morgan Stanley Dean Witter Capital I Trust:

10% 1/25/32 (g)

321

321

10% 2/25/32 (g)

419

419

10% 4/25/32 (g)

248

249

10% 5/25/32 (g)

246

246

Sears Credit Account Master Trust II 7.5% 11/15/07

650

687

UAF Auto Grantor Trust 6.1% 1/15/03 (g)

107

107

TOTAL ASSET-BACKED SECURITIES

(Cost $14,053)

14,298

Collateralized Mortgage Obligations - 0.1%

Private Sponsor - 0.0%

Credit-Based Asset Servicing and Securitization LLC weighted average coupon Series 1997-2 Class 2B, 7.0245% 12/29/25 (g)(j)

391

193

U.S. Government Agency - 0.1%

Fannie Mae:

planned amortization class Series 1999-54 Class PH, 6.5% 11/18/29

800

851

Collateralized Mortgage Obligations - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

U.S. Government Agency - continued

Fannie Mae: - continued

REMIC planned amortization class Series 1999-57 Class PH, 6.5% 12/25/29

$ 700

$ 750

Freddie Mac Multi-class Mortgage Ctfs. of Prtn. guaranteed REMIC planned amoritization class Series 2444 Class PF, 6.5% 8/15/27

2,300

2,407

TOTAL U.S. GOVERNMENT AGENCY

4,008

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $4,008)

4,201

Commercial Mortgage Securities - 0.8%

Asset Securitization Corp.:

sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29

459

506

Series 1997-D5 Class PS1, 1.4810% 2/14/43 (b)(j)

3,789

291

Berkeley Federal Bank & Trust FSB Series 1994-1 Class B, 4.3797% 8/1/24 (g)(j)

1,900

1,349

CBM Funding Corp. sequential pay Series 1996-1:

Class A3PI, 7.08% 11/1/07

942

1,026

Class B, 7.48% 2/1/08

770

873

COMM sequential pay Series 1999-1 Class A2, 6.455% 5/15/32

275

309

CS First Boston Mortgage Securities Corp.:

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

1,275

1,411

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

175

191

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

1,420

1,508

DLJ Commercial Mortgage Corp. sequential pay
Series 1999-CG2 Class A1A, 6.88% 6/10/32

1,063

1,172

Equitable Life Assurance Society of the United States
Series 174:

Class B1, 7.33% 5/15/06 (g)

1,200

1,350

Class C1, 7.52% 5/15/06 (g)

1,000

1,118

Commercial Mortgage Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 8.169% 4/29/39 (g)(j)

$ 1,800

$ 1,555

FMAC Loan Receivables Trust weighted average coupon
Series 1997-A Class E, 0% 4/15/19 (d)(g)(j)

500

0

GAFCO Franchisee Loan Trust Series 1998-1 Class D, 13.5% 6/1/16 (g)(j)

1,650

1,247

General Motors Acceptance Corp. Commercial Mortgage Securities, Inc. Series 1996-C1 Class F, 7.86% 11/15/06 (g)

750

779

Ginnie Mae guaranteed Multi-family REMIC pass thru securities sequential pay Series 2002-26 Class C, 6.0213% 2/16/24 (j)

500

544

GS Mortgage Securities Corp. II Series 1998-GLII Class E, 6.97% 4/13/31 (j)

1,750

1,728

J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 1998-C6 Class A3, 6.613% 1/15/30

900

1,008

LTC Commercial Mortgage pass thru certificates:

sequential pay Series 1998-1 Class A, 6.029% 5/30/30 (g)

933

989

Series 1996-1 Class E, 9.16% 4/15/28

500

413

Penn Mutual Life Insurance Co./Penn Insurance & Annuity Co. Series 1996-PML:

Class K, 7.9% 11/15/26 (g)

1,750

1,352

Class L, 7.9% 11/15/26 (g)

1,300

806

Structured Asset Securities Corp. Series 1996-CFL Class E, 7.75% 2/25/28

500

511

Thirteen Affiliates of General Growth Properties, Inc. Series 1:

Class D2, 6.992% 11/15/07 (g)

1,410

1,542

Class E2, 7.224% 11/15/07 (g)

840

910

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $23,651)

24,488

Foreign Government and Government Agency Obligations - 0.2%

Chilean Republic:

5.625% 7/23/07

815

850

7.125% 1/11/12

1,180

1,270

Polish Government 6.25% 7/3/12

1,275

1,383

Foreign Government and Government Agency Obligations - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

United Mexican States:

7.5% 1/14/12

$ 840

$ 851

8% 9/24/22

700

666

TOTAL FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS

(Cost $4,847)

5,020

Supranational Obligations - 0.0%

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $257)

260

278

Floating Rate Loans - 0.3%

FINANCIALS - 0.3%

Diversified Financials - 0.3%

Nextel Finance Co.:

Tranche B term loan 5.1875% 6/30/08 (j)

5,120

4,429

Tranche C term loan 5.4375% 12/31/08 (j)

5,120

4,429

8,858

MATERIALS - 0.0%

Chemicals - 0.0%

Lyondell Chemical Co. sr. secured Tranche E term loan 6.185% 5/17/06 (j)

335

333

TELECOMMUNICATION SERVICES - 0.0%

Diversified Telecommunication Services - 0.0%

Broadwing, Inc. Tranche B term loan 4.5529% 12/30/06 (j)

1,134

907

TOTAL FLOATING RATE LOANS

(Cost $10,602)

10,098

Money Market Funds - 5.6%

Shares

Fidelity Cash Central Fund, 1.86% (c)

163,084,303

163,084

Fidelity Money Market Central Fund, 1.91% (c)

8,056,119

8,056

Fidelity Securities Lending Cash Central Fund, 1.88% (c)

3,205,129

3,205

TOTAL MONEY MARKET FUNDS

(Cost $174,345)

174,345

Cash Equivalents - 0.1%

Maturity
Amount (000s)

Value (Note 1)
(000s)

Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.73%, dated 9/30/02 due 10/1/02)
(Cost $3,370)

$ 3,370

$ 3,370

TOTAL INVESTMENT PORTFOLIO - 100.5%

(Cost $3,834,778)

3,137,511

NET OTHER ASSETS - (0.5)%

(15,175)

NET ASSETS - 100%

$ 3,122,336

Futures Contracts

Expiration Date

Underlying Face Amount at Value (000s)

Unrealized Gain/(Loss) (000s)

Purchased

Equity Index Contracts

715 S&P 500 Index Contracts

Dec. 2002

$ 145,681

$ (12,889)

The face value of futures purchased as a percentage of net assets - 4.7%

Legend

(a) Non-income producing

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

(c) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(d) Non-income producing - issuer filed for bankruptcy or is in default of interest payments.

(e) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end.

(f) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end.

(g) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $92,065,000 or 2.9% of net assets.

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

(i) 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 $10,749,000.

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

(k) Restricted securities - Investment in securities not registered under the Securities Act of 1933.

Additional information on each holding is as follows:

Security

Acquisition
Date

Acquisition
Cost (000s)

Micron Technology, Inc. 6.5% 9/30/05

7/15/99 - 9/12/02

$ 4,192

Other Information

The composition of long-term debt holdings as a percentage of total value of investments in securities, is as follows (ratings are unaudited):

Ratings

U.S. Governments

5.7%

AAA, AA, A

2.0%

BBB

2.8%

BB

7.3%

B

9.8%

CCC, CC, C

1.4%

Not rated

0.7%

Equities

69.0%

Short-Term

1.3%

We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Percentages are adjusted for the effect of futures contracts, if applicable.

Purchases and sales of securities, other than short-term securities, aggregated $3,686,354,000 and $3,789,364,000, respectively, of which long-term U.S. government and government agency obligations aggregated $494,939,000 and $472,358,000, respectively.

The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $168,000 for the period.

The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $4,275,000 or 0.1% of net assets.

The fund participated in the interfund lending program as a borrower. The average daily loan balance during the period for which loans were outstanding amounted to $7,119,000. The weighted average interest rate was 2.19%. Interest expense includes $2,000 paid under the interfund lending program. At period end there were no interfund loans outstanding.

The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $5,933,000. The weighted average interest rate was 2.05%. Interest expense includes $1,000 paid under the bank borrowing program. At period end there were no bank borrowings outstanding.

The fund invested in loans and loan participations, trade claims or other receivables. At period end the value of these investments amounted to $10,098,000 or 0.3% of net assets.

Income Tax Information

At September 30, 2002, the fund had a capital loss carryforward of approximately $452,142,000 of which $74,519,000 and $377,623,000 will expire on September 30, 2009 and 2010, respectively.

The fund intends to elect to defer to its fiscal year ending September 30, 2003, approximately $205,222,000 of losses recognized during the period November 1, 2001 to September 30, 2002.

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)

September 30, 2002

Assets

Investment in securities, at value (including securities loaned of $3,017 and repurchase agreements of $3,370) (cost $3,834,778) - See accompanying schedule

$ 3,137,511

Cash

30

Receivable for investments sold

9,882

Receivable for fund shares sold

3,002

Dividends receivable

3,089

Interest receivable

19,569

Other receivables

15

Total assets

3,173,098

Liabilities

Payable for investments purchased
Regular delivery

$ 23,498

Delayed delivery

10,612

Payable for fund shares redeemed

9,343

Accrued management fee

1,611

Payable for daily variation on futures contracts

1,841

Other payables and accrued expenses

652

Collateral on securities loaned, at value

3,205

Total liabilities

50,762

Net Assets

$ 3,122,336

Net Assets consist of:

Paid in capital

$ 4,413,627

Undistributed net investment income

77,713

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(658,851)

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

(710,153)

Net Assets, for 276,260 shares outstanding

$ 3,122,336

Net Asset Value, offering price and redemption price per share ($3,122,336 ÷ 276,260 shares)

$ 11.30

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

Annual Report

Financial Statements - continued

Statement of Operations

Amounts in thousands

Year ended September 30, 2002

Investment Income

Dividends

$ 41,586

Interest

96,113

Security lending

45

Total income

137,744

Expenses

Management fee

$ 22,632

Transfer agent fees

8,825

Accounting and security lending fees

630

Non-interested trustees' compensation

12

Custodian fees and expenses

101

Registration fees

53

Audit

69

Legal

26

Interest

3

Miscellaneous

141

Total expenses before reductions

32,492

Expense reductions

(1,124)

31,368

Net investment income (loss)

106,376

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investments

(225,616)

Foreign currency transactions

(2)

Futures contracts

(9,294)

Total net realized gain (loss)

(234,912)

Change in net unrealized appreciation (depreciation) on:

Investment securities

(351,815)

Assets and liabilities in foreign currencies

1

Futures contracts

(13,535)

Delayed delivery commitments

(17)

Total change in net unrealized appreciation (depreciation)

(365,366)

Net gain (loss)

(600,278)

Net increase (decrease) in net assets resulting from operations

$ (493,902)

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

Annual Report

Statement of Changes in Net Assets

Amounts in thousands

Year ended
September 30,
2002

Year ended
September 30,
2001

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 106,376

$ 120,989

Net realized gain (loss)

(234,912)

(421,909)

Change in net unrealized appreciation (depreciation)

(365,366)

(770,440)

Net increase (decrease) in net assets resulting
from operations

(493,902)

(1,071,360)

Distributions to shareholders from net investment income

(120,566)

(118,203)

Distributions to shareholders from net realized gain

-

(657,869)

Total distributions

(120,566)

(776,072)

Share transactions
Net proceeds from sales of shares

451,259

546,826

Reinvestment of distributions

118,338

761,688

Cost of shares redeemed

(748,639)

(801,481)

Net increase (decrease) in net assets resulting from share transactions

(179,042)

507,033

Total increase (decrease) in net assets

(793,510)

(1,340,399)

Net Assets

Beginning of period

3,915,846

5,256,245

End of period (including undistributed net investment income of $77,713 and undistributed net investment income of $100,960, respectively)

$ 3,122,336

$ 3,915,846

Other Information

Shares

Sold

33,085

34,311

Issued in reinvestment of distributions

8,287

48,546

Redeemed

(55,646)

(50,892)

Net increase (decrease)

(14,274)

31,965

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

Annual Report

Financial Highlights

Years ended September 30,

2002

2001

2000

1999

1998

Selected Per-Share Data

Net asset value, beginning of period

$ 13.48

$ 20.33

$ 19.05

$ 18.80

$ 19.97

Income from Investment Operations

Net investment income (loss) B

.37 D

.42

.48

.46

.49

Net realized and unrealized gain (loss)

(2.13) D

(4.25)

2.35

2.82

.49

Total from investment
operations

(1.76)

(3.83)

2.83

3.28

.98

Distributions from net investment income

(.42)

(.46)

(.45)

(.35)

(.40)

Distributions from net realized gain

-

(2.56)

(1.10)

(2.68)

(1.75)

Total distributions

(.42)

(3.02)

(1.55)

(3.03)

(2.15)

Net asset value, end of period

$ 11.30

$ 13.48

$ 20.33

$ 19.05

$ 18.80

Total Return A

(13.71) %

(20.93)%

15.50%

18.37%

5.33%

Ratios to Average Net Assets C

Expenses before expense reductions

.84%

.81%

.80%

.83%

.84%

Expenses net of voluntary waivers, if any

.84%

.81%

.80%

.83%

.84%

Expenses net of all
reductions

.81%

.78%

.77%

.80%

.80%

Net investment income (loss)

2.73% D

2.62%

2.46%

2.38%

2.49%

Supplemental Data

Net assets, end of period (in millions)

$ 3,122

$ 3,916

$ 5,256

$ 5,051

$ 4,537

Portfolio turnover rate

101%

143%

197%

101%

150%

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

B Calculated based on average shares outstanding during the period.

C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from directed brokerage or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflects expenses after reimbursement by the investment adviser but prior to reductions from directed brokerage or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

D Effective October 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The effect of this change during the period was to increase net investment income (loss) per share by $.03 and decrease net realized and unrealized gain (loss) per share by $.03. Without this change the ratio of net investment income (loss) to average net assets would have been 2.53%. Per share data, ratios and supplemental data for prior periods have not been restated to reflect this change.

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

Annual Report

Notes to Financial Statements

For the period ended September 30, 2002

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Fidelity Asset Manager: Growth (the fund) is a fund of Fidelity Charles Street 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 financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:

Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.

Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Foreign Currency - continued

The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 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, under the general supervision of the Board of Trustees. 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 the funds in the trust.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan.

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Distributions are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences

Annual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

are primarily due to futures transactions, foreign currency transactions, prior period premium and discount on debt securities, defaulted bonds, market discount, non-taxable dividends, 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 was as follows:

Unrealized appreciation

$ 97,542

|

Unrealized depreciation

(803,304)

Net unrealized appreciation (depreciation)

(705,762)

Undistributed ordinary income

71,835

Capital loss carryforward

(452,142)

Total Distributable earnings

$ (1,086,069)

Cost for federal income tax purposes

$ 3,843,273

The tax character of distributions paid during the year was as follows:

Ordinary Income

$ 120,566

|

Change in Accounting Principle. Effective October 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $4,871 increase to the cost of securities held and a corresponding increase to accumulated net undistributed realized gain (loss), based on securities held by the fund on October 1, 2001.

The effect of this change during the period, was to increase net investment income (loss) by $7,922; decrease net unrealized appreciation/ depreciation by $5,074; and decrease net realized gain (loss) by $2,848. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

2. Operating Policies.

Repurchase Agreements. Fidelity Management and Research Company (FMR) has received an Exemptive order from the Securities and Exchange Commission which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

2. Operating Policies - continued

Repurchase Agreements - continued

paper and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is "marked to market" daily and equivalent deliverable securities are held for the transaction. The values of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.

Futures Contracts. The fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase the fund's exposure to the underlying instrument, while selling futures tends to decrease the fund's exposure to the underlying instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption Futures Contracts. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counter-parties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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

Annual Report

2. Operating Policies - continued

Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

4. Fees and Other Transactions with Affiliates.

Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee.

The management fee is the sum of an individual fund fee rate of .30% of the fund's average net assets and a group fee rate that averaged .28% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .58% of the fund's average net assets.

Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .23% of average net assets.

Accounting and Security Lending Fees. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates - continued

Central Funds - continued

capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $3,781 for the period.

Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.

Interfund Lending Program. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.

6. Security Lending.

The fund lends portfolio securities from time to time in order to earn additional income. 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. Cash collateral 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.

Annual Report

7. Bank Borrowings.

The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. The interest rate on the borrowings is the bank's base rate, as revised from time to time. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

8. Expense Reductions.

Certain security trades were directed to brokers who paid $1,028 of the fund's expenses. In addition, 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, these credits reduced the fund's custody and transfer agent expenses by $16 and $80, respectively.

Annual Report

Independent Auditors' Report

To the Trustees of Fidelity Charles Street Trust and Shareholders of Fidelity Asset Manager: Growth:

We have audited the accompanying statement of assets and liabilities of Fidelity Asset Manager: Growth (the Fund), a fund of Fidelity Charles Street Trust, including the portfolio of investments, as of September 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Asset Manager: Growth as of September 30, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Boston, Massachusetts

November 8, 2002

Annual Report

Trustees and Officers

The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and William S. Stavropoulos, each of the Trustees oversees 266 funds advised by FMR or an affiliate. Mr. McCoy oversees 268 funds advised by FMR or an affiliate, and Mr. Stavropoulos oversees 231 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers hold office without limit in time, except that any officer 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 the Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (72)**

Year of Election or Appointment: 1981

President of Asset Manager: Growth®. Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; a Director of Fidelity Management & Research (U.K.) Inc.; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc.

Abigail P. Johnson (40)*

Year of Election or Appointment: 2001
Senior Vice President of Asset Manager: Growth (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds.

Peter S. Lynch (59)

Year of Election or Appointment: 1990
Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

** Edward C. Johnson 3d, Trustee and President of the funds, is Abigail P. Johnson's father.

Annual Report

Non-Interested Trustees:

Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation

J. Michael Cook (60)

Year of Election or Appointment: 2001

Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of AT&T (2001), International Flavors & Fragrances, Inc. (2000), Rockwell Automation International (2000), The Dow Chemical Company (2000), and HCA - The Healthcare Company (1999). He is a Member of the Advisory Board of the Securities Regulation Institute and of the Directorship Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Panel to the Comptroller General of the United States. He also serves as a member of the Board of Overseers of the Columbia Business School and a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater.

Ralph F. Cox (70)

Year of Election or Appointment: 1991
Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.

Phyllis Burke Davis (70)

Year of Election or Appointment: 1992
Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Toshiba International Advisory Group of Toshiba Corporation (2001) and a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc.

Robert M. Gates (59)

Year of Election or Appointment: 1997
Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), TRW Inc. (automotive, space, defense, and information technology), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines) and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy.

Donald J. Kirk (69)

Year of Election or Appointment: 1987
Mr. Kirk is a Public Governor of the National Association of Securities Dealers, Inc., and of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Stabilization Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations).

Marie L. Knowles (55)

Year of Election or Appointment: 2001

Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (58)

Year of Election or Appointment: 2000
Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and Chief Executive Officer (1999) and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman and C.E.O. of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.

Marvin L. Mann (69)

Year of Election or Appointment: 1993
Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage, 1997) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama.

William O. McCoy (68)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).

William S. Stavropoulos (63)

Year of Election or Appointment: 2001

Mr. Stavropoulos also serves as a Trustee (2001) or Member of the Advisory Board (2000) of other investment companies advised by FMR. He is Chairman of the Board and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions, 1997), BellSouth Corporation (telecommunications, 1997), and the Chemical Financial Corporation. He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research and Fordham University. In addition, Mr. Stavropoulos is a member of the American Chemical Society, The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science.

Executive Officers:

Correspondence intended for each executive officer may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Bart A. Grenier (43)

Year of Election or Appointment: 2001

Vice President of Asset Manager: Growth. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001) and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000).

Charles S. Morrison (41)

Year of Election or Appointment: 2002
Vice President of Asset Manager: Growth. Mr Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division.

Richard C. Habermann (62)

Year of Election or Appointment: 1996
Vice President of Asset Manager: Growth. Mr. Habermann is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Habermann managed a variety of Fidelity funds.

Charles Mangum (38)

Year of Election or Appointment: 2001
Vice President of Asset Manager: Growth. Mr. Mangum is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Mangum managed a variety of Fidelity funds.

Jeffrey Moore (36)

Year of Election or Appointment: 2002
Vice President of Asset Manager: Growth. Prior to assuming his current responsibilities, Mr. Moore served as a fixed-income analyst and portfolio manager.

John Todd (53)

Year of Election or Appointment: 1996
Vice President of Asset Manager: Growth. Mr. Todd is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Todd managed a variety of Fidelity funds.

Eric D. Roiter (53)

Year of Election or Appointment: 1998

Secretary of Asset Manager: Growth. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).

Maria F. Dwyer (43)

Year of Election or Appointment: 2002

Treasurer of Asset Manager: Growth. She also serves as Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.

John H. Costello (56)

Year of Election or Appointment: 1991

Assistant Treasurer of Asset Manager: Growth. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

Francis V. Knox, Jr. (55)

Year of Election or Appointment: 2002

Assistant Treasurer of Asset Manager: Growth. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), Compliance Officer of FMR Corp., and Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002) and Fidelity Management & Research (Far East) (1991-2002).

Thomas J. Simpson (44)

Year of Election or Appointment: 2000

Assistant Treasurer of Asset Manager: Growth. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995).

Annual Report

Distributions

The fund designates 31% of the dividend distributed during the fiscal year as qualifying for the dividends-received deduction for corporate shareholders.

The fund will notify shareholders in January 2003 of amounts for use in preparing 2002 income tax returns.

Annual Report

Managing Your Investments

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

By Phone

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

(phone_graphic)

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

Press

1   For mutual fund and brokerage trading.

2   For quotes.*

3   For account balances and holdings.

4   To review orders and mutual
fund activity.

5   To change your PIN.

*0   To speak to a Fidelity representative.

By PC

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

(computer_graphic)

Fidelity's Web Site
www.fidelity.com

If you are not currently on the Internet, call EarthLink Sprint at 1-800-EarthLink, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider.

* 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

Investment Adviser

Fidelity Management & Research Company

Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

Fidelity Investments
Money Management, Inc.

Fidelity Management & Research

(U.K.) Inc.

Fidelity Management & Research

(Far East) Inc.

Fidelity Investments Japan Limited

General Distributor

Fidelity Distributors Corporation

Boston, MA

Transfer and Shareholder
Servicing Agent

Fidelity Service Company, Inc.

Boston, MA

Custodian

JPMorgan Chase Bank

New York, NY

Fidelity's Asset Allocation Funds

Asset ManagerSM 

Asset Manager: Aggressive®

Asset Manager: Growth®

Asset Manager: Income®

Fidelity Freedom Funds® -
Income, 2000, 2010, 2020, 2030, 2040

The Fidelity Telephone Connection

Mutual Fund 24-Hour Service

Exchanges/Redemptions
and Account Assistance 1-800-544-6666

Product Information 1-800-544-6666

Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)

TDD Service 1-800-544-0118
(for the deaf and hearing impaired)
(9 a.m. - 9 p.m. Eastern time)

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

(automated graphic)    Automated line for quickest service

AMG-ANN-1102 158239
1.537733.105

(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com

Fidelity®

Asset Manager: Income®

Annual Report

September 30, 2002

(2_fidelity_logos) (Registered_Trademark)

Contents

President's Message

<Click Here>

Ned Johnson on investing strategies.

Performance

<Click Here>

How the fund has done over time.

Market Recap

<Click Here>

An overview of the market's performance and the factors driving it.

Fund Talk

<Click Here>

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

Investment Changes

<Click Here>

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

Independent Auditors' Report

<Click Here>

The auditors' opinion.

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

Other third party marks appearing herein are the property of their respective owners.

All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.

(Recycle graphic)   This report is printed on recycled paper using soy-based inks.

This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.

Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.

Neither the fund nor Fidelity Distributors Corporation is a bank.

For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.

Annual Report

President's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

The Dow Jones Industrial AverageSM - often used as a gauge of U.S. stock market performance - fell to its lowest point in four years during September 2002. The third quarter was the average's worst three-month stretch since the final quarter of 1987, and the Dow had its worst September since 1937. With equities in disarray, investors flocked to U.S. Treasury bonds, pushing yields of the bellwether 10-year Treasury note to 40-year lows.

While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs.

First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation.

Second, you can further manage your investing risk through diversification. Asset Manager funds are already diversified because they invest in stocks, bonds and short-term and money market instruments, both in the U.S. and overseas. If you have a shorter investment time horizon, you might want to consider moving some of your investment into Asset Manager: Income, which generally has a higher weighting in short-term investments compared with the other Asset Manager funds.

Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy.

If you have questions, please call us at 1-800-544-6666, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

There are several ways to evaluate a fund's historical performance. You can look at cumulative total returns, average annual returns, or the growth of a hypothetical investment. 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). If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Cumulative Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Life of
fund

Fidelity ® Asset Manager: Income ®

-0.92%

20.47%

93.30%

Fidelity Asset Manager: Income Composite

0.52%

29.18%

n/a*

S&P 500 ®

-20.49%

-7.88%

137.54%

LB Aggregate Bond

8.60%

45.79%

102.67%

LB 3 Month T-Bill

2.01%

25.84%

n/a*

Income Funds Average

-3.75%

13.89%

n/a*

Cumulative total returns show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on October 1, 1992. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Fidelity Asset Manager: Income Composite Index, a hypothetical combination of unmanaged indices. The composite index combines the total returns of the Standard & Poor's 500 SM Index, the Lehman Brothers® Aggregate Bond Index and the Lehman Brothers® 3 Month Treasury Bill Index, weighted according to the fund's neutral mix. You can also compare the fund's performance to the performance of mutual funds tracked by Lipper Inc. and grouped by similar objectives. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges.

Average Annual Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Life of
fund

Fidelity Asset Manager: Income

-0.92%

3.79%

6.81%

Fidelity Asset Manager: Income Composite

0.52%

5.25%

n/a*

Average annual total returns take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year.

* Not available

Annual Report

Performance - continued

$10,000 Over Life of Fund

Let's say hypothetically that $10,000 was invested in Fidelity ® Asset Manager: Income® Fund on October 31, 1992, shortly after the fund started. The chart shows how the value of your investment would have grown, and also shows how the S&P 500 Index, Lehman Brothers Aggregate Bond Index and Fidelity Asset Manager: Income Composite Index did over the same period.



3

Understanding Performance

How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. When you sell you shares, they could be worth more or less than what you paid for them.

Annual Report

Market Recap

Investors favored the relative safety typically offered by bond investing during the 12-month period ending September 30, 2002, as a number of negative factors, such as ongoing economic weakness, declining corporate profitability and geopolitical unrest, raised the level of uncertainty about the near-term performance of stocks. Historically, heightened uncertainty has never been a positive influence on stocks, and once again it caused most of the major equity market indexes to decline significantly during the past year. In contrast, investment-grade bonds performed remarkably well.

Stocks: After a year and a half of losses, investors looking for some improvement in the stock market found little relief during the 12-month period. The Standard & Poor's 500SM Index, a benchmark of 500 larger companies, fell 20.49%, while the tech-heavy NASDAQ Composite® Index and the blue-chips' benchmark, the Dow Jones Industrial AverageSM, dropped 21.52% and 12.46%, respectively. Smaller-cap stocks fared slightly better but still proved disappointing, as evidenced by the 9.30% decline in the Russell 2000® Index. A year ago, the outlook for stocks looked particularly dismal in the aftermath of September 11, but the market rebounded surprisingly well as many investors stepped in to scoop up stocks at bargain prices. Expectations for an economic recovery also were heightened after the Federal Reserve Board lowered interest rates in the fourth quarter of 2001 to levels not seen since the 1960s. However, optimism for a sustained market rally was muted by a series of worries that arose in 2002 and lasted throughout the remainder of the period. Among the concerns were slow and uneven economic growth, disappointing corporate earnings, allegations of egregious corporate conduct at many high-profile firms and a series of corporate accounting investigations by the Securities and Exchange Commission that resulted in several earnings restatements, most of which were lower. Also weighing on the market was the possibility of a U.S. war with Iraq and potential future terrorist incidents.

Bonds: Investment-grade bonds sparkled during the one-year period, as the economic recovery stalled and the prospects firmed for a continued favorable interest rate environment. The Lehman Brothers® Aggregate Bond Index, a proxy for taxable-bond performance, returned 8.60%, well ahead of flagging stock markets that incurred yet another round of double-digit declines. Negative sentiment infesting the equity markets boosted demand for bonds, as risk-averse investors sought out safer havens offering some return on their assets. A strong flight to quality in Treasuries and high-quality, higher-yielding government agency securities resulted, as reflected in the stellar performance of the Lehman Brothers U.S. Agency and Treasury indexes, which registered gains of 9.38% and 10.45%, respectively. Meanwhile, the Lehman Brothers Credit Bond Index posted a distant third-place finish, returning 8.19%. While corporates benefited from some economic improvement, eroding investor confidence in the sector, along with widespread credit-quality downgrades and the resulting liquidity crisis, curbed their advances. The Lehman Brothers Mortgage-Backed Securities Index brought up the rear, returning 7.36%. While enjoying lower volatility and reduced prepayment risk for much of the period, mortgage securities retreated during the summer as record-low interest rates triggered another massive refinancing wave, far stronger than the one spawned during the fall of 2001.

Annual Report

Fund Talk: The Manager's Overview

(Portfolio Manager photograph)
An interview with Richard Habermann, Portfolio Manager of Fidelity Asset Manager: Income

Q. How did the fund perform, Dick?

A. For the one-year period that ended September 30, 2002, the fund returned -0.92%. During the same period, the income funds average tracked by Lipper Inc. fell 3.75%, while the Fidelity Asset Manager: Income Composite Index was up 0.52%.

Q. How did your asset-allocation decisions influence fund results?

A. The fund's positioning in equities contributed to relative performance. After favoring stocks during last year's strong fourth-quarter rally, I scaled back early in 2002 to around a 20% neutral weighting, given continued erosion in business fundamentals and growing concerns about corporate mismanagement. The fund benefited from becoming more cautious on equities, as share prices cratered during the spring and summer on waning investor confidence. Consistent with this cautious stance, I became more overweighted in bonds. However, within the bond subportfolio, our commitment to high-yield securities hurt performance. While high-yield bonds benefited from optimism about a potential economic recovery early in the period, their advances were curbed by weak equity markets, widespread credit-quality downgrades and an influx of supply from fallen investment-grade issuers. Despite strong security selection and reducing the high-yield weighting as market conditions deteriorated, we still lost ground to the all-investment-grade bond allocation seen in our composite index, which benefited from the massive flight to quality in Treasuries. In hindsight, I should have moved more toward higher-quality issuers, but the high coupon income was attractive and I didn't expect high-yield bond prices to decline further from already historically low levels.

Q. What drove the fixed-income portion of the fund?

A. Favorable interest rate conditions, a sluggish economy and robust demand from shaken equity investors translated into strong absolute returns for our investment-grade holdings, managed by Jeff Moore - who took over for Charlie Morrison in April. Despite good security selection overall and favorable yield-curve positioning, underweighting strong-performing government bonds hurt performance relative to the index. While we gained a yield advantage from emphasizing corporate bonds and mortgage securities, it couldn't outweigh the dramatic rally in Treasury prices. Good credit analysis and diversification helped us dodge some of the severe credit problems that plagued several corporate issuers. Overweighting real estate, bank and foreign government agency issues also helped. Within mortgages, we focused on securities less susceptible to prepayment, which helped amid the period's two massive refinancing waves. While it lagged the returns provided by investment-grade bonds, the fund's high-yield holdings also had a positive return and beat their benchmark. Managed by Matt Conti, the high-yield subportfolio avoided several key defaults and credit downgrades. It further benefited from emphasizing higher-quality bonds, while having only limited exposure to speculative securities. Solid security selection in the battered telecom and utilities sectors also helped. Finally, the strategic cash portion of the fund - managed by John Todd - was effective in providing reasonably steady returns to help offset capital market volatility.

Annual Report

Fund Talk: The Manager's Overview - continued

Q. How did the fund's equity investments fare?

A. It was an extremely challenging year, one where nearly every major sector posted double-digit declines. Even companies with solid fundamentals only modestly outperformed the market. Against that backdrop, the fund's equity investments - managed by Charles Mangum - edged the S&P 500, largely due to favorable sector positioning. Underweighting troubled technology stocks helped the most, particularly large-cap hardware names, such as IBM and Intel, which suffered from high valuations and persistently weak capital spending. IBM was no longer held at period end. Avoiding landmines within the sector also helped, as did holding Dell, which delivered positive returns. Several defensive, consumer-related holdings, including Coca-Cola, Philip Morris and Alberto-Culver, also fared well. Finally, holding defensive financials with little exposure to the capital markets boosted returns, as did our stake in health care services stock Cardinal Health.

Q. What moves didn't work as well?

A. Disappointing security selection among weak pharmaceutical stocks hurt. Bristol-Myers Squibb plunged on patent renewal rejections and a poor success rate for late-stage clinical products. Schering-Plough was another notable detractor in the drug space. We also suffered from becoming more aggressive prematurely, as valuations looked attractive and the economy showed signs of firming during the first quarter of 2002. However, a recovery in corporate earnings failed to materialize and investors continued to reward conservative names, while seemingly punishing everything else. As a result, the fund was underexposed to more stable consumer names, such as Wal-Mart and Procter & Gamble, which continued to outperform the market. Neither stock was held at period end. At the same time, while we benefited from avoiding the WorldCom disaster in telecommunications, we were too early investing in regional Bell operating companies BellSouth and Verizon.

Q. What's your outlook?

A. Although sentiment continues to be negative, many stocks are now more reasonably valued on several measures, and companies are entering a period of easier year-over-year earnings comparisons. In addition, the quality of earnings likely has improved. While this represents a more positive environment for higher-risk assets, it's potentially negative for extremely conservative assets, such as Treasuries, which have flourished of late with geopolitical concerns and the risk of war with Iraq weighing heavily on the market.

The views expressed in this report reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Annual Report

Note to shareholders: Effective November 15, 2002, Robert Bertelson assumed responsibility for managing the fund's equity subportfolio.

Fund Facts

Goal: high current income, and capital appreciation when appropriate

Fund number: 328

Trading symbol: FASIX

Start date: October 1, 1992

Size: as of September 30, 2002, more than $849 million

Manager: Richard Habermann, since 1996; manager, Fidelity Asset Manager: Aggressive, since 1999; Fidelity Asset Manager and Fidelity Asset Manager: Growth, since 1996; Fidelity Trend Fund, 1977- 1982; Fidelity Magellan Fund, 1972-1977; joined Fidelity in 1968

3

Dick Habermann expands on his outlook:

"Where we go from here has a lot to do with what happens in the fixed-income markets. Despite sharply lower interest rates and an accommodative Federal Reserve Board, investment-grade corporate bonds have come under extreme pressure in recent months, with household-name issuers selling at very large premiums over Treasuries. While this environment has caused high-yield spreads to widen even further than expected, it has also dragged on equity performance. A stronger economy and improved earnings would be necessary to reverse this effect, as fund flows out of government bonds and into corporates could help alleviate the credit crunch and induce firms to invest and hire again, which could help equities. While continued cost cutting should help boost corporate earnings in 2003, it may take some time for demand-driven earnings to rebound. In the meantime, higher pension costs and other reforms, such as stock option expensing, could put a damper on earnings expectations.

"Rarely have bonds outperformed equities for such a prolonged period of time, as investors have sought safe havens. Our approach is to lean against such trends when they become overstretched and when market valuations seem to have reached extreme levels."

Annual Report

Investment Changes

Top Five Bond Issuers as of September 30, 2002

(with maturities greater than one year)

% of fund's
net assets

% of fund's net assets
6 months ago

Fannie Mae

13.1

13.1

U.S. Treasury Obligations

5.6

7.4

Government National Mortgage Association

2.8

3.0

Structured Asset Securities Corp.

0.4

0.1

AT&T Corp.

0.4

0.4

22.3

Top Five Stocks as of September 30, 2002

% of fund's
net assets

% of fund's net assets
6 months ago

Cardinal Health, Inc.

1.4

1.5

Clear Channel Communications, Inc.

1.0

1.0

American International Group, Inc.

1.0

0.8

General Electric Co.

1.0

0.9

Fannie Mae

0.7

0.9

5.1

Quality Diversification (% of fund's investments)

As of September 30, 2002

As of March 31, 2002

U.S. Governments 22.8%

U.S. Governments 23.2%

AAA, AA, A 9.0%

AAA, AA, A 7.5%

BBB 8.4%

BBB 9.1%

BB and Below 10.3%

BB and Below 10.5%

Not Rated 0.3%

Not Rated 0.1%

Equities 20.7%

Equities 19.4%

Short-term
Investments 28.5%

Short-term
Investments 30.2%



We have used ratings from Moody's Investors Service, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Percentages are adjusted for the effect of futures contracts, if applicable.

Asset Allocation (% of fund's net assets)

As of September 30, 2002 *

As of March 31, 2002**

Stock class 21.4%

Stock class 20.0%

Bond class 51.0%

Bond class 51.0%

Short-term class 27.6%

Short-term class 29.0%

* Foreign investments

4.9%

** Foreign investments

3.7%



Asset allocations in the pie charts reflect the categorization of assets as defined in the fund's prospectus in effect as of the time periods indicated above. Financial Statement categorizations conform to accounting standards and will differ from the pie chart. Percentages are adjusted for the effect of futures contracts, if applicable.

Annual Report

Investments September 30, 2002

Showing Percentage of Net Assets

Common Stocks - 17.0%

Shares

Value
(Note 1)

CONSUMER DISCRETIONARY - 1.9%

Hotels, Restaurants & Leisure - 0.1%

McDonald's Corp.

53,900

$ 951,874

Household Durables - 0.0%

Leggett & Platt, Inc.

7,100

140,509

Media - 1.4%

AOL Time Warner, Inc. (a)

268,700

3,143,790

Clear Channel Communications, Inc. (a)

248,000

8,618,000

Cox Communications, Inc. Class A (a)

4,900

120,491

11,882,281

Multiline Retail - 0.1%

Target Corp.

18,600

549,072

Specialty Retail - 0.3%

Home Depot, Inc.

49,000

1,278,900

Limited Brands, Inc.

22,330

320,212

Lowe's Companies, Inc.

29,900

1,237,860

Office Depot, Inc. (a)

6,300

77,742

2,914,714

TOTAL CONSUMER DISCRETIONARY

16,438,450

CONSUMER STAPLES - 1.3%

Beverages - 0.2%

PepsiCo, Inc.

34,100

1,259,995

The Coca-Cola Co.

22,700

1,088,692

2,348,687

Food & Drug Retailing - 0.5%

Albertson's, Inc.

32,600

787,616

CVS Corp.

92,600

2,347,410

Safeway, Inc. (a)

42,300

943,290

4,078,316

Food Products - 0.0%

McCormick & Co., Inc. (non-vtg.)

2,900

66,120

Personal Products - 0.2%

Alberto-Culver Co. Class B

17,300

848,219

Estee Lauder Companies, Inc. Class A

9,100

261,534

Gillette Co.

14,770

437,192

1,546,945

Common Stocks - continued

Shares

Value
(Note 1)

CONSUMER STAPLES - continued

Tobacco - 0.4%

Philip Morris Companies, Inc.

83,300

$ 3,232,040

TOTAL CONSUMER STAPLES

11,272,108

ENERGY - 1.4%

Energy Equipment & Services - 0.2%

Cooper Cameron Corp. (a)

4,400

183,744

Diamond Offshore Drilling, Inc.

2,900

57,855

GlobalSantaFe Corp.

17,575

392,801

Halliburton Co.

18,000

232,380

Transocean, Inc.

17,800

370,240

1,237,020

Oil & Gas - 1.2%

ChevronTexaco Corp.

34,900

2,416,825

ConocoPhillips

100,648

4,653,964

Exxon Mobil Corp.

96,300

3,071,970

10,142,759

TOTAL ENERGY

11,379,779

FINANCIALS - 4.2%

Banks - 0.7%

Bank of America Corp.

14,400

918,720

Bank One Corp.

19,000

710,600

Comerica, Inc.

12,800

617,216

FleetBoston Financial Corp.

63,500

1,290,955

PNC Financial Services Group, Inc.

14,840

625,803

Synovus Financial Corp.

20,600

424,772

Wachovia Corp.

44,081

1,441,008

6,029,074

Diversified Financials - 2.3%

Bank United Corp. Litigation Contingent Payment Rights Trust rights 12/31/02 (a)

10,200

612

Citigroup, Inc.

200,267

5,937,907

Fannie Mae

104,400

6,215,976

Goldman Sachs Group, Inc.

6,300

415,989

J.P. Morgan Chase & Co.

26,100

495,639

Merrill Lynch & Co., Inc.

116,300

3,832,085

Morgan Stanley

87,400

2,961,112

19,859,320

Common Stocks - continued

Shares

Value
(Note 1)

FINANCIALS - continued

Insurance - 1.2%

ACE Ltd.

1,900

$ 56,259

Allmerica Financial Corp.

23,300

279,600

American International Group, Inc.

151,400

8,281,580

Hartford Financial Services Group, Inc.

19,600

803,600

PartnerRe Ltd.

1,100

52,998

Prudential Financial, Inc.

2,700

77,112

Travelers Property Casualty Corp.:

Class A

7,174

94,697

Class B (a)

14,740

199,432

9,845,278

TOTAL FINANCIALS

35,733,672

HEALTH CARE - 3.5%

Health Care Equipment & Supplies - 0.1%

Baxter International, Inc.

9,500

290,225

C.R. Bard, Inc.

7,800

426,114

Guidant Corp. (a)

17,200

555,732

1,272,071

Health Care Providers & Services - 1.4%

Cardinal Health, Inc.

185,800

11,556,760

Pharmaceuticals - 2.0%

Bristol-Myers Squibb Co.

127,700

3,039,260

Eli Lilly & Co.

1,200

66,408

Merck & Co., Inc.

81,900

3,743,649

Pfizer, Inc.

145,700

4,228,214

Pharmacia Corp.

31,100

1,209,168

Schering-Plough Corp.

148,600

3,168,152

Wyeth

41,100

1,306,980

16,761,831

TOTAL HEALTH CARE

29,590,662

INDUSTRIALS - 1.6%

Airlines - 0.0%

AMR Corp. (a)

7,300

30,514

Delta Air Lines, Inc.

7,900

73,391

Southwest Airlines Co.

10,100

131,906

235,811

Common Stocks - continued

Shares

Value
(Note 1)

INDUSTRIALS - continued

Commercial Services & Supplies - 0.2%

Automatic Data Processing, Inc.

6,500

$ 226,005

ChoicePoint, Inc. (a)

15,533

553,608

First Data Corp.

31,900

891,605

1,671,218

Industrial Conglomerates - 1.3%

General Electric Co.

332,800

8,203,520

Tyco International Ltd.

188,200

2,653,620

10,857,140

Machinery - 0.1%

Ingersoll-Rand Co. Ltd. Class A

20,300

699,132

Parker Hannifin Corp.

2,260

86,355

785,487

Road & Rail - 0.0%

Burlington Northern Santa Fe Corp.

8,300

198,536

TOTAL INDUSTRIALS

13,748,192

INFORMATION TECHNOLOGY - 1.4%

Communications Equipment - 0.2%

CIENA Corp. (a)

49,200

146,124

Cisco Systems, Inc. (a)

73,100

766,088

Comverse Technology, Inc. (a)

31,000

216,690

QUALCOMM, Inc. (a)

5,600

154,672

1,283,574

Computers & Peripherals - 0.4%

Dell Computer Corp. (a)

94,300

2,216,993

EMC Corp. (a)

38,800

177,316

Hewlett-Packard Co.

43,800

511,146

Sun Microsystems, Inc. (a)

50,000

129,500

3,034,955

Electronic Equipment & Instruments - 0.0%

Solectron Corp. (a)

87,900

185,469

Internet Software & Services - 0.0%

Yahoo!, Inc. (a)

39,600

378,972

Semiconductor Equipment & Products - 0.4%

Altera Corp. (a)

16,300

141,321

Analog Devices, Inc. (a)

17,200

338,840

Applied Materials, Inc. (a)

13,600

157,080

Intel Corp.

43,400

602,826

Common Stocks - continued

Shares

Value
(Note 1)

INFORMATION TECHNOLOGY - continued

Semiconductor Equipment & Products - continued

KLA-Tencor Corp. (a)

10,700

$ 298,958

LAM Research Corp. (a)

14,300

127,270

Linear Technology Corp.

18,700

387,464

Micron Technology, Inc. (a)

37,500

463,875

Novellus Systems, Inc. (a)

3,700

76,997

Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR (a)

32,450

206,058

United Microelectronics Corp. sponsored ADR (a)

60,490

213,530

Xilinx, Inc. (a)

8,300

131,455

3,145,674

Software - 0.4%

Adobe Systems, Inc.

16,900

322,790

Computer Associates International, Inc.

45,600

437,760

Microsoft Corp. (a)

60,900

2,663,766

Network Associates, Inc. (a)

7,500

79,725

VERITAS Software Corp. (a)

16,000

234,720

3,738,761

TOTAL INFORMATION TECHNOLOGY

11,767,405

MATERIALS - 0.1%

Chemicals - 0.0%

E.I. du Pont de Nemours & Co.

2,600

93,782

Monsanto Co.

4,298

65,716

159,498

Metals & Mining - 0.1%

Alcoa, Inc.

49,000

945,700

TOTAL MATERIALS

1,105,198

TELECOMMUNICATION SERVICES - 1.2%

Diversified Telecommunication Services - 1.1%

AT&T Corp.

57,200

686,972

BellSouth Corp.

96,500

1,771,740

Qwest Communications International, Inc. (a)

441,800

1,007,304

SBC Communications, Inc.

133,200

2,677,320

Verizon Communications, Inc.

119,700

3,284,568

9,427,904

Common Stocks - continued

Shares

Value
(Note 1)

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - 0.1%

Nextel Communications, Inc. Class A (a)

33,700

$ 254,435

TOTAL TELECOMMUNICATION SERVICES

9,682,339

UTILITIES - 0.4%

Electric Utilities - 0.4%

AES Corp. (a)

17,900

44,929

FirstEnergy Corp.

53,400

1,596,126

Progress Energy, Inc. warrants 12/31/07 (a)

9,200

0

Southern Co.

25,200

725,256

TXU Corp.

28,700

1,197,077

3,563,388

TOTAL COMMON STOCKS

(Cost $187,145,912)

144,281,193

Convertible Preferred Stocks - 0.0%

FINANCIALS - 0.0%

Diversified Financials - 0.0%

AES Trust VII $3.00
(Cost $131,751)

9,700

105,691

Corporate Bonds - 24.3%

Principal
Amount

Convertible Bonds - 0.6%

CONSUMER DISCRETIONARY - 0.0%

Media - 0.0%

EchoStar Communications Corp. 4.875% 1/1/07

$ 310,000

235,600

Specialty Retail - 0.0%

Gap, Inc. 5.75% 3/15/09 (g)

201,000

197,360

TOTAL CONSUMER DISCRETIONARY

432,960

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Convertible Bonds - continued

HEALTH CARE - 0.1%

Biotechnology - 0.1%

Affymetrix, Inc. 4.75% 2/15/07

$ 840,000

$ 666,750

Aviron 5.25% 2/1/08

200,000

180,240

846,990

INFORMATION TECHNOLOGY - 0.3%

Communications Equipment - 0.1%

CIENA Corp. 3.75% 2/1/08

270,000

155,925

Juniper Networks, Inc. 4.75% 3/15/07

920,000

611,460

ONI Systems Corp. 5% 10/15/05

190,000

141,512

908,897

Electronic Equipment & Instruments - 0.1%

Sanmina-SCI Corp. 4.25% 5/1/04

600,000

520,500

Semiconductor Equipment & Products - 0.1%

Agere Systems, Inc. 6.5% 12/15/09

170,000

81,600

ASML Holding NV 4.25% 11/30/04 (g)

240,000

176,100

Atmel Corp. 0% 5/23/21

137,000

18,331

Teradyne, Inc. 3.75% 10/15/06

230,000

179,688

Vitesse Semiconductor Corp. 4% 3/15/05

520,000

374,400

830,119

Software - 0.0%

BEA Systems, Inc. 4% 12/15/06

40,000

30,829

TOTAL INFORMATION TECHNOLOGY

2,290,345

TELECOMMUNICATION SERVICES - 0.2%

Wireless Telecommunication Services - 0.2%

Nextel Communications, Inc.:

5.25% 1/15/10

1,435,000

970,347

6% 6/1/11 (g)

210,000

151,452

6% 6/1/11

700,000

504,840

1,626,639

TOTAL CONVERTIBLE BONDS

5,196,934

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - 23.7%

CONSUMER DISCRETIONARY - 4.7%

Auto Components - 0.2%

DaimlerChrysler North America Holding Corp. 7.2% 9/1/09

$ 225,000

$ 246,299

Dana Corp. 6.5% 3/1/09

110,000

93,500

Delco Remy International, Inc. 11% 5/1/09

180,000

120,600

Dura Operating Corp. 8.625% 4/15/12

150,000

147,750

Goodyear Tire & Rubber Co. 6.625% 12/1/06

90,000

78,300

Intermet Corp. 9.75% 6/15/09

355,000

333,700

Lear Corp. 8.11% 5/15/09

355,000

369,200

Stoneridge, Inc. 11.5% 5/1/12

185,000

187,313

1,576,662

Hotels, Restaurants & Leisure - 1.3%

Alliance Gaming Corp. 10% 8/1/07

335,000

350,075

Bally Total Fitness Holding Corp. 9.875% 10/15/07

415,000

365,200

Boyd Gaming Corp. 9.25% 10/1/03

270,000

280,800

Buffets, Inc. 11.25% 7/15/10 (g)

285,000

285,000

Capstar Hotel Co. 8.75% 8/15/07

30,000

24,300

Chumash Casino & Resort Enterprise 9% 7/15/10 (g)

210,000

217,350

Circus Circus Enterprises, Inc.:

6.45% 2/1/06

110,000

107,250

6.75% 7/15/03

80,000

80,200

Coast Hotels & Casinos, Inc. 9.5% 4/1/09

180,000

189,000

Courtyard by Marriott II LP/Courtyard II Finance Co. 10.75% 2/1/08

225,000

226,125

Domino's, Inc. 10.375% 1/15/09

721,000

771,470

Extended Stay America, Inc. 9.875% 6/15/11

160,000

155,200

Friendly Ice Cream Corp. 10.5% 12/1/07

320,000

308,800

Harrah's Operating Co., Inc. 7.875% 12/15/05

215,000

227,094

Herbst Gaming, Inc. 10.75% 9/1/08

220,000

228,250

Hilton Hotels Corp. 7.625% 5/15/08

260,000

263,900

HMH Properties, Inc. 7.875% 8/1/05

525,000

504,000

Hollywood Park, Inc. 9.25% 2/15/07

165,000

145,200

International Game Technology 8.375% 5/15/09

120,000

130,200

ITT Corp.:

6.75% 11/15/05

190,000

186,200

7.375% 11/15/15

350,000

318,500

Mandalay Resort Group 10.25% 8/1/07

150,000

161,250

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Hotels, Restaurants & Leisure - continued

MGM Mirage, Inc. 8.375% 2/1/11

$ 35,000

$ 36,225

Mirage Resorts, Inc. 7.25% 10/15/06

235,000

239,753

Mohegan Tribal Gaming Authority:

8% 4/1/12

290,000

295,800

8.125% 1/1/06

420,000

432,600

8.375% 7/1/11

40,000

41,000

8.75% 1/1/09

150,000

156,000

Park Place Entertainment Corp.:

7.875% 12/15/05

745,000

759,900

7.875% 3/15/10

200,000

203,000

Penn National Gaming, Inc. 8.875% 3/15/10

120,000

119,400

Premier Parks, Inc. 0% 4/1/08 (e)

370,000

303,400

Resorts International Hotel & Casino, Inc. 11.5% 3/15/09

410,000

356,700

Royal Caribbean Cruises Ltd.:

7.25% 8/15/06

40,000

34,000

8.25% 4/1/05

30,000

27,000

8.75% 2/2/11

50,000

42,750

Starwood Hotels & Resorts Worldwide, Inc. 7.375% 5/1/07 (g)

185,000

179,913

Sun International Hotels Ltd./Sun International North America, Inc.:

8.875% 8/15/11

540,000

540,000

yankee 8.625% 12/15/07

120,000

120,600

Tricon Global Restaurants, Inc.:

8.5% 4/15/06

325,000

342,875

8.875% 4/15/11

420,000

459,900

Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 (g)

515,000

504,700

10,720,880

Household Durables - 0.4%

Beazer Homes USA, Inc. 8.375% 4/15/12

135,000

134,663

Champion Enterprises, Inc. 11.25% 4/15/07 (g)

225,000

163,125

D.R. Horton, Inc. 8% 2/1/09

500,000

490,000

Juno Lighting, Inc. 11.875% 7/1/09

425,000

416,500

K. Hovnanian Enterprises, Inc. 8.875% 4/1/12

405,000

364,500

Kaufman & Broad Home Corp. 7.75% 10/15/04

130,000

130,000

KB Home 8.625% 12/15/08

300,000

297,000

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Household Durables - continued

Kinetic Concepts, Inc. 9.625% 11/1/07

$ 320,000

$ 300,800

Lennar Corp. 9.95% 5/1/10

230,000

248,400

Ryland Group, Inc.:

8% 8/15/06

25,000

25,000

8.25% 4/1/08

75,000

75,000

9.75% 9/1/10

270,000

290,250

Standard Pacific Corp. 9.25% 4/15/12

155,000

147,250

WCI Communities, Inc. 10.625% 2/15/11

645,000

625,650

3,708,138

Internet & Catalog Retail - 0.1%

Amazon.com, Inc. 0% 5/1/08 (e)

330,000

306,900

J. Crew Group, Inc. 0% 10/15/08 (e)

910,000

455,000

761,900

Leisure Equipment & Products - 0.0%

Hasbro, Inc. 5.6% 11/1/05

80,000

74,400

The Hockey Co. 11.25% 4/15/09

190,000

182,400

256,800

Media - 2.1%

AMC Entertainment, Inc.:

9.5% 3/15/09

40,000

35,200

9.875% 2/1/12

380,000

338,200

American Media Operations, Inc. 10.25% 5/1/09

330,000

343,200

AOL Time Warner, Inc.:

7.625% 4/15/31

800,000

667,000

7.7% 5/1/32

2,330,000

1,974,675

British Sky Broadcasting Group PLC (BSkyB) yankee:

6.875% 2/23/09

140,000

135,100

7.3% 10/15/06

125,000

124,375

8.2% 7/15/09

780,000

791,700

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.:

0% 4/1/11 (e)

220,000

101,200

0% 5/15/11 (e)

875,000

288,750

8.25% 4/1/07

315,000

195,300

8.625% 4/1/09

385,000

238,700

10% 4/1/09

190,000

117,800

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp.: - continued

11.125% 1/15/11

$ 130,000

$ 83,200

Cinemark USA, Inc. 9.625% 8/1/08

495,000

470,250

Comcast Cable Communications, Inc.:

6.2% 11/15/08

55,000

50,875

6.375% 1/30/06

100,000

96,000

6.75% 1/30/11

55,000

51,150

6.875% 6/15/09

235,000

222,075

8.125% 5/1/04

40,000

39,600

Continental Cablevision, Inc.:

8.3% 5/15/06

1,375,000

1,340,625

8.3% 5/15/06

120,000

115,200

Corus Entertainment, Inc. 8.75% 3/1/12

140,000

141,400

CSC Holdings, Inc.:

9.875% 2/15/13

385,000

296,450

9.875% 4/1/23

300,000

222,000

EchoStar DBS Corp.:

9.125% 1/15/09 (g)

205,000

192,700

9.25% 2/1/06

1,375,000

1,320,000

9.375% 2/1/09

75,000

72,000

Entravision Communications Corp. 8.125% 3/15/09

90,000

91,800

Granite Broadcasting Corp.:

8.875% 5/15/08

50,000

42,250

10.375% 5/15/05

45,000

38,250

Insight Communications, Inc. 0% 2/15/11 (e)

605,000

211,750

Insight Midwest LP/Insight Capital, Inc. 10.5% 11/1/10

305,000

274,500

Lamar Media Corp. 9.25% 8/15/07

150,000

154,500

LBI Media, Inc. 10.125% 7/15/12 (g)

255,000

257,550

Lenfest Communications, Inc.:

8.375% 11/1/05

30,000

29,400

10.5% 6/15/06

305,000

300,425

Mediacom Broadband LLC/Mediacom Broadband Corp. 11% 7/15/13

220,000

204,600

Mediacom LLC/Mediacom Capital Corp. 9.5% 1/15/13

140,000

116,200

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Media - continued

News America Holdings, Inc.:

7.7% 10/30/25

$ 1,090,000

$ 1,033,833

8% 10/17/16

770,000

833,059

PanAmSat Corp.:

6% 1/15/03

50,000

49,500

6.125% 1/15/05

170,000

156,400

6.375% 1/15/08

120,000

103,200

Pegasus Satellite Communications, Inc.:

0% 3/1/07 (e)

615,000

172,200

12.375% 8/1/06

120,000

52,800

Radio One, Inc. 8.875% 7/1/11

485,000

506,825

Regal Cinemas Corp. 9.375% 2/1/12

260,000

265,200

Satelites Mexicanos SA de CV 6.2569% 6/30/04 (g)(j)

164,000

139,400

Shaw Communications, Inc. 8.25% 4/11/10

1,275,000

1,209,758

Sinclair Broadcast Group, Inc.:

8% 3/15/12

520,000

522,600

8.75% 12/15/07

180,000

184,500

Spanish Broadcasting System, Inc. 9.625% 11/1/09

190,000

192,375

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

310,000

308,614

TV Azteca SA de CV yankee 10.5% 2/15/07

270,000

252,450

Yell Finance BV:

0% 8/1/11 (e)

300,000

183,000

10.75% 8/1/11

220,000

222,200

18,173,864

Multiline Retail - 0.2%

Dillard's, Inc.:

6.125% 11/1/03

105,000

104,213

6.39% 8/1/03

230,000

226,550

Federated Department Stores, Inc. 6.79% 7/15/27

650,000

691,809

JCPenney Co., Inc. 9% 8/1/12 (g)

436,000

416,380

Saks, Inc.:

7.25% 12/1/04

40,000

39,200

8.25% 11/15/08

110,000

101,200

9.875% 10/1/11

132,000

128,040

1,707,392

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER DISCRETIONARY - continued

Specialty Retail - 0.3%

Asbury Automotive Group, Inc. 9% 6/15/12

$ 215,000

$ 193,500

AutoNation, Inc. 9% 8/1/08

220,000

224,400

Gap, Inc.:

5.625% 5/1/03

390,000

382,200

9.9% 12/15/05

500,000

482,500

Hollywood Entertainment Corp. 10.625% 8/15/04

295,000

297,950

Michaels Stores, Inc. 9.25% 7/1/09

150,000

159,000

PETCO Animal Supplies, Inc. 10.75% 11/1/11

80,000

84,800

United Auto Group, Inc. 9.625% 3/15/12 (g)

220,000

218,900

United Rentals, Inc.:

8.8% 8/15/08

40,000

32,400

9% 4/1/09

40,000

32,400

9.25% 1/15/09

190,000

157,700

2,265,750

Textiles Apparel & Luxury Goods - 0.1%

Russell Corp. 9.25% 5/1/10 (g)

265,000

272,950

The William Carter Co. 10.875% 8/15/11

250,000

273,750

546,700

TOTAL CONSUMER DISCRETIONARY

39,718,086

CONSUMER STAPLES - 1.0%

Beverages - 0.1%

Canandaigua Brands, Inc. 8.625% 8/1/06

110,000

116,050

Constellation Brands, Inc. 8.125% 1/15/12

390,000

396,825

Cott Beverages, Inc. 8% 12/15/11

300,000

307,500

820,375

Food & Drug Retailing - 0.2%

Delhaize America, Inc.:

7.375% 4/15/06

150,000

141,019

8.125% 4/15/11

150,000

137,217

Great Atlantic & Pacific Tea, Inc.:

7.75% 4/15/07

350,000

255,500

9.125% 12/15/11

160,000

120,800

Kroger Co. 6.8% 4/1/11

510,000

559,587

Rite Aid Corp.:

6.125% 12/15/08 (g)

125,000

68,750

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

CONSUMER STAPLES - continued

Food & Drug Retailing - continued

Rite Aid Corp.: - continued

6.875% 8/15/13

$ 440,000

$ 255,200

7.125% 1/15/07

255,000

173,400

1,711,473

Food Products - 0.2%

Corn Products International, Inc. 8.25% 7/15/07

115,000

111,550

Dean Foods Co.:

6.75% 6/15/05

230,000

228,850

6.9% 10/15/17

290,000

256,650

8.15% 8/1/07

160,000

162,400

Del Monte Corp. 9.25% 5/15/11

625,000

615,625

Dole Food Co., Inc.:

6.375% 10/1/05

25,000

23,250

7.25% 5/1/09

500,000

440,000

1,838,325

Tobacco - 0.5%

Philip Morris Companies, Inc. 7% 7/15/05

1,755,000

1,925,432

RJ Reynolds Tobacco Holdings, Inc.:

6.5% 6/1/07

1,025,000

1,080,287

7.25% 6/1/12

500,000

533,542

7.75% 5/15/06

380,000

420,058

3,959,319

TOTAL CONSUMER STAPLES

8,329,492

ENERGY - 0.8%

Energy Equipment & Services - 0.1%

DI Industries, Inc. 8.875% 7/1/07

355,000

362,100

Grant Prideco, Inc. 9.625% 12/1/07

210,000

220,500

Key Energy Services, Inc.:

8.375% 3/1/08

535,000

556,400

14% 1/15/09

110,000

124,850

1,263,850

Oil & Gas - 0.7%

Barrett Resources Corp. 7.55% 2/1/07

135,000

126,757

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

ENERGY - continued

Oil & Gas - continued

Chesapeake Energy Corp.:

7.875% 3/15/04

$ 410,000

$ 421,275

8.125% 4/1/11

75,000

75,000

8.375% 11/1/08

215,000

216,075

9% 8/15/12 (g)

130,000

133,250

Clark Refining & Marketing, Inc.:

8.625% 8/15/08

55,000

46,750

8.875% 11/15/07

135,000

109,350

Encore Acquisition Co. 8.375% 6/15/12 (g)

70,000

70,700

Forest Oil Corp.:

8% 6/15/08

190,000

195,700

8% 12/15/11

80,000

82,200

Nexen, Inc. 7.875% 3/15/32

1,100,000

1,181,140

Nuevo Energy Co. 9.5% 6/1/08

190,000

190,000

Petro-Canada 7% 11/15/28

430,000

453,231

Plains Exploration & Production Co. LP 8.75% 7/1/12 (g)

260,000

260,000

Pogo Producing Co. 8.25% 4/15/11

395,000

414,750

Swift Energy Co. 9.375% 5/1/12

75,000

72,000

Teekay Shipping Corp. 8.875% 7/15/11

610,000

631,350

The Coastal Corp.:

6.2% 5/15/04

200,000

158,000

7.75% 10/15/35

50,000

31,500

9.625% 5/15/12

975,000

716,625

Western Oil Sands, Inc. 8.375% 5/1/12

270,000

268,650

5,854,303

TOTAL ENERGY

7,118,153

FINANCIALS - 8.1%

Banks - 1.2%

BankBoston Corp. 6.625% 2/1/04

150,000

156,746

BankBoston NA 6.5% 12/19/07

2,000,000

2,211,478

Capital One Bank:

6.5% 7/30/04

350,000

331,346

6.875% 2/1/06

125,000

117,430

Chevy Chase Savings Bank FSB 9.25% 12/1/08

310,000

310,000

Den Danske Bank AS 6.375% 6/15/08 (g)(j)

2,190,000

2,380,977

Fleet Financial Group, Inc. 7.125% 4/15/06

350,000

385,972

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Banks - continued

MBNA Corp. 6.25% 1/17/07

$ 480,000

$ 497,060

PNC Funding Corp.:

5.75% 8/1/06

590,000

628,955

6.875% 3/1/03

530,000

540,465

Royal Bank of Scotland Group PLC:

7.648% 12/31/49 (j)

585,000

648,699

7.816% 11/29/49

1,020,000

1,146,482

Sovereign Bancorp, Inc.:

8.625% 3/15/04

515,000

532,381

10.5% 11/15/06

210,000

234,150

Western Financial Bank 9.625% 5/15/12

340,000

323,000

10,445,141

Diversified Financials - 5.7%

ABN AMRO NA Holding Pfd. Capital Repackage Trust I yankee 6.523% 12/29/49 (f)(g)

1,050,000

1,063,125

Ahmanson Capital Trust I 8.36% 12/1/26 (g)

1,000,000

1,093,476

Alliance Capital Management LP 5.625% 8/15/06

575,000

613,512

American Airlines pass thru trust certificate 7.8% 4/1/08

180,000

162,000

American Gen. Finance Corp. 5.875% 7/14/06

1,180,000

1,267,337

Amvescap PLC 6.6% 5/15/05

2,920,000

3,160,763

BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08

515,000

522,725

Capital One Financial Corp.:

7.25% 12/1/03

90,000

81,900

7.25% 5/1/06

200,000

172,471

8.75% 2/1/07

60,000

51,000

CIT Group, Inc. 7.75% 4/2/12

450,000

489,574

Citigroup, Inc.:

5.625% 8/27/12

740,000

772,310

7.25% 10/1/10

1,380,000

1,581,571

CMS Energy X-TRAS pass thru trust I 7% 1/15/05

60,000

46,200

Continental Airlines, Inc. pass thru trust certificate 6.9% 1/2/17

85,729

65,154

Countrywide Home Loans, Inc. 5.5% 8/1/06

920,000

966,421

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Credit Suisse First Boston (USA), Inc. 6.5% 1/15/12

$ 605,000

$ 645,930

Dana Credit Corp. 7.25% 12/6/02 (g)

190,000

187,150

Delta Air Lines, Inc. pass thru trust certificate:

7.57% 11/18/10

475,000

505,775

7.711% 9/18/11

45,000

41,850

Deutsche Telekom International Finance BV 8.25% 6/15/05

500,000

536,242

El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11

395,000

377,225

Ford Motor Credit Co.:

5.8% 1/12/09

2,830,000

2,555,315

7.375% 10/28/09

450,000

427,870

7.875% 6/15/10

500,000

493,084

GATX Financial Corp. 8.875% 6/1/09

265,000

217,300

General Electric Capital Corp.:

4.625% 9/15/09

900,000

909,378

6% 6/15/12

600,000

646,390

General Motors Acceptance Corp. 6.875% 9/15/11

2,310,000

2,251,772

Goldman Sachs Group, Inc.:

5.7% 9/1/12

560,000

570,971

6.6% 1/15/12

540,000

592,779

Household Finance Corp.:

6.375% 10/15/11

1,250,000

1,161,964

8% 5/9/05

240,000

251,007

HSBC Capital Funding LP 9.547% 12/31/49 (f)(g)

1,525,000

1,846,645

IOS Capital, Inc. 9.75% 6/15/04

380,000

383,800

J.P. Morgan Chase & Co. 6.625% 3/15/12

700,000

761,267

John Hancock Global Funding II 5.625% 6/27/06 (g)

600,000

645,104

John Q. Hammons Hotels LP/John Q. Hammons Hotels Corp. III 8.875% 5/15/12

215,000

206,400

Lehman Brothers Holdings, Inc. 6.625% 1/18/12

500,000

547,873

Meditrust Exercisable Put Options Securities Trust 7.114% 8/15/04 (g)

40,000

39,750

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Millennium America, Inc.:

9.25% 6/15/08

$ 40,000

$ 41,000

9.25% 6/15/08 (g)

280,000

287,000

Morgan Stanley 6.6% 4/1/12

1,355,000

1,474,006

NiSource Finance Corp.:

7.625% 11/15/05

190,000

194,087

7.875% 11/15/10

2,385,000

2,451,985

Northwest Airlines pass thru trust certificate 9.179% 10/1/11

76,446

61,157

Pemex Project Funding Master Trust 9.125% 10/13/10

825,000

880,688

Petronas Capital Ltd. 7% 5/22/12 (g)

1,640,000

1,824,500

Powergen US Funding LLC 4.5% 10/15/04

555,000

572,903

Prime Property Funding II 6.25% 5/15/07

435,000

464,406

Qwest Capital Funding, Inc.:

5.875% 8/3/04

140,000

98,000

7% 8/3/09

165,000

75,075

7.25% 2/15/11

85,000

39,100

7.75% 8/15/06

280,000

149,800

Salomon Smith Barney Holdings, Inc. 5.875% 3/15/06

875,000

943,202

Sears Roebuck Acceptance Corp. 6.7% 4/15/12

850,000

900,471

SESI LLC 8.875% 5/15/11

240,000

238,800

Sprint Capital Corp.:

6% 1/15/07

1,040,000

714,944

6.875% 11/15/28

660,000

380,398

8.75% 3/15/32

790,000

529,011

Stone Container Finance Co. yankee 11.5% 8/15/06 (g)

125,000

131,250

TIAA Global Markets, Inc. 5% 3/1/07 (g)

565,000

605,312

TXU Eastern Funding 6.75% 5/15/09

1,180,000

1,132,425

U.S. West Capital Funding, Inc. 6.875% 7/15/28

255,000

99,450

UBS Preferred Funding Trust 1 8.622% 12/29/49

1,000,000

1,195,685

Verizon Global Funding Corp.:

6.125% 6/15/07

1,275,000

1,327,433

7.375% 9/1/12

445,000

468,536

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

FINANCIALS - continued

Diversified Financials - continued

Verizon Wireless Capital LLC 5.375% 12/15/06 (g)

$ 1,405,000

$ 1,321,676

Xerox Capital (Europe) PLC 5.875% 5/15/04

370,000

284,900

Xerox Credit Corp. 6.1% 12/16/03

140,000

117,600

47,917,180

Insurance - 0.3%

Hartford Financial Services Group, Inc. 4.7% 9/1/07

170,000

175,115

Principal Life Global Funding I:

5.125% 6/28/07 (g)

1,800,000

1,881,029

6.25% 2/15/12 (g)

505,000

543,543

2,599,687

Real Estate - 0.9%

AvalonBay Communities, Inc. 5% 8/1/07

460,000

472,066

BRE Properties, Inc. 5.95% 3/15/07

935,000

995,865

Camden Property Trust 5.875% 6/1/07

555,000

583,028

CenterPoint Properties Trust 6.75% 4/1/05

490,000

529,174

Corrections Corp. of America 9.875% 5/1/09 (g)

80,000

82,600

EOP Operating LP:

6.75% 2/15/08

480,000

525,994

6.75% 2/15/12

645,000

702,912

7.75% 11/15/07

1,710,000

1,955,578

Gables Realty LP 5.75% 7/15/07

250,000

261,025

iStar Financial, Inc. 8.75% 8/15/08

215,000

215,000

LNR Property Corp.:

9.375% 3/15/08

305,000

301,950

10.5% 1/15/09

15,000

15,300

Mack-Cali Realty LP 7.25% 3/15/09

200,000

224,036

Meditrust Corp. 7.82% 9/10/26

525,000

526,313

MeriStar Hospitality Corp. 9% 1/15/08

230,000

204,700

Senior Housing Properties Trust 8.625% 1/15/12

340,000

334,900

7,930,441

TOTAL FINANCIALS

68,892,449

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

HEALTH CARE - 0.5%

Health Care Equipment & Supplies - 0.0%

Sybron Dental Specialties, Inc. 8.125% 6/15/12 (g)

$ 60,000

$ 59,400

Health Care Providers & Services - 0.4%

Alderwoods Group, Inc.:

11% 1/2/07

103,700

102,922

12.25% 1/2/09

210,000

197,400

Columbia/HCA Healthcare Corp. 6.73% 7/15/45

255,000

258,536

Hanger Orthopedic Group, Inc. 10.375% 2/15/09

95,000

101,175

HCA, Inc.:

7.875% 2/1/11

50,000

53,500

8.75% 9/1/10

365,000

408,800

HealthSouth Corp.:

6.875% 6/15/05

265,000

193,450

7% 6/15/08

140,000

91,000

Owen & Minor, Inc. 8.5% 7/15/11

350,000

364,000

PacifiCare Health Systems, Inc. 10.75% 6/1/09

475,000

463,125

Rotech Healthcare, Inc. 9.5% 4/1/12 (g)

100,000

92,000

Triad Hospitals Holdings, Inc. 11% 5/15/09

85,000

93,500

Triad Hospitals, Inc. 8.75% 5/1/09

465,000

488,250

Vanguard Health Systems, Inc. 9.75% 8/1/11

620,000

626,200

3,533,858

Pharmaceuticals - 0.1%

aaiPharma, Inc. 11% 4/1/10

540,000

475,200

Biovail Corp. 7.875% 4/1/10

265,000

262,350

737,550

TOTAL HEALTH CARE

4,330,808

INDUSTRIALS - 1.3%

Aerospace & Defense - 0.2%

Alliant Techsystems, Inc. 8.5% 5/15/11

215,000

227,363

BE Aerospace, Inc.:

8% 3/1/08

115,000

81,650

8.875% 5/1/11

45,000

31,950

9.5% 11/1/08

60,000

45,900

Raytheon Co. 8.2% 3/1/06

600,000

657,125

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Aerospace & Defense - continued

Sequa Corp.:

8.875% 4/1/08

$ 240,000

$ 214,800

9% 8/1/09

160,000

144,800

Transdigm, Inc. 10.375% 12/1/08

100,000

103,000

1,506,588

Airlines - 0.1%

Continental Airlines, Inc. 8% 12/15/05

95,000

47,500

Delta Air Lines, Inc.:

6.65% 3/15/04

180,000

126,000

7.7% 12/15/05

105,000

69,300

8.3% 12/15/29

155,000

69,750

Northwest Airlines, Inc.:

7.625% 3/15/05

170,000

93,500

9.875% 3/15/07

120,000

64,800

470,850

Building Products - 0.0%

Nortek, Inc. 9.125% 9/1/07

185,000

185,925

Commercial Services & Supplies - 0.3%

Allied Waste North America, Inc.:

7.375% 1/1/04

120,000

118,800

7.625% 1/1/06

535,000

508,250

7.875% 1/1/09

305,000

283,650

10% 8/1/09

240,000

220,800

Browning-Ferris Industries, Inc. 6.375% 1/15/08

260,000

226,200

Coinmach Corp. 9% 2/1/10

350,000

357,000

Iron Mountain, Inc.:

8.625% 4/1/13

505,000

505,000

8.75% 9/30/09

320,000

321,600

JohnsonDiversey, Inc. 9.625% 5/15/12 (g)

70,000

69,300

2,610,600

Construction & Engineering - 0.0%

Williams Scotsman, Inc. 9.875% 6/1/07

350,000

297,500

Industrial Conglomerates - 0.4%

Tyco International Group SA:

6.125% 11/1/08

40,000

32,800

6.25% 6/15/13

140,000

133,700

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INDUSTRIALS - continued

Industrial Conglomerates - continued

Tyco International Group SA: - continued

6.875% 1/15/29

$ 80,000

$ 61,200

yankee:

5.8% 8/1/06

745,000

625,800

5.875% 11/1/04

85,000

75,650

6.375% 6/15/05

55,000

47,575

6.375% 2/15/06

150,000

129,000

6.375% 10/15/11

190,000

155,800

6.75% 2/15/11

2,190,000

1,806,750

3,068,275

Machinery - 0.3%

AGCO Corp.:

8.5% 3/15/06

40,000

39,200

9.5% 5/1/08

220,000

231,000

Dresser, Inc. 9.375% 4/15/11

405,000

390,825

Dunlop Standard Aerospace Holdings PLC 11.875% 5/15/09

660,000

669,900

Navistar International Corp. 9.375% 6/1/06

370,000

357,050

NMHG Holding Co. 10% 5/15/09

150,000

151,500

Terex Corp.:

Series D, 8.875% 4/1/08

100,000

95,500

8.875% 4/1/08

220,000

209,000

TriMas Corp. 9.875% 6/15/12 (g)

230,000

232,300

2,376,275

Road & Rail - 0.0%

TFM SA de CV 12.5% 6/15/12 (g)

150,000

145,875

TOTAL INDUSTRIALS

10,661,888

INFORMATION TECHNOLOGY - 1.0%

Communications Equipment - 0.1%

Avaya, Inc. 11.125% 4/1/09

400,000

252,000

L-3 Communications Corp. 8% 8/1/08

110,000

114,400

Lucent Technologies, Inc.:

6.5% 1/15/28

130,000

39,650

7.25% 7/15/06

195,000

82,875

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Communications Equipment - continued

Motorola, Inc.:

6.5% 11/15/28

$ 360,000

$ 272,458

8% 11/1/11

370,000

365,357

1,126,740

Computers & Peripherals - 0.3%

Compaq Computer Corp. 7.65% 8/1/05

530,000

585,416

Hewlett-Packard Co. 5.5% 7/1/07

575,000

594,803

NCR Corp. 7.125% 6/15/09 (g)

895,000

966,489

Seagate Technology HDD Holdings 8% 5/15/09 (g)

295,000

277,300

2,424,008

Electronic Equipment & Instruments - 0.3%

ChipPAC International Ltd. 12.75% 8/1/09

175,000

171,500

Fisher Scientific International, Inc.:

8.125% 5/1/12

215,000

215,000

9% 2/1/08

610,000

631,350

Flextronics International Ltd.:

9.875% 7/1/10

460,000

466,900

yankee 8.75% 10/15/07

530,000

516,750

Ingram Micro, Inc. 9.875% 8/15/08

295,000

300,900

Millipore Corp. 7.5% 4/1/07

30,000

28,200

Solectron Corp.:

7.375% 3/1/06

355,000

276,900

9.625% 2/15/09

335,000

268,000

2,875,500

IT Consulting & Services - 0.1%

Unisys Corp.:

7.875% 4/1/08

120,000

115,200

8.125% 6/1/06

460,000

447,350

562,550

Office Electronics - 0.1%

Xerox Corp.:

5.5% 11/15/03

225,000

189,000

7.15% 8/1/04

180,000

138,600

9.75% 1/15/09 (g)

205,000

161,950

489,550

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

INFORMATION TECHNOLOGY - continued

Semiconductor Equipment & Products - 0.1%

Amkor Technology, Inc. 9.25% 5/1/06

$ 250,000

$ 170,000

Fairchild Semiconductor Corp.:

10.375% 10/1/07

250,000

255,000

10.5% 2/1/09

80,000

82,400

ON Semiconductor Corp./Semiconductor Components Industries LLC 12% 5/15/08 (g)

210,000

132,300

639,700

Software - 0.0%

Computer Associates International, Inc. 6.375% 4/15/05

220,000

189,200

TOTAL INFORMATION TECHNOLOGY

8,307,248

MATERIALS - 1.4%

Chemicals - 0.4%

Berry Plastics Corp. 10.75% 7/15/12

410,000

422,300

Foamex LP/Foamex Capital Corp. 10.75% 4/1/09 (g)

190,000

169,100

Georgia Gulf Corp. 10.375% 11/1/07

205,000

219,350

Huntsman International LLC 9.875% 3/1/09 (g)

430,000

430,000

IMC Global, Inc.:

6.55% 1/15/05

210,000

198,450

7.3% 1/15/28

195,000

150,150

7.375% 8/1/18

40,000

28,800

7.625% 11/1/05

110,000

103,950

10.875% 6/1/08

60,000

64,800

11.25% 6/1/11

70,000

75,600

International Specialty Holdings, Inc. 10.625% 12/15/09

300,000

270,000

Lyondell Chemical Co.:

9.625% 5/1/07

80,000

73,600

9.875% 5/1/07

135,000

124,875

10.875% 5/1/09

140,000

114,800

Methanex Corp. yankee 7.75% 8/15/05

425,000

420,750

OM Group, Inc. 9.25% 12/15/11

390,000

384,150

3,250,675

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

MATERIALS - continued

Containers & Packaging - 0.3%

Applied Extrusion Technologies, Inc. 10.75% 7/1/11

$ 460,000

$ 335,800

Graphic Packaging Corp. 8.625% 2/15/12

70,000

71,400

Jefferson Smurfit Corp. U.S. 8.25% 10/1/12 (g)

250,000

248,750

Owens-Brockway Glass Container, Inc. 8.875% 2/15/09

685,000

686,713

Owens-Illinois, Inc.:

7.15% 5/15/05

130,000

118,950

7.35% 5/15/08

40,000

34,800

7.5% 5/15/10

50,000

42,500

7.8% 5/15/18

370,000

296,000

7.85% 5/15/04

70,000

66,500

8.1% 5/15/07

150,000

138,000

Riverwood International Corp. 10.625% 8/1/07

140,000

142,800

Silgan Holdings, Inc. 9% 6/1/09 (g)

180,000

186,300

2,368,513

Metals & Mining - 0.4%

AK Steel Corp. 7.875% 2/15/09

170,000

166,813

Century Aluminum Co. 11.75% 4/15/08

335,000

314,900

Falconbridge Ltd. 7.35% 6/5/12

880,000

942,305

Freeport-McMoRan Copper & Gold, Inc. 7.5% 11/15/06

380,000

342,000

Luscar Coal Ltd. 9.75% 10/15/11

110,000

116,600

Oregon Steel Mills, Inc. 10% 7/15/09 (g)

385,000

385,000

P&L Coal Holdings Corp. 9.625% 5/15/08

1,080,000

1,131,300

Phelps Dodge Corp.:

8.75% 6/1/11

340,000

340,000

9.5% 6/1/31

155,000

151,900

Steel Dynamics, Inc. 9.5% 3/15/09 (g)

120,000

119,400

4,010,218

Paper & Forest Products - 0.3%

Boise Cascade Corp. 7.68% 3/29/06

830,000

853,975

Georgia-Pacific Group:

7.5% 5/15/06

160,000

132,800

8.125% 5/15/11

365,000

292,000

8.875% 5/15/31

305,000

219,600

9.625% 3/15/22

105,000

92,400

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

MATERIALS - continued

Paper & Forest Products - continued

Louisiana-Pacific Corp.:

8.5% 8/15/05

$ 110,000

$ 110,550

10.875% 11/15/08

80,000

84,200

Stone Container Corp.:

8.375% 7/1/12 (g)

320,000

318,400

9.75% 2/1/11

255,000

266,475

2,370,400

TOTAL MATERIALS

11,999,806

TELECOMMUNICATION SERVICES - 2.0%

Diversified Telecommunication Services - 1.6%

American Cellular Corp. 9.5% 10/15/09

135,000

25,313

AT&T Corp.:

6% 3/15/09

1,150,000

1,035,000

6.5% 3/15/29

3,010,000

2,498,300

Centennial Cellular Operating Co. LLC/Centennial Finance Corp. 10.75% 12/15/08

535,000

267,500

Cincinnati Bell Telephone Co. 6.3% 12/1/28

240,000

139,200

Citizens Communications Co.:

8.5% 5/15/06

785,000

753,600

9.25% 5/15/11

535,000

529,650

France Telecom SA:

8.7% 3/1/06

350,000

372,342

9.25% 3/1/11

200,000

218,173

Koninklijke KPN NV yankee:

8% 10/1/10

1,280,000

1,414,437

8.375% 10/1/30

250,000

276,589

Qwest Corp. 8.875% 3/15/12 (g)

275,000

239,250

Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06

1,560,000

1,563,463

Telefonica Europe BV 7.75% 9/15/10

500,000

539,684

Telefonos de Mexico SA de CV 8.25% 1/26/06

1,580,000

1,649,204

Teleglobe Canada, Inc. yankee:

7.2% 7/20/09 (d)

620,000

15,500

7.7% 7/20/29 (d)

90,000

2,250

TELUS Corp. 8% 6/1/11

1,875,000

1,434,375

Tritel PCS, Inc. 10.375% 1/15/11

65,000

58,500

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Diversified Telecommunication Services - continued

Triton PCS, Inc.:

8.75% 11/15/11

$ 170,000

$ 113,050

9.375% 2/1/11

445,000

311,500

U.S. West Communications:

5.65% 11/1/04

85,000

73,100

6.875% 9/15/33

260,000

176,800

7.2% 11/1/04

80,000

72,800

7.2% 11/1/04

185,000

168,350

13,947,930

Wireless Telecommunication Services - 0.4%

AirGate PCS, Inc. 0% 10/1/09 (e)

335,000

23,450

American Tower Corp. 9.375% 2/1/09

205,000

123,000

AT&T Wireless Services, Inc.:

7.875% 3/1/11

120,000

92,400

8.125% 5/1/12

460,000

354,200

8.75% 3/1/31

490,000

352,800

Crown Castle International Corp.:

9.375% 8/1/11

480,000

307,200

10.75% 8/1/11

205,000

137,350

Dobson Communications Corp. 10.875% 7/1/10

190,000

138,700

Echostar Broadband Corp. 10.375% 10/1/07

585,000

579,150

Millicom International Cellular SA 13.5% 6/1/06

320,000

93,600

Nextel Communications, Inc.:

0% 10/31/07 (e)

75,000

59,063

0% 2/15/08 (e)

130,000

97,825

9.375% 11/15/09

65,000

50,375

9.5% 2/1/11

90,000

68,850

Nextel Partners, Inc. 0% 2/1/09 (e)

365,000

189,800

Rogers Wireless, Inc. 9.625% 5/1/11

475,000

342,000

Rural Cellular Corp.:

9.625% 5/15/08

40,000

22,000

9.75% 1/15/10

80,000

43,200

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

VoiceStream Wireless Corp.:

0% 11/15/09 (e)

$ 154,000

$ 125,510

10.375% 11/15/09

217,000

222,425

3,422,898

TOTAL TELECOMMUNICATION SERVICES

17,370,828

UTILITIES - 2.9%

Electric Utilities - 1.8%

Allegheny Energy Supply Co. LLC 8.25% 4/15/12 (g)

1,185,000

690,303

Avon Energy Partners Holdings:

6.46% 3/4/08 (g)

1,160,000

1,201,795

6.73% 12/11/02 (g)

1,340,000

1,345,592

CMS Energy Corp.:

6.75% 1/15/04

325,000

269,750

7.5% 1/15/09

250,000

190,000

7.625% 11/15/04

60,000

49,200

8.9% 7/15/08

165,000

127,050

9.875% 10/15/07

125,000

102,500

Constellation Energy Group, Inc. 6.35% 4/1/07

660,000

680,086

Dominion Resources, Inc.:

6.25% 6/30/12

745,000

806,463

8.125% 6/15/10

500,000

581,188

Duke Capital Corp. 6.75% 2/15/32

600,000

515,685

FirstEnergy Corp. 6.45% 11/15/11

1,325,000

1,246,051

Illinois Power Co. 7.5% 6/15/09

580,000

472,700

Israel Electric Corp. Ltd. 7.75% 12/15/27 (g)

590,000

555,002

Pacific Gas & Electric Co.:

6.25% 8/1/03

185,000

182,225

6.25% 3/1/04

375,000

365,625

8.25% 11/1/22

340,000

316,200

9.625% 11/1/05 (g)

410,000

393,600

PSI Energy, Inc. 6.65% 6/15/06

870,000

923,157

Public Service Co. of Colorado 7.875% 10/1/12 (g)

455,000

455,431

Reliant Energy Resources Corp. 8.125% 7/15/05

750,000

677,255

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - continued

Electric Utilities - continued

Southern California Edison Co.:

5.625% 10/1/02

$ 110,000

$ 107,800

6.25% 6/15/03

25,000

24,688

8.95% 11/3/03

365,000

355,875

Southern Power Co. 6.25% 7/15/12 (g)

535,000

581,254

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

400,000

372,733

TECO Energy, Inc.:

6.125% 5/1/07

725,000

671,669

7% 5/1/12

1,190,000

1,066,823

Texas Utilities Co. 6.375% 1/1/08

115,000

110,286

15,437,986

Gas Utilities - 0.6%

CMS Panhandle Holding Co. 6.125% 3/15/04

125,000

121,250

Columbia Energy Group 6.8% 11/28/05

190,000

188,510

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

270,000

295,246

El Paso Energy Corp. 7.75% 1/15/32

315,000

201,600

Kinder Morgan Energy Partners LP 7.125% 3/15/12

420,000

468,121

Ras Laffan Liquid Natural Gas Co. Ltd. yankee 8.294% 3/15/14 (g)

610,000

682,438

Sempra Energy 7.95% 3/1/10

675,000

730,683

Tennessee Gas Pipeline Co. 7.625% 4/1/37

1,240,000

942,400

Texas Eastern Transmission Corp.:

5.25% 7/15/07

180,000

188,018

7% 7/15/32

900,000

951,371

Transcontinental Gas Pipe Line:

6.125% 1/15/05

65,000

59,800

6.25% 1/15/08

35,000

30,800

8.875% 7/15/12 (g)

235,000

225,600

5,085,837

Multi-Utilities & Unregulated Power - 0.5%

Aquila, Inc. 11.875% 7/1/12 (g)

175,000

154,000

Calpine Corp. 8.5% 2/15/11

410,000

172,200

Utilicorp United, Inc.:

6.875% 10/1/04

65,000

56,550

7.95% 2/1/11

160,000

118,400

Corporate Bonds - continued

Principal
Amount

Value
(Note 1)

Nonconvertible Bonds - continued

UTILITIES - continued

Multi-Utilities & Unregulated Power - continued

Western Resources, Inc.:

7.875% 5/1/07

$ 400,000

$ 392,000

9.75% 5/1/07

480,000

444,000

Williams Companies, Inc.:

6.5% 8/1/06

355,000

227,200

7.125% 9/1/11

1,665,000

1,032,300

7.125% 9/1/11

235,000

145,700

7.5% 1/15/31

770,000

415,800

7.875% 9/1/21

160,000

91,200

8.125% 3/15/12 (g)

385,000

246,400

9.25% 3/15/04

375,000

281,250

3,777,000

TOTAL UTILITIES

24,300,823

TOTAL NONCONVERTIBLE BONDS

201,029,581

TOTAL CORPORATE BONDS

(Cost $210,083,985)

206,226,515

U.S. Government and Government Agency Obligations - 8.9%

U.S. Government Agency Obligations - 1.7%

Fannie Mae:

3% 6/15/04

2,540,000

2,584,486

6.25% 2/1/11

5,400,000

5,997,040

7.25% 5/15/30

1,220,000

1,535,709

Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06

2,735,948

3,192,933

Israel Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank)
Series 1994-1, 6.88% 1/26/03

38,235

38,861

U.S. Government and Government Agency Obligations - continued

Principal
Amount

Value
(Note 1)

U.S. Government Agency Obligations - continued

Private Export Funding Corp. secured 6.86% 4/30/04

$ 273,000

$ 289,230

U.S. Department of Housing and Urban Development Government guaranteed participation certificates
Series 1996-A, 7.63% 8/1/14

1,000,000

1,100,821

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

14,739,080

U.S. Treasury Obligations - 7.2%

U.S. Treasury Bills, yield at date of purchase 1.62% to 1.69% 10/3/02 to 12/5/02 (i)

2,850,000

2,849,079

U.S. Treasury Bonds:

5.25% 2/15/29

8,720,000

9,282,370

8.125% 8/15/19

7,445,000

10,520,716

11.75% 2/15/10

8,500,000

10,401,212

U.S. Treasury Notes:

5.5% 1/31/03

10,893,000

11,036,820

5.5% 5/15/09

14,734,000

16,819,775

TOTAL U.S. TREASURY OBLIGATIONS

60,909,972

TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS

(Cost $71,414,769)

75,649,052

U.S. Government Agency - Mortgage Securities - 14.6%

Fannie Mae - 11.7%

5.5% 10/1/17 (h)

9,000,000

9,264,375

5.5% 1/1/32

850,000

860,558

6% 4/1/09 to 6/1/32

17,676,451

18,262,466

6% 10/1/32 (h)

1,740,940

1,788,272

6.5% 9/1/25 to 8/1/32

29,047,150

30,148,642

6.5% 10/1/32 (h)

19,134,307

19,815,967

7% 12/1/25 to 3/1/32

12,637,219

13,218,338

7.5% 10/1/09 to 9/1/29

2,905,015

3,072,671

7.5% 10/1/32 (h)

2,097,717

2,215,058

11.5% 11/1/15

108,345

125,149

TOTAL FANNIE MAE

98,771,496

U.S. Government Agency - Mortgage Securities - continued

Principal
Amount

Value
(Note 1)

Freddie Mac - 0.1%

7.5% 8/1/28 to 11/1/30

$ 981,369

$ 1,036,089

8.5% 3/1/22 to 5/1/22

9,564

10,325

12% 11/1/19

49,808

58,227

TOTAL FREDDIE MAC

1,104,641

Government National Mortgage Association - 2.8%

6.5% 11/15/08 to 8/15/32

8,793,514

9,211,913

7% 3/15/28 to 7/15/32

10,111,519

10,624,286

7.5% 5/15/22 to 8/15/28

2,080,729

2,218,696

8.5% 8/15/29 to 12/15/30

1,577,917

1,708,797

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

23,763,692

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $119,031,376)

123,639,829

Asset-Backed Securities - 1.8%

Amortizing Residential Collateral Trust:

2.16% 8/25/32 (j)

1,982,416

1,980,248

2.6138% 10/25/32 (j)

1,790,000

1,781,050

7% 6/25/32

198,881

196,998

BankAmerica Manufactured Housing Contract Trust V 6.2% 4/10/09

101,705

101,768

Capital One Master Trust:

4.55% 2/15/08

1,800,000

1,866,089

4.9% 3/15/10

510,000

538,209

Capital One Multi-Asset Execution Trust 2.48% 7/15/08 (h)(j)

690,000

686,550

CIT Marine Trust 5.8% 4/15/10

562,203

568,001

Citibank Credit Card Master Trust I 5.75% 2/15/06

685,000

719,179

CSFB Nims Trust:

8% 8/1/32

934,033

913,455

8% 8/27/32

192,281

186,513

Ford Credit Auto Owner Trust 5.71% 9/15/05

405,000

429,063

Household Private Label Credit Card Master Note Trust I 5.5% 1/18/11

550,000

599,844

Long Beach Asset Holdings Corp. Nim Trust 9.05% 5/25/32 (g)

578,415

572,631

Asset-Backed Securities - continued

Principal
Amount

Value
(Note 1)

MBNA Credit Card Master Note Trust 3.9% 11/15/07

$ 1,600,000

$ 1,657,742

Morgan Stanley Dean Witter Capital I Trust:

10% 1/25/32 (g)

377,807

378,516

10% 2/25/32 (g)

558,049

559,095

10% 4/25/32 (g)

291,077

291,623

10% 5/25/32 (g)

288,145

288,686

Railcar Trust 7.75% 6/1/04

12,202

12,839

Sears Credit Account Master Trust II 7.5% 11/15/07

750,000

792,525

UAF Auto Grantor Trust 6.1% 1/15/03 (g)

72,500

72,413

TOTAL ASSET-BACKED SECURITIES

(Cost $14,913,101)

15,193,037

Collateralized Mortgage Obligations - 0.5%

U.S. Government Agency - 0.5%

Fannie Mae:

planned amortization class Series 1999-54 Class PH, 6.5% 11/18/29

900,000

957,074

REMIC planned amortization class Series 1999-57 Class PH, 6.5% 12/25/29

800,000

856,853

Freddie Mac Multi-class Mortgage Ctfs. of Prtn. guaranteed REMIC planned amoritization class Series 2444 Class PF, 6.5% 8/15/27

2,400,000

2,512,171

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS

(Cost $4,053,047)

4,326,098

Commercial Mortgage Securities - 2.4%

Asset Securitization Corp.:

sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29

1,800,801

1,984,243

Series 1997-D5 Class PS1, 1.4810% 2/14/43 (b)(j)

6,968,842

534,913

CBM Funding Corp. sequential pay Series 1996-1:

Class A3PI, 7.08% 11/1/07

828,106

901,795

Class B, 7.48% 2/1/08

680,000

771,083

COMM sequential pay Series 1999-1 Class A2, 6.455% 5/15/32

450,000

505,489

Commercial Mortgage Securities - continued

Principal
Amount

Value
(Note 1)

CS First Boston Mortgage Securities Corp.:

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

$ 1,050,000

$ 1,162,006

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

205,000

223,289

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

1,320,000

1,401,675

DLJ Commercial Mortgage Corp. sequential pay
Series 1999-CG2 Class A1A, 6.88% 6/10/32

1,294,009

1,427,050

Equitable Life Assurance Society of the United States
Series 174:

Class B1, 7.33% 5/15/06 (g)

1,000,000

1,125,386

Class C1, 7.52% 5/15/06 (g)

700,000

782,469

Ginnie Mae guaranteed Multi-family REMIC pass thru securities sequential pay Series 2002-26 Class C, 6.0213% 2/16/24 (j)

550,000

598,297

GS Mortgage Securities Corp. II Series 1998-GLII Class E, 6.97% 4/13/31 (j)

1,420,000

1,401,806

J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 1998-C6 Class A3, 6.613% 1/15/30

1,100,000

1,232,018

LB-UBS Commercial Mortgage Trust sequential pay
Series 2001-C3 Class A1, 6.058% 6/15/20

1,628,883

1,767,358

LTC Commercial Mortgage pass thru certificates sequential pay Series 1998-1 Class A, 6.029% 5/30/30 (g)

854,366

905,895

Structured Asset Securities Corp. Series 1996-CFL Class E, 7.75% 2/25/28

390,242

398,977

Thirteen Affiliates of General Growth Properties, Inc.:

sequential pay Series 1 Class A2, 6.602% 11/15/07 (g)

1,150,000

1,291,594

Series 1:

Class D2, 6.992% 11/15/07 (g)

1,100,000

1,202,781

Class E2, 7.224% 11/15/07 (g)

660,000

714,863

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $18,929,362)

20,332,987

Foreign Government and Government Agency Obligations - 0.6%

Chilean Republic:

5.625% 7/23/07

890,000

928,381

7.125% 1/11/12

1,070,000

1,151,588

Foreign Government and Government Agency Obligations - continued

Principal
Amount

Value
(Note 1)

Polish Government 6.25% 7/3/12

$ 1,510,000

$ 1,638,350

United Mexican States:

7.5% 1/14/12

780,000

789,750

8% 9/24/22

800,000

760,800

TOTAL FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS

(Cost $5,059,983)

5,268,869

Supranational Obligations - 0.0%

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $415,509)

420,000

449,009

Money Market Funds - 33.8%

Shares

Fidelity Cash Central Fund, 1.86% (c)

146,463,838

146,463,838

Fidelity Money Market Central Fund, 1.91% (c)

140,550,134

140,550,134

TOTAL MONEY MARKET FUNDS

(Cost $287,013,972)

287,013,972

TOTAL INVESTMENT PORTFOLIO - 103.9%

(Cost $918,192,767)

882,486,252

NET OTHER ASSETS - (3.9)%

(33,360,951)

NET ASSETS - 100%

$ 849,125,301

Futures Contracts

Expiration
Date

Underlying
Face Amount
at Value

Unrealized
Gain/(Loss)

Purchased

Equity Index Contracts

187 S&P 500 Index Contracts

Dec. 2002

$ 38,101,250

$ (4,120,311)

The face value of futures purchased as a percentage of net assets - 4.5%

Legend

(a) Non-income producing

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

(c) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(d) Non-income producing - issuer filed for bankruptcy or is in default of interest payments.

(e) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end.

(f) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end.

(g) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $36,789,198 or 4.3% of net assets.

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

(i) 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 $2,849,079.

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

Other Information

Purchases and sales of securities, other than short-term securities, aggregated $1,061,090,331 and $1,018,586,395, respectively, of which long-term U.S. government and government agency obligations aggregated $511,285,816 and $530,056,089, respectively.

The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $12,937 for the period.

Income Tax Information

At September 30, 2002, the fund had a capital loss carryforward of approximately $55,334,000 of which $7,669,000 and $47,665,000 will expire on September 30, 2009 and 2010, respectively.

The fund intends to elect to defer to its fiscal year ending September 30, 2003, approximately $8,627,000 of losses recognized during the period November 1, 2001 to September 30, 2002.

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

Annual Report

Financial Statements

Statement of Assets and Liabilities

September 30, 2002

Assets

Investment in securities, at value (cost $918,192,767) - See accompanying schedule

$ 882,486,252

Cash

169,859

Receivable for investments sold

1,172,581

Receivable for fund shares sold

2,193,895

Dividends receivable

201,592

Interest receivable

6,736,625

Other receivables

367

Total assets

892,961,171

Liabilities

Payable for investments purchased
Regular delivery

$ 4,945,446

Delayed delivery

33,983,698

Payable for fund shares redeemed

3,932,324

Accrued management fee

310,802

Payable for daily variation on futures contracts

481,525

Other payables and accrued expenses

182,075

Total liabilities

43,835,870

Net Assets

$ 849,125,301

Net Assets consist of:

Paid in capital

$ 946,376,548

Undistributed net investment income

4,202,699

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(61,627,120)

Net unrealized appreciation (depreciation) on investments

(39,826,826)

Net Assets, for 80,018,556 shares outstanding

$ 849,125,301

Net Asset Value, offering price and redemption price per share ($849,125,301 ÷ 80,018,556 shares)

$ 10.61

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

Annual Report

Financial Statements - continued

Statement of Operations

Year ended September 30, 2002

Investment Income

Dividends

$ 2,537,608

Interest

38,325,186

Total income

40,862,794

Expenses

Management fee

$ 3,876,105

Transfer agent fees

1,470,689

Accounting fees and expenses

224,050

Non-interested trustees' compensation

3,151

Custodian fees and expenses

57,859

Registration fees

45,190

Audit

41,076

Legal

5,688

Miscellaneous

29,715

Total expenses before reductions

5,753,523

Expense reductions

(98,205)

5,655,318

Net investment income (loss)

35,207,476

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investments

3,004,913

Foreign currency transactions

10

Futures contracts

127,743

Total net realized gain (loss)

3,132,666

Change in net unrealized appreciation (depreciation) on:

Investment securities

(40,807,737)

Futures contracts

(4,421,662)

Total change in net unrealized appreciation (depreciation)

(45,229,399)

Net gain (loss)

(42,096,733)

Net increase (decrease) in net assets resulting from operations

$ (6,889,257)

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

Annual Report

Statement of Changes in Net Assets

Year ended
September 30,
2002

Year ended
September 30,
2001

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 35,207,476

$ 47,204,551

Net realized gain (loss)

3,132,666

(60,146,274)

Change in net unrealized appreciation (depreciation)

(45,229,399)

(8,589,012)

Net increase (decrease) in net assets resulting
from operations

(6,889,257)

(21,530,735)

Distributions to shareholders from net investment income

(34,805,397)

(46,841,643)

Distributions to shareholders from net realized gain

-

(18,585,700)

Total distributions

(34,805,397)

(65,427,343)

Share transactions
Net proceeds from sales of shares

223,469,769

487,220,816

Reinvestment of distributions

33,022,254

62,057,762

Cost of shares redeemed

(282,028,465)

(364,391,087)

Net increase (decrease) in net assets resulting from share transactions

(25,536,442)

184,887,491

Total increase (decrease) in net assets

(67,231,096)

97,929,413

Net Assets

Beginning of period

916,356,397

818,426,984

End of period (including undistributed net investment income of $4,202,699 and undistributed net investment income of $4,176,015, respectively)

$ 849,125,301

$ 916,356,397

Other Information

Shares

Sold

20,084,529

41,381,680

Issued in reinvestment of distributions

2,968,552

5,320,503

Redeemed

(25,332,214)

(31,244,863)

Net increase (decrease)

(2,279,133)

15,457,320

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

Annual Report

Financial Highlights

Years ended September 30,

2002

2001

2000

1999

1998

Selected Per-Share Data

Net asset value,
beginning of period

$ 11.13

$ 12.24

$ 12.15

$ 12.45

$ 12.36

Income from Investment Operations

Net investment income (loss) B

.43

.59

.65

.58

.57

Net realized and unrealized gain (loss)

(.52)

(.87)

.30

.22

.39

Total from investment
operations

(.09)

(.28)

.95

.80

.96

Distributions from net investment income

(.43)

(.61)

(.65)

(.57)

(.58)

Distributions from net realized gain

-

(.22)

(.21)

(.53)

(.29)

Total distributions

(.43)

(.83)

(.86)

(1.10)

(.87)

Net asset value, end of period

$ 10.61

$ 11.13

$ 12.24

$ 12.15

$ 12.45

Total Return A

(.92)%

(2.40)%

8.10%

6.65%

8.06 %

Ratios to Average Net Assets C

Expenses before expense reductions

.64%

.64%

.65%

.69%

.71%

Expenses net of voluntary waivers, if any

.64%

.64%

.65%

.69%

.71%

Expenses net of all
reductions

.63%

.62%

.62%

.67%

.69%

Net investment income (loss)

3.90%

5.10%

5.36%

4.72%

4.62%

Supplemental Data

Net assets, end of period (000 omitted)

$ 849,125

$ 916,356

$ 818,427

$ 902,755

$ 776,116

Portfolio turnover rate

164%

164%

140%

121%

156%

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

B Calculated based on average shares outstanding during the period.

C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from directed brokerage or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflects expenses after reimbursement by the investment adviser but prior to reductions from directed brokerage or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

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

Annual Report

Notes to Financial Statements

For the period ended September 30, 2002

1. Significant Accounting Policies.

Fidelity Asset Manager: Income (the fund) is a fund of Fidelity Charles Street 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 financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:

Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.

Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.

Annual Report

Notes to Financial Statements - continued

1. Significant Accounting Policies - continued

Foreign Currency - continued

The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 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, under the general supervision of the Board of Trustees. 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 the funds in the trust.

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Distributions are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, foreign currency transactions, prior period premium and discount on debt securities, defaulted bonds, market discount, non-taxable dividends, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.

Annual Report

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

The tax-basis components of distributable earnings and the federal tax cost as of period end was as follows:

Unrealized appreciation

$ 21,192,884

Unrealized depreciation

(57,554,070)

Net unrealized appreciation (depreciation)

(36,361,186)

Undistributed ordinary income

3,070,886

Capital loss carryforward

(55,333,823)

Total Distributable earnings

$ (88,624,123)

Cost for federal income tax purposes

$ 918,847,438

The tax character of distributions paid during the year was as follows:

Ordinary Income

$ 34,805,397

Change in Accounting Principle. Effective October 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $979,414 decrease to the cost of securities held and a corresponding decrease to accumulated net undistributed realized gain (loss), based on securities held by the fund on October 1, 2001.

The effect of this change during the period, was to decrease net investment income (loss) by $20,330; decrease net unrealized appreciation/ depreciation by $164,675; and increase net realized gain (loss) by $185,005. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

2. Operating Policies.

Repurchase Agreements. Fidelity Management and Research Company (FMR) has received an Exemptive order from the Securities and Exchange Commission which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements, that are collateralized by commercial paper and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

Annual Report

Notes to Financial Statements - continued

2. Operating Policies - continued

Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is "marked to market" daily and equivalent deliverable securities are held for the transaction. The values of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.

Futures Contracts. The fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase the fund's exposure to the underlying instrument, while selling futures tends to decrease the fund's exposure to the underlying instrument or hedge other fund investments. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. The underlying face amount at value of any open futures contracts at period end is shown in the Schedule of Investments under the caption Futures Contracts. This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments or if the counter-parties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded.

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

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

Annual Report

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 of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.

Transfer Agent Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .16% of average net assets.

Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $6,151,333 for the period.

Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.

5. Committed Line of Credit.

The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.

Annual Report

Notes to Financial Statements - continued

6. Expense Reductions.

Certain security trades were directed to brokers who paid $67,737 of the fund's expenses. In addition, 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, these credits reduced the fund's custody and transfer agent expenses by $3,405 and $27,063, respectively.

7. Other Information.

At the end of the period, one unaffiliated shareholder was the owner of record of 15% of the total outstanding shares of the fund.

Annual Report

Independent Auditors' Report

To the Trustees of Fidelity Charles Street Trust and Shareholders of Fidelity Asset Manager: Income:

We have audited the accompanying statement of assets and liabilities of Fidelity Asset Manager: Income (the Fund), a fund of Fidelity Charles Street Trust, including the portfolio of investments, as of September 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Asset Manager: Income as of September 30, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Boston, Massachusetts

November 8, 2002

Annual Report

Trustees and Officers

The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and William S. Stavropoulos, each of the Trustees oversees 266 funds advised by FMR or an affiliate. Mr. McCoy oversees 268 funds advised by FMR or an affiliate, and Mr. Stavropoulos oversees 231 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (72)**

Year of Election or Appointment: 1981

President of Asset Manager: Income®. Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; a Director of Fidelity Management & Research (U.K.) Inc.; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc.

Abigail P. Johnson (40)**

Year of Election or Appointment: 2001
Senior Vice President of Asset Manager: Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds.

Peter S. Lynch (59)

Year of Election or Appointment: 1990
Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

** Edward C. Johnson 3d, Trustee and President of the funds, is Abigail P. Johnson's father.

Annual Report

Non-Interested Trustees:

Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation

J. Michael Cook (60)

Year of Election or Appointment: 2001

Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of AT&T (2001), International Flavors & Fragrances, Inc. (2000), Rockwell Automation International (2000), The Dow Chemical Company (2000), and HCA - The Healthcare Company (1999). He is a Member of the Advisory Board of the Securities Regulation Institute and of the Directorship Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Panel to the Comptroller General of the United States. He also serves as a member of the Board of Overseers of the Columbia Business School and a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater.

Ralph F. Cox (70)

Year of Election or Appointment: 1991
Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.

Phyllis Burke Davis (70)

Year of Election or Appointment: 1992
Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Toshiba International Advisory Group of Toshiba Corporation (2001) and a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc.

Robert M. Gates (59)

Year of Election or Appointment: 1997
Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), TRW Inc. (automotive, space, defense, and information technology), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines) and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy.

Donald J. Kirk (69)

Year of Election or Appointment: 1987
Mr. Kirk is a Public Governor of the National Association of Securities Dealers, Inc., and of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, and a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Stabilization Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations).

Marie L. Knowles (55)

Year of Election or Appointment: 2001

Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (58)

Year of Election or Appointment: 2000
Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and Chief Executive Officer (1999) and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman and C.E.O. of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.

Marvin L. Mann (69)

Year of Election or Appointment: 1993
Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage, 1997) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama.

William O. McCoy (68)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).

William S. Stavropoulos (63)

Year of Election or Appointment: 2001

Mr. Stavropoulos also serves as a Trustee (2001) or Member of the Advisory Board (2000) of other investment companies advised by FMR. He is Chairman of the Board and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions, 1997), BellSouth Corporation (telecommunications, 1997), and the Chemical Financial Corporation. He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research and Fordham University. In addition, Mr. Stavropoulos is a member of the American Chemical Society, The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science.

Executive Officers:

Correspondence intended for each executive officer may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Bart A. Grenier (43)

Year of Election or Appointment: 2001

Vice President of Asset Manager: Income. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), and Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000) Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000).

Richard C. Habermann (62)

Year of Election or Appointment: 1996
Vice President of Asset Manager: Income (1996). Mr. Habermann is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Habermann managed a variety of Fidelity funds.

Charles Mangum (38)

Year of Election or Appointment: 2001
Vice President of Asset Manager: Income. Mr. Mangum is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Mangum managed a variety of Fidelity funds.

Jeffrey Moore (36)

Year of Election or Appointment: 2002
Vice President of Asset Manager: Income. Prior to assuming his current responsibilities, Mr. Moore served as a fixed-income analyst and portfolio manager.

John Todd (53)

Year of Election or Appointment: 1996
Vice President of Asset Manager: Income. Mr. Todd is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Todd managed a variety of Fidelity funds.

Eric D. Roiter (53)

Year of Election or Appointment: 1998

Secretary of Asset Manager: Income (1998). He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).

Maria F. Dwyer (43)

Year of Election or Appointment: 2002

Treasurer of Asset Manager: Income. She also serves as Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.

John H. Costello (56)

Year of Election or Appointment: 1992

Assistant Treasurer of Asset Manager: Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

Francis V. Knox, Jr. (55)

Year of Election or Appointment: 2002

Assistant Treasurer of Asset Manager: Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), Compliance Officer of FMR Corp., and Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002) and Fidelity Management & Research (Far East) (1991-2002).

Thomas J. Simpson (44)

Year of Election or Appointment: 2000

Assistant Treasurer of Asset Manager: Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995).

Annual Report

Distributions

A total of 12.15% 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 4% of the dividends distributed in October, November, and December of 2001, and 9% from February through September of 2002, as qualifying for the dividends-received deduction for corporate shareholders.

The fund will notify shareholders in January 2003 of amounts for use in preparing 2002 income tax returns.

Annual Report

Managing Your Investments

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

By Phone

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

(phone_graphic)

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

Press

1   For mutual fund and brokerage trading.

2   For quotes.*

3   For account balances and holdings.

4   To review orders and mutual
fund activity.

5   To change your PIN.

*0   To speak to a Fidelity representative.

By PC

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

(computer_graphic)

Fidelity's Web Site
www.fidelity.com

If you are not currently on the Internet, call EarthLink Sprint at 1-800-EarthLink, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider.

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

Annual Report

To Write Fidelity

We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.

(letter_graphic)

Making Changes
To Your Account

(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

(letter_graphic)

For Non-Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Overnight Express
Fidelity Investments
2300 Litton Lane - KH2B
Hebron, KY 41048

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
2300 Litton Lane - KH2GC
Hebron, KY 41048-9397

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

(letter_graphic)

For Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
2300 Litton Lane - KH2GC
Hebron, KY 41048-9397

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

Annual Report

To Visit Fidelity

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

Arizona

7001 West Ray Road
Chandler, AZ

7373 N. Scottsdale Road
Scottsdale, AZ

California

815 East Birch Street
Brea, CA

1411 Chapin Avenue
Burlingame, CA

851 East Hamilton Avenue
Campbell, CA

527 North Brand Boulevard
Glendale, CA

19200 Von Karman Avenue
Irvine, CA

601 Larkspur Landing Circle
Larkspur, CA

10100 Santa Monica Blvd.
Los Angeles, CA

27101 Puerta Real
Mission Viejo, CA

73-575 El Paseo
Palm Desert, CA

251 University Avenue
Palo Alto, CA

1760 Challenge Way
Sacramento, CA

7676 Hazard Center Drive
San Diego, CA

8 Montgomery Street
San Francisco, CA

21701 Hawthorne Boulevard
Torrance, CA

1400 Civic Drive
Walnut Creek, CA

6300 Canoga Avenue
Woodland Hills, CA

Colorado

1625 Broadway
Denver, CO

9185 East Westview Road
Littleton, CO

Connecticut

48 West Putnam Avenue
Greenwich, CT

265 Church Street
New Haven, CT

300 Atlantic Street
Stamford, CT

29 South Main Street
West Hartford, CT

Delaware

222 Delaware Avenue
Wilmington, DE

Florida

4400 N. Federal Highway
Boca Raton, FL

121 Alhambra Plaza
Coral Gables, FL

2948 N. Federal Highway
Ft. Lauderdale, FL

1907 West State Road 434
Longwood, FL

8880 Tamiami Trail, North
Naples, FL

3501 PGA Boulevard
West Palm Beach, FL

8065 Beneva Road
Sarasota, FL

1502 N. Westshore Blvd.
Tampa, FL

Georgia

3445 Peachtree Road, N.E.
Atlanta, GA

1000 Abernathy Road
Atlanta, GA

Illinois

One North LaSalle Street
Chicago, IL

1415 West 22nd Street
Oak Brook, IL

1700 East Golf Road
Schaumburg, IL

3232 Lake Avenue
Wilmette, IL

Indiana

4729 East 82nd Street
Indianapolis, IN

Kansas

5400 College Boulevard
Overland Park, KS

Maine

Three Canal Plaza
Portland, ME

Maryland

7401 Wisconsin Avenue
Bethesda, MD

One W. Pennsylvania Ave.
Towson, MD

Massachusetts

801 Boylston Street
Boston, MA

155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
Braintree, MA

44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

Annual Report

Michigan

280 Old N. Woodward Ave.
Birmingham, MI

43420 Grand River Avenue
Novi, MI

29155 Northwestern Hwy.
Southfield, MI

Minnesota

7600 France Avenue South
Edina, MN

Missouri

8885 Ladue Road
Ladue, MO

New Jersey

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
Paramus, NJ

New York

1055 Franklin Avenue
Garden City, NY

37 West Jericho Turnpike
Huntington Station, NY

1271 Avenue of the Americas
New York, NY

61 Broadway
New York, NY

350 Park Avenue
New York, NY

North Carolina

4611 Sharon Road
Charlotte, NC

Ohio

3805 Edwards Road
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

Oregon

16850 SW 72nd Avenue
Tigard, OR

Pennsylvania

600 West DeKalb Pike
King of Prussia, PA

1735 Market Street
Philadelphia, PA

12001 Perry Highway
Wexford, PA

Rhode Island

47 Providence Place
Providence, RI

Tennessee

6150 Poplar Avenue
Memphis, TN

Texas

10000 Research Boulevard
Austin, TX

4017 Northwest Parkway
Dallas, TX

12532 Memorial Drive
Houston, TX

2701 Drexel Drive
Houston, TX

400 East Las Colinas Blvd.
Irving, TX

14100 San Pedro
San Antonio, TX

19740 IH 45 North
Spring, TX

Utah

215 South State Street
Salt Lake City, UT

Virginia

1861 International Drive
McLean, VA

Washington

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

1518 6th Avenue
Seattle, WA

Washington, DC

1900 K Street, N.W.
Washington, DC

Wisconsin

595 North Barker Road
Brookfield, WI

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

Annual Report

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Spartan®

Investment Grade Bond

Fund

Annual Report

September 30, 2002

(2_fidelity_logos)(Registered_Trademark)

Contents

President's Message

<Click Here>

Ned Johnson on investing strategies.

Performance

<Click Here>

How the fund has done over time.

Fund Talk

<Click Here>

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

Investment Changes

<Click Here>

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

Independent Auditors' Report

<Click Here>

The auditors' opinion.

Trustees and Officers

<Click Here>

Distributions

<Click Here>

Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.

Other third party marks appearing herein are the property of their respective owners.

All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.

(Recycle graphic)   This report is printed on recycled paper using soy-based inks.

This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.

Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.

Neither the fund nor Fidelity Distributors Corporation is a bank.

For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.

Semiannual Report

President's Message

(photo_of_Edward_C_Johnson_3d)

Dear Shareholder:

The Dow Jones Industrial AverageSM - often used as a gauge of U.S. stock market performance - fell to its lowest point in four years during September 2002. The third quarter was the average's worst three-month stretch since the final quarter of 1987, and the Dow had its worst September since 1937. With equities in disarray, investors flocked to U.S. Treasury bonds, pushing yields of the bellwether 10-year Treasury note to 40-year lows.

While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs.

The longer your investment time frame, the less likely it is that you will be affected by short-term market volatility. A 10-year investment horizon appropriate for saving for a college education, for example, enables you to weather market cycles in a long-term fund, which may have a higher risk potential, but also has a higher potential rate of return.

An intermediate-length fund could make sense if your investment horizon is two to four years, while a short-term bond fund could be the right choice if you need your money in one or two years.

If your time horizon is less than a year, you might want to consider moving some of your bond investment into a money market fund. These funds seek income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these types of funds.

Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy.

If you have questions, please call us at 1-800-544-6666, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you.

Best regards,

/s/Edward C. Johnson 3d

Edward C. Johnson 3d

Annual Report

Performance: The Bottom Line

There are several ways to evaluate a fund's historical performance. You can look at cumulative total returns, average annual returns, or the growth of a hypothetical investment. 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). You can also look at the fund's income, as reflected in the fund's yield, to measure performance. If Fidelity had not reimbursed certain fund expenses, the total returns and dividends would have been lower. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Cumulative Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Life of
fund

Spartan ® Inv. Grade Bond

7.23%

43.34%

107.54%

LB Aggregate Bond

8.60%

45.79%

102.67%

Intermediate Investment Grade
Debt Funds Average

6.20%

37.16%

n/a*

Cumulative total returns show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on October 1, 1992. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Lehman Brothers® Aggregate Bond Index - a market value-weighted index of investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. You can also compare the fund's performance to the performance of mutual funds tracked by Lipper Inc. and grouped by similar objectives. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges.

Average Annual Total Returns

Periods ended September 30, 2002

Past 1
year

Past 5
years

Life of
fund

Spartan Inv. Grade Bond

7.23%

7.47%

7.57%

LB Aggregate Bond

8.60%

7.83%

7.32%

Intermediate Investment Grade Debt Funds Average

6.20%

6.51%

n/a*

Average annual total returns take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a different figure than that obtained by averaging the cumulative total returns and annualizing the result.)

* Not available

Annual Report

Performance - continued

$10,000 Over Life of Fund

Let's say hypothetically that $10,000 was invested in Spartan® Investment Grade Bond Fund on October 1, 1992, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Aggregate Bond Index did over the same period.



3

Understanding Performance

How a fund did yesterday is no guarantee of how it will do tomorrow. Bond prices, for example, generally move in the opposite direction of interest rates. In turn, the share price, return and yield of a fund that invests in bonds will vary. When you sell your shares, they could be worth more or less than what you paid for them.

Annual Report

Total Return Components

Years ended September 30,

2002

2001

2000

1999

1998

Dividend returns

5.03%

6.69%

6.73%

5.83%

6.56%

Capital returns

2.20%

6.20%

-0.10%

-5.73%

4.39%

Total returns

7.23%

12.89%

6.63%

0.10%

10.95%

Total return components include both dividend returns and capital returns. A dividend return reflects the actual dividends paid by the fund. A capital return reflects both the amount paid by the fund to shareholders as capital gain distributions and changes in the fund's share price. Both returns assume the dividends or capital gains, if any, paid by the fund are reinvested.

Dividends and Yield

Periods ended September 30, 2002

Past 1
month

Past 6
months

Past 1
year

Dividends per share

4.09¢

25.34¢

50.79¢

Annualized dividend rate

4.63%

4.80%

4.82%

30-day annualized yield

4.45%

-

-

Dividends per share show the income paid by the fund for a set period. If you annualize this number, based on an average share price of $10.76 over the past one month, $10.54 over the past six months and $10.53 over the past one year, you can compare the fund's income over these three periods. The 30-day annualized yield is a standard formula for all bond funds based on the yields of the bonds in the fund, averaged over the past 30 days. This figure shows you the yield characteristics of the fund's investments at the end of the period. It also helps you compare funds from different companies on an equal basis. If Fidelity had not reimbursed certain fund expenses during the periods shown, the yield would have been 4.35%.

Annual Report

Fund Talk: The Manager's Overview

Market Recap

Investment-grade bonds sparkled during the one-year period that ended September 30, 2002, as the economic recovery stalled and the prospects firmed for a continued favorable interest rate environment. The Lehman Brothers® Aggregate Bond Index, a proxy for taxable-bond performance, returned 8.60%, well ahead of flagging stock markets that incurred yet another round of double-digit declines. Negative sentiment infesting the equity markets - due to heightened concerns about corporate governance, terrorism and geopolitical unrest - further boosted demand for bonds, as risk-averse investors sought out safer havens offering some return on their assets. A strong flight to quality in Treasuries and high-quality, higher-yielding government agency securities resulted, as reflected in the stellar performance of the Lehman Brothers U.S. Agency and Treasury indexes, which registered gains of 9.38% and 10.45%, respectively. Meanwhile, the Lehman Brothers Credit Bond Index posted a distant third-place finish, returning 8.19%. While corporates benefited from some economic improvement, eroding investor confidence in the sector, along with widespread credit-quality downgrades and the resulting liquidity crisis, curbed their advances. The Lehman Brothers Mortgage-Backed Securities Index brought up the rear, returning 7.36%. While enjoying lower volatility and reduced prepayment risk for much of the period, mortgage securities retreated during the summer as record-low interest rates triggered another massive refinancing wave, far stronger than the one spawned during the fall of 2001.

(Portfolio Manager photograph)
An interview with Kevin Grant, Portfolio Manager of Spartan Investment Grade Bond Fund

Q. How did the fund perform, Kevin?

A. For the 12 months ending September 30, 2002, the fund returned 7.23%. During the same period, the Lipper Inc. intermediate investment grade debt funds average returned 6.20%, while the Lehman Brothers Aggregate Bond Index gained 8.60%.

Q. What factors drove the fund's performance during the past year?

A. Bonds rallied sharply in the face of historically weak equity markets, a sluggish economy and the steady drumbeat of negative headlines that marked the past 12 months. Interest rates across the yield curve plunged to levels not seen in decades, as skittish investors flocked to high-quality, low-risk government bonds such as Treasuries and agencies. Against a backdrop of falling rates, the fund turned in solid positive absolute returns. However, its performance on a relative basis was mixed. Despite outperforming its peers, the fund trailed the index, largely due to its underweighting in strong-performing government securities. Unfortunately, the yield advantage gained from emphasizing the spread sectors - namely corporate bonds and mortgage securities - was unable to overcome the sharp rally in Treasury prices during the period.

Annual Report

Fund Talk: The Manager's Overview - continued

Q. What was your strategy with corporates?

A. It was a period marked by both unprecedented volatility and incredible opportunity in the corporate market. Despite heightened credit risk - fueled by a record number of rating agency downgrades, widespread company mismanagement concerns and corporate accounting issues - we still managed to generate respectable returns in the sector. While the performance of our holdings lagged those of the index, they helped us widen our lead over the Lipper peer average. Risk management was important for the fund, as diversification and good credit analysis helped us sidestep several prominent corporate bond issuers that failed to maintain their investment-grade quality. That's not to say we escaped unscathed, however. We had some exposure to troubled securities - primarily within the telecommunications and utilities sectors - but they were generally smaller positions than those held by our average competitor. This positioning also helped reduce our risk exposure and limit our downside versus the index. We offset some of our losses by overweighting strong-performing real-estate issues and large, high-quality banks, which benefited from solid balance sheets, high quality of assets and scant credit problems. Adding to the fund's holdings in Yankee bonds - dollar-denominated securities issued by foreign entities - was a defensive strategy that also helped. Another key was my decision to selectively trim the fund's corporate weighting heading into the spring as market conditions deteriorated. I took profits in several names, including some economically sensitive cyclical issues that had recovered nicely early in 2002 when it looked like the economy was improving. In hindsight, I wish I had sold more corporates, considering that even the best names faltered during the second half of the period.

Q. How about the fund's positioning in mortgages?

A. The fund benefited from my focus on high-quality mortgage securities that were trading at very attractive yield-spread levels relative to Treasuries. As mortgage rates continued to fall sharply, homeowners grew hungry to refinance, and mortgage bankers became more efficient and aggressive in helping them do so. As such, I focused on securities that were less susceptible to being prepaid, including newly issued current-coupon mortgages in the 5.5%-6% range and commercial mortgage-backed securities. At the same time, I avoided bonds trading at a premium - or above par - which were the most vulnerable to prepayment. Increased volatility and prepayments are negatives for bondholders, given that future cash flows may have to be reinvested at potentially lower interest rates. This strategy of avoiding premium bonds worked, as the market experienced huge waves of mortgage refinancing and mortgage security prepayment during the fall of 2001 and again this past summer, when refinancing activity hit new highs.

Q. What's your outlook?

A. Interest rates are currently very low, but they could go lower. The good news for bondholders is that Treasuries now represent an even smaller share - around 20% - of the investment-grade universe, while the rest of the market arguably has become less correlated in recent years with the general level of interest rates. So, even if the economy were to improve and Treasury yields were to rise moderately - and their prices were to fall - the other sectors still could produce decent total returns. Of course, if rates were to rise significantly in response to a strong economic recovery, I'd have to re-evaluate the fund's positioning.

Annual Report

The views expressed in this report reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Fund Facts

Goal: high level of current income

Fund number: 448

Trading symbol: FSIBX

Start date: October 1, 1992

Size: as of September 30, 2002, more than $2.7 billion

Manager: Kevin Grant, since 1997; manager, several Fidelity investment-grade taxable bond funds; joined Fidelity in 1993

3

Kevin Grant on his investment approach for the coming months:

"Corporate bonds are now very cheap and are priced in anticipation of a double-dip recession. While I've added some exposure to the sector of late, I've done so prudently. I still maintain only a modest overweighting in the sector because I want the fund to remain flexible enough to take advantage of opportunities whenever and wherever they arise in the market. The challenge for me going forward will be to continue to find the best corporate names at the best prices, while maintaining broad diversification.

"At the end of the period, I felt that the mortgage market offered the best risk/reward profile of any investment-grade sector. After dramatically underperforming Treasuries in recent months, mortgages have become pretty cheap. I think of the mortgage market today as two markets: the old one, which is rapidly getting paid off; and the new one that is replacing it with very low coupon bonds. Interest rates are already at historically low levels, and these mortgages are so low in coupon that it would require rates to fall even further for them to have prepayments, which is unlikely. So, the new market is actually quite different, probably quite a bit safer and, given its compelling yields, an attractive alternative to high-grade corporate bonds. That said, I may look to increase the fund's stake in mortgages going forward."

Annual Report

Investment Changes

Average Years to Maturity as of September 30, 2002

% of fund's
investments

% of fund's investments
6 months ago

Years

6.9

6.6

Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount.

Duration as of September 30, 2002

6 months ago

Years

3.7

4.9

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.

Quality Diversification (% of fund's investments)

As of September 30, 2002

As of March 31, 2002

U.S. Governments 48.7%

U.S. Governments 51.9%

AAA 4.9%

AAA 2.9%

AA 3.0%

AA 3.0%

A 14.4%

A 13.5%

BBB 15.4%

BBB 15.2%

BB and Below 1.6%

BB and Below 0.5%

Not Rated 0.1%

Not Rated 0.0%

Short-Term
Investments 11.9%

Short-Term
Investments 13.0%



We have used ratings from Moody's Investors Service, 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.

Asset Allocation (% of fund's net assets)

As of September 30, 2002 *

As of March 31, 2002 **

Corporate Bonds 33.6%

Corporate Bonds 31.6%

U.S. Governments 54.7%

U.S. Governments 61.2%

Asset-Backed
Securities 6.5%

Asset-Backed
Securities 5.5%

CMOs and Other Mortgage Related Securities 2.1%

CMOs and Other Mortgage Related Securities 1.8%

Other Investments 1.3%

Other Investments 2.0%

Short-Term
Investments and
Net Other Assets 1.8%

Short-Term
Investments and
Net Other Assets (dagger) (2.1)%

* Foreign investments

8.2%

** Foreign investments

7.3%



(dagger) Net Other Assets are not included in the pie chart.

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

Annual Report

Investments September 30, 2002

Showing Percentage of Net Assets

Nonconvertible Bonds - 32.2%

Principal
Amount (000s)

Value (Note 1)
(000s)

CONSUMER DISCRETIONARY - 2.4%

Media - 2.4%

AOL Time Warner, Inc. 6.875% 5/1/12

$ 4,185

$ 3,808

British Sky Broadcasting Group PLC (BSkyB) yankee 8.2% 7/15/09

7,750

7,866

Clear Channel Communications, Inc. 7.875% 6/15/05

2,725

2,838

Continental Cablevision, Inc.:

8.3% 5/15/06

1,775

1,731

9% 9/1/08

1,500

1,455

Cox Communications, Inc.:

7.125% 10/1/12

3,690

3,681

7.75% 8/15/06

2,000

2,066

7.75% 11/1/10

6,900

7,142

News America Holdings, Inc.:

7.75% 1/20/24

10,000

9,491

8% 10/17/16

6,000

6,491

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

4,400

4,380

Time Warner Entertainment Co. LP:

8.375% 3/15/23

810

760

8.375% 7/15/33

14,275

13,240

8.875% 10/1/12

750

756

10.15% 5/1/12

500

515

66,220

CONSUMER STAPLES - 0.7%

Food Products - 0.1%

Dole Food Co., Inc. 7.25% 5/1/09

2,785

2,451

Tobacco - 0.6%

Philip Morris Companies, Inc. 7% 7/15/05

3,600

3,950

RJ Reynolds Tobacco Holdings, Inc.:

6.5% 6/1/07

3,915

4,126

7.25% 6/1/12

4,100

4,375

7.75% 5/15/06

2,795

3,090

15,541

TOTAL CONSUMER STAPLES

17,992

ENERGY - 0.7%

Oil & Gas - 0.7%

Duke Energy Field Services LLC 7.875% 8/16/10

6,000

6,310

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

ENERGY - continued

Oil & Gas - continued

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

$ 3,000

$ 3,354

Oryx Energy Co. 8.375% 7/15/04

5,000

5,444

The Coastal Corp. 7.75% 10/15/35

35

22

Valero Energy Corp. 6.875% 4/15/12

3,225

3,175

18,305

FINANCIALS - 17.9%

Banks - 3.0%

Bank of Montreal 6.1% 9/15/05

3,000

3,255

Bank One NA, Chicago 5.5% 3/26/07

4,770

5,178

BankBoston Corp. 6.625% 2/1/04

110

115

Barclays Bank PLC yankee 8.55% 9/29/49 (c)(d)

1,595

1,933

Capital One Bank:

6.375% 2/15/03

1,600

1,576

6.65% 3/15/04

400

379

Fleet Financial Group, Inc. 7.125% 4/15/06

260

287

FleetBoston Financial Corp. 7.25% 9/15/05

7,730

8,458

HSBC Finance Nederland BV 7.4% 4/15/03 (d)

250

257

KeyCorp. 4.625% 5/16/05

5,045

5,253

Korea Development Bank:

7.125% 4/22/04

1,710

1,828

7.375% 9/17/04

3,060

3,327

Landesbank Baden-Wurttemberg 6.35% 4/1/12

2,600

2,938

MBNA America Bank NA 6.625% 6/15/12

4,320

4,240

MBNA Corp.:

6.34% 6/2/03

800

815

6.875% 11/15/02

3,600

3,619

7.5% 3/15/12

5,360

5,655

Merita Bank Ltd. yankee 6.5% 1/15/06

3,000

3,298

PNC Funding Corp. 5.75% 8/1/06

3,870

4,126

Royal Bank of Scotland Group PLC:

7.648% 12/31/49 (g)

3,705

4,108

7.816% 11/29/49

705

792

8.817% 3/31/49

2,845

3,235

9.118% 3/31/49

2,045

2,572

Union Planters Corp. 6.75% 11/1/05

1,200

1,330

Union Planters National Bank, Memphis 5.125% 6/15/07

2,385

2,567

Washington Mutual Bank 6.875% 6/15/11

3,500

3,981

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

FINANCIALS - continued

Banks - continued

Washington Mutual, Inc. 5.625% 1/15/07

$ 5,175

$ 5,507

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

2,200

2,640

83,269

Diversified Financials - 12.5%

ABN AMRO NA Holding Pfd. Capital Repackage Trust I yankee 6.523% 12/29/49 (c)(d)

3,000

3,038

American Gen. Finance Corp. 5.875% 7/14/06

11,700

12,566

Amvescap PLC:

5.9% 1/15/07

2,940

3,144

6.375% 5/15/03

1,500

1,533

6.6% 5/15/05

7,750

8,389

Associates Corp. of North America 6% 7/15/05

5,000

5,388

Capital One Financial Corp. 7.125% 8/1/08

2,900

2,373

CIT Group, Inc.:

5.5% 2/15/04

980

993

7.75% 4/2/12

3,800

4,134

Citigroup, Inc.:

5.625% 8/27/12

7,000

7,306

7.25% 10/1/10

8,100

9,283

Conoco Funding Co. 6.35% 10/15/11

4,265

4,801

Countrywide Home Loans, Inc.:

5.5% 8/1/06

12,785

13,430

5.625% 5/15/07

3,900

4,135

6.85% 6/15/04

965

1,023

Credit Suisse First Boston (USA), Inc.:

5.875% 8/1/06

4,300

4,609

6.5% 1/15/12

2,770

2,957

Delta Air Lines, Inc. pass thru trust certificate 7.57% 11/18/10

880

937

Deutsche Telekom International Finance BV 8.25% 6/15/05

7,380

7,915

Devon Financing Corp. U.L.C. 6.875% 9/30/11

4,140

4,649

Ford Motor Credit Co.:

5.8% 1/12/09

3,170

2,862

6.5% 1/25/07

8,140

7,855

6.875% 2/1/06

12,200

12,007

7.375% 10/28/09

3,960

3,765

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

FINANCIALS - continued

Diversified Financials - continued

Ford Motor Credit Co.: - continued

7.875% 6/15/10

$ 8,525

$ 8,407

General Electric Capital Corp.:

6% 6/15/12

4,500

4,848

6.125% 2/22/11

14,500

15,744

General Motors Acceptance Corp.:

6.38% 1/30/04

4,720

4,839

6.75% 1/15/06

7,080

7,337

6.875% 9/15/11

6,055

5,902

Goldman Sachs Group, Inc.:

5.7% 9/1/12

4,100

4,180

6.6% 1/15/12

9,250

10,154

Household Finance Corp.:

6.375% 10/15/11

7,955

7,395

7% 5/15/12

4,000

3,854

8% 5/9/05

1,585

1,658

HSBC Capital Funding LP 9.547% 12/31/49 (c)(d)

4,300

5,207

ING Capital Funding Trust III 8.439% 12/31/10

11,110

12,806

J.P. Morgan Chase & Co. 6.75% 2/1/11

6,835

7,456

John Deere Capital Corp. 2.42% 9/17/04 (g)

8,000

8,003

Lehman Brothers Holdings, Inc. 6.625% 1/18/12

200

219

Mellon Funding Corp. 7.5% 6/15/05

1,500

1,695

Merrill Lynch & Co., Inc.:

6.13% 5/16/06

1,235

1,336

6.15% 1/26/06

6,400

6,902

Morgan Stanley 6.6% 4/1/12

4,825

5,249

Newcourt Credit Group, Inc. 6.875% 2/16/05

1,850

1,931

NiSource Finance Corp.:

7.625% 11/15/05

8,620

8,805

7.875% 11/15/10

5,940

6,107

Petronas Capital Ltd. 7% 5/22/12 (d)

9,140

10,168

Popular North America, Inc. 6.125% 10/15/06

5,570

6,013

Powergen US Funding LLC 4.5% 10/15/04

2,085

2,152

Sears Roebuck Acceptance Corp.:

6.7% 4/15/12

5,200

5,509

7% 6/1/32

8,000

7,940

Sprint Capital Corp.:

5.875% 5/1/04

290

251

6.875% 11/15/28

18,830

10,853

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

FINANCIALS - continued

Diversified Financials - continued

Sprint Capital Corp.: - continued

7.125% 1/30/06

$ 2,800

$ 2,110

8.75% 3/15/32

4,710

3,154

TCI Communications Financing III 9.65% 3/31/27

2,500

2,355

TXU Eastern Funding 6.75% 5/15/09

4,200

4,031

UBS Preferred Funding Trust 1 8.622% 12/29/49

4,400

5,261

Verizon Global Funding Corp.:

6.125% 6/15/07

5,800

6,039

7.25% 12/1/10

5,000

5,232

7.375% 9/1/12

3,275

3,448

343,642

Real Estate - 2.4%

Cabot Industrial Property LP 7.125% 5/1/04

2,280

2,387

Camden Property Trust 5.875% 6/1/07

2,665

2,800

CenterPoint Properties Trust:

5.75% 8/15/09

3,065

3,112

6.75% 4/1/05

1,100

1,188

Duke Realty LP 7.3% 6/30/03

4,000

4,134

EOP Operating LP:

6.5% 1/15/04

2,255

2,347

6.625% 2/15/05

10,010

10,744

6.75% 2/15/08

6,270

6,871

7.75% 11/15/07

1,345

1,538

ERP Operating LP 7.1% 6/23/04

4,000

4,296

Gables Realty LP:

5.75% 7/15/07

5,500

5,743

6.8% 3/15/05

765

830

Mack-Cali Realty LP 7.75% 2/15/11

7,300

8,223

Merry Land & Investment Co., Inc. 7.25% 6/15/05

3,150

3,471

ProLogis Trust 6.7% 4/15/04

970

1,018

Regency Centers LP 6.75% 1/15/12

5,280

5,791

64,493

TOTAL FINANCIALS

491,404

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

INDUSTRIALS - 1.7%

Aerospace & Defense - 0.5%

Lockheed Martin Corp. 8.2% 12/1/09

$ 3,000

$ 3,686

Raytheon Co.:

5.7% 11/1/03

3,400

3,473

7.9% 3/1/03

5,395

5,484

12,643

Airlines - 0.0%

Delta Air Lines, Inc. equipment trust certificate 8.54% 1/2/07

1,984

1,389

Industrial Conglomerates - 0.5%

Tyco International Group SA:

6.875% 1/15/29

3,000

2,295

yankee 6.75% 2/15/11

14,250

11,756

14,051

Road & Rail - 0.7%

Burlington Northern Santa Fe Corp. 6.53% 7/15/37

10,000

10,680

Norfolk Southern Corp. 7.25% 2/15/31

7,400

8,603

19,283

TOTAL INDUSTRIALS

47,366

INFORMATION TECHNOLOGY - 0.7%

Communications Equipment - 0.3%

Motorola, Inc.:

6.75% 2/1/06

1,000

984

8% 11/1/11

6,355

6,275

7,259

Computers & Peripherals - 0.4%

Hewlett-Packard Co.:

5.5% 7/1/07

5,020

5,193

6.5% 7/1/12

4,495

4,689

Sun Microsystems, Inc. 7.5% 8/15/06

1,000

997

10,879

TOTAL INFORMATION TECHNOLOGY

18,138

MATERIALS - 0.2%

Metals & Mining - 0.1%

Falconbridge Ltd. 7.35% 6/5/12

2,105

2,254

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

MATERIALS - continued

Paper & Forest Products - 0.1%

Weyerhaeuser Co. 6.125% 3/15/07 (d)

$ 4,300

$ 4,580

TOTAL MATERIALS

6,834

TELECOMMUNICATION SERVICES - 3.9%

Diversified Telecommunication Services - 3.1%

AT&T Corp. 6.5% 3/15/29

25,095

20,829

British Telecommunications PLC:

8.375% 12/15/10

6,800

7,989

8.875% 12/15/30

3,980

4,799

Cable & Wireless Optus Finance Property Ltd. 8.125% 6/15/09 (d)

2,300

2,684

Citizens Communications Co. 8.5% 5/15/06

3,785

3,634

France Telecom SA 9.25% 3/1/11

13,000

14,181

GTE Corp. 7.83% 5/1/23

1,000

1,033

Koninklijke KPN NV yankee 8% 10/1/10

6,200

6,851

Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06

3,075

3,082

Telefonos de Mexico SA de CV 8.25% 1/26/06

8,500

8,872

Teleglobe Canada, Inc. yankee:

7.2% 7/20/09 (b)

8,440

211

7.7% 7/20/29 (b)

2,611

65

TELUS Corp.:

7.5% 6/1/07

10,240

8,346

8% 6/1/11

3,000

2,295

84,871

Wireless Telecommunication Services - 0.8%

AT&T Wireless Services, Inc.:

7.35% 3/1/06

1,000

870

8.75% 3/1/31

9,345

6,728

Cingular Wireless LLC:

5.625% 12/15/06

6,800

6,736

6.5% 12/15/11

4,755

4,576

7.125% 12/15/31

4,000

3,521

22,431

TOTAL TELECOMMUNICATION SERVICES

107,302

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

UTILITIES - 4.0%

Electric Utilities - 2.8%

Allegheny Energy Supply Co. LLC 8.25% 4/15/12 (d)

$ 2,100

$ 1,223

Avon Energy Partners Holdings:

6.46% 3/4/08 (d)

3,200

3,315

7.05% 12/11/07 (d)

6,000

6,393

Constellation Energy Group, Inc.:

6.35% 4/1/07

4,790

4,936

7% 4/1/12

3,105

3,233

Dominion Resources, Inc. 6.25% 6/30/12

2,820

3,053

FirstEnergy Corp.:

5.5% 11/15/06

4,500

4,359

6.45% 11/15/11

8,295

7,801

FPL Group Capital, Inc. 6.125% 5/15/07

3,090

3,340

Hydro-Quebec:

6.3% 5/11/11

15,500

17,845

yankee 8% 2/1/13

250

323

Illinois Power Co. 7.5% 6/15/09

4,800

3,912

Israel Electric Corp. Ltd. 7.75% 12/15/27 (d)

2,445

2,300

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

3,470

3,772

Reliant Energy Resources Corp. 8.125% 7/15/05

3,000

2,709

TECO Energy, Inc.:

6.125% 5/1/07

5,375

4,980

7% 5/1/12

2,080

1,865

Texas Utilities Co. 6.375% 1/1/08

1,065

1,021

76,380

Gas Utilities - 0.9%

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

1,200

1,312

El Paso Energy Corp. 7.75% 1/15/32

195

125

KeySpan Corp.:

7.25% 11/15/05

3,390

3,781

7.625% 11/15/10

2,500

2,959

Ras Laffan Liquid Natural Gas Co. Ltd. yankee 8.294% 3/15/14 (d)

5,200

5,818

Sempra Energy 7.95% 3/1/10

1,650

1,786

Tennessee Gas Pipeline Co. 7.625% 4/1/37

2,930

2,227

Texas Eastern Transmission Corp.:

5.25% 7/15/07

1,395

1,457

7.3% 12/1/10

3,435

3,880

23,345

Nonconvertible Bonds - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

UTILITIES - continued

Multi-Utilities & Unregulated Power - 0.3%

Williams Companies, Inc.:

7.125% 9/1/11

$ 8,715

$ 5,403

7.5% 1/15/31

2,010

1,085

8.125% 3/15/12 (d)

4,725

3,024

9,512

TOTAL UTILITIES

109,237

TOTAL NONCONVERTIBLE BONDS

(Cost $880,285)

882,798

U.S. Government and Government Agency Obligations - 14.2%

U.S. Government Agency Obligations - 4.5%

Fannie Mae:

5% 5/14/07

16,700

17,301

5.25% 6/15/06

5,145

5,580

5.5% 5/2/06

7,740

8,339

6.25% 2/1/11

3,210

3,565

6.25% 7/19/11

17,800

18,725

6.625% 11/15/10

6,070

7,083

7.25% 1/15/10

14,600

17,640

Federal Home Loan Bank 7.25% 5/15/03

9,370

9,712

Financing Corp. - coupon STRIPS 0% 3/26/04

5,606

5,440

Freddie Mac:

2.875% 9/26/05

13,800

13,803

5.875% 3/21/11

15,425

16,770

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

123,958

U.S. Treasury Obligations - 9.7%

U.S. Treasury Bonds:

6.125% 11/15/27

17,300

20,563

6.125% 8/15/29

134,135

160,538

6.375% 8/15/27

8,050

9,847

9.875% 11/15/15

4,860

7,616

11.25% 2/15/15

18,900

32,007

U.S. Treasury Notes:

4.375% 5/15/07

440

475

4.75% 11/15/08

8,200

9,006

U.S. Government and Government Agency Obligations - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

U.S. Treasury Obligations - continued

U.S. Treasury Notes: - continued

5% 8/15/11

$ 18,010

$ 20,002

6% 8/15/09

5,500

6,440

TOTAL U.S. TREASURY OBLIGATIONS

266,494

TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS

(Cost $357,237)

390,452

U.S. Government Agency - Mortgage Securities - 38.1%

Fannie Mae - 23.7%

5.5% 1/1/09 to 4/1/11

6,447

6,726

5.5% 10/1/17 (e)

40,806

42,005

5.5% 12/1/32 (e)

11,000

11,038

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

68,378

70,446

6% 10/1/32 (e)

61,725

63,403

6.5% 12/1/25 to 8/1/32 (f)

176,587

183,246

6.5% 10/1/32 (e)

231,618

239,869

7% 3/1/23 to 4/1/32

16,563

17,343

7.5% 7/1/25 to 12/1/30

15,879

16,823

9.5% 4/1/17 to 12/1/18

422

468

TOTAL FANNIE MAE

651,367

Freddie Mac - 0.1%

8.5% 5/1/25 to 8/1/27

1,417

1,522

Government National Mortgage Association - 14.3%

6% 10/15/08 to 7/15/29

4,430

4,633

6.5% 10/15/27 to 8/15/32

11,476

11,987

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

326,034

342,501

7.5% 12/15/05 to 10/15/27

5,119

5,469

8% 1/15/30 to 6/15/32

15,849

17,012

8% 10/1/32 (e)

10,000

10,706

8.5% 8/15/29 to 8/15/30

963

1,043

TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

393,351

TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES

(Cost $1,022,907)

1,046,240

Asset-Backed Securities - 3.2%

Principal
Amount (000s)

Value (Note 1)
(000s)

American Express Credit Account Master Trust 6.1%
12/15/06

$ 2,600

$ 2,763

Capital One Master Trust 5.45% 3/16/09

7,800

8,380

Capital One Multi-Asset Execution Trust 2.48%
7/15/08 (e)(g)

5,185

5,159

Chase Manhattan Auto Owner Trust 5.06% 2/15/08

1,575

1,632

Ford Credit Auto Owner Trust:

5.54% 12/15/05

3,000

3,193

5.71% 9/15/05

1,775

1,880

Honda Auto Receivables Owner Trust 5.09% 10/18/06

3,525

3,683

Household Home Equity Loan Trust 2.12% 4/20/32 (g)

12,042

11,998

JCPenney Master Credit Card Trust 5.5% 6/15/07

13,400

13,897

MBNA Credit Card Master Note Trust 2.1831%
1/15/09 (g)

24,500

24,252

Morgan Stanley Dean Witter Capital I Trust 9.5%
6/25/32 (d)

4,684

4,678

Sears Credit Account Master Trust II 6.75% 9/16/09

6,300

7,011

TOTAL ASSET-BACKED SECURITIES

(Cost $86,221)

88,526

Collateralized Mortgage Obligations - 0.4%

U.S. Government Agency - 0.4%

Freddie Mac Multi-class Mortgage Ctfs. of Prtn. guaranteed REMIC planned amortization class Series 1669 Class H, 6.5% 7/15/23
(Cost $9,669)

10,000

10,782

Commercial Mortgage Securities - 1.2%

Commercial Resecuritization Trust sequential pay
Series 1999-ABC1 Class A, 6.74% 1/1/09 (d)

4,670

5,042

CS First Boston Mortgage Securities Corp.:

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

3,100

3,665

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

1,065

1,179

DLJ Commercial Mortgage Corp. sequential pay
Series 2000-CF1 Class A1B, 7.62% 5/10/10

8,000

9,514

Commercial Mortgage Securities - continued

Principal
Amount (000s)

Value (Note 1)
(000s)

Equitable Life Assurance Society of the United States
Series 174:

Class B1, 7.33% 5/15/06 (d)

$ 1,000

$ 1,125

Class C1, 7.52% 5/15/06 (d)

1,000

1,118

GS Mortgage Securities Corp. II Series 1998-GLII Class E, 6.97% 4/13/31 (g)

2,000

1,974

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

7,000

7,862

TOTAL COMMERCIAL MORTGAGE SECURITIES

(Cost $27,788)

31,479

Foreign Government and Government Agency Obligations - 1.2%

Chilean Republic 7.125% 1/11/12

3,915

4,214

Malaysian Government 7.5% 7/15/11

3,325

3,869

New Brunswick Province yankee 7.625% 2/15/13

500

635

Ontario Province:

6% 2/21/06

4,600

5,068

7% 8/4/05

2,000

2,239

Polish Government 6.25% 7/3/12

3,965

4,302

United Mexican States:

7.5% 1/14/12

6,400

6,480

8.5% 2/1/06

3,325

3,633

9.875% 2/1/10

3,000

3,405

TOTAL FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS

(Cost $31,224)

33,845

Supranational Obligations - 0.1%

Corporacion Andina de Fomento 6.875% 3/15/12
(Cost $3,037)

3,070

3,282

Fixed-Income Funds - 8.4%

Shares

Fidelity Ultra-Short Central Fund (a)
(Cost $232,000)

2,322,510

230,393

Cash Equivalents - 13.6%

Maturity
Amount (000s)

Value (Note 1)
(000s)

Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.97%, dated 9/30/02 due 10/1/02)
(Cost $371,787)

$ 371,807

$ 371,787

TOTAL INVESTMENT PORTFOLIO - 112.6%

(Cost $3,022,155)

3,089,584

NET OTHER ASSETS - (12.6)%

(345,800)

NET ASSETS - 100%

$ 2,743,784

Legend

(a) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request.

(b) Non-income producing - issuer filed for bankruptcy or is in default of interest payments.

(c) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end.

(d) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $69,765,000 or 2.5% of net assets.

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

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

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

Other Information

Purchases and sales of securities, other than short-term securities, aggregated $7,071,476,000 and $6,811,053,000, respectively, of which long-term U.S. government and government agency obligations aggregated $6,168,104,000 and $6,120,211,000, respectively.

The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which the loans were outstanding amounted to $32,676,000. The weighted average interest rate was 1.87%. Interest earned from the interfund lending program amounted to $7,000 and is included in interest income on the Statement of Operations. At period end there were no interfund loans outstanding.

Income Tax Information

The fund hereby designates approximately $1,275,000 as a 20% rate capital gain dividend for the purpose of the dividend paid deduction.

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

Annual Report

Financial Statements

Statement of Assets and Liabilities

Amounts in thousands (except per-share amount)

September 30, 2002

Assets

Investment in securities, at value (including repurchase agreements of $371,787) (cost $ 3,022,155) - See accompanying schedule

$ 3,089,584

Commitment to sell securities on a delayed delivery basis

$ (25,891)

Receivable for securities sold on a delayed delivery basis

25,744

(147)

Receivable for investments sold, regular delivery

118

Cash

1

Receivable for fund shares sold

4,924

Interest receivable

24,742

Receivable from investment adviser for expense reductions

224

Total assets

3,119,446

Liabilities

Payable for investments purchased
Regular delivery

25

Delayed delivery

369,749

Payable for fund shares redeemed

3,786

Distributions payable

746

Accrued management fee

1,356

Total liabilities

375,662

Net Assets

$ 2,743,784

Net Assets consist of:

Paid in capital

$ 2,627,108

Undistributed net investment income

2,706

Accumulated undistributed net realized gain (loss) on investments

46,688

Net unrealized appreciation (depreciation) on investments

67,282

Net Assets, for 254,357 shares outstanding

$ 2,743,784

Net Asset Value, offering price and redemption price per share ($2,743,784 ÷ 254,357 shares)

$ 10.79

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

Annual Report

Financial Statements - continued

Statement of Operations

Amounts in thousands

Year ended September 30, 2002

Investment Income

Interest

$ 147,027

Security lending

385

Total income

147,412

Expenses

Management fee

$ 16,236

Non-interested trustees' compensation

10

Total expenses before reductions

16,246

Expense reductions

(2,757)

13,489

Net investment income (loss)

133,923

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on investments

58,576

Change in net unrealized appreciation (depreciation) on:

Investment securities

(4,170)

Delayed delivery commitments

(38)

Total change in net unrealized appreciation (depreciation)

(4,208)

Net gain (loss)

54,368

Net increase (decrease) in net assets resulting from operations

$ 188,291

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

Annual Report

Statement of Changes in Net Assets

Amounts in thousands

Year ended
September 30,
2002

Year ended
September 30,
2001

Increase (Decrease) in Net Assets

Operations

Net investment income (loss)

$ 133,923

$ 124,660

Net realized gain (loss)

58,576

38,677

Change in net unrealized appreciation (depreciation)

(4,208)

91,763

Net increase (decrease) in net assets resulting
from operations

188,291

255,100

Distributions to shareholders from net investment income

(130,391)

(126,822)

Distributions to shareholders from net realized gain

(15,551)

-

Total distributions

(145,942)

(126,822)

Share transactions
Net proceeds from sales of shares

1,530,222

1,222,841

Reinvestment of distributions

133,806

114,665

Cost of shares redeemed

(1,403,212)

(859,915)

Net increase (decrease) in net assets resulting from share transactions

260,816

477,591

Total increase (decrease) in net assets

303,165

605,869

Net Assets

Beginning of period

2,440,619

1,834,750

End of period (including undistributed net investment income of $2,706 and undistributed net investment income of $387, respectively)

$ 2,743,784

$ 2,440,619

Other Information

Shares

Sold

145,355

118,232

Issued in reinvestment of distributions

12,708

11,102

Redeemed

(133,479)

(83,067)

Net increase (decrease)

24,584

46,267

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

Annual Report

Financial Highlights

Years ended September 30,

2002

2001

2000

1999

1998

Selected Per-Share Data

Net asset value, beginning of period

$ 10.62

$ 10.00

$ 10.01

$ 10.70

$ 10.25

Income from Investment Operations

Net investment income (loss) B

.521 D

.618

.640

.620

.634

Net realized and unrealized gain (loss)

.218 D

.634

(.005)

(.610)

.453

Total from investment operations

.739

1.252

.635

.010

1.087

Distributions from net investment income

(.508)

(.632)

(.645)

(.620)

(.637)

Distributions from net realized gain

(.061)

-

-

(.022)

-

Distributions in excess of net realized gain

-

-

-

(.058)

-

Total distributions

(.569)

(.632)

(.645)

(.700)

(.637)

Net asset value, end of period

$ 10.79

$ 10.62

$ 10.00

$ 10.01

$ 10.70

Total Return A

7.23%

12.89%

6.63%

.10%

10.95%

Ratios to Average Net Assets C

Expenses before expense reductions

.60%

.60%

.60%

.60%

.63%

Expenses net of voluntary waivers, if any

.50%

.50%

.50%

.47%

.38%

Expenses net of all reductions

.50%

.50%

.50%

.47%

.38%

Net investment income (loss)

4.95% D

6.02%

6.50%

6.04%

6.11%

Supplemental Data

Net assets, end of period
(in millions)

$ 2,744

$ 2,441

$ 1,835

$ 1,638

$ 1,220

Portfolio turnover rate

271%

223%

122%

148%

222%

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

B Calculated based on average shares outstanding during the period.

C Expense ratios reflect operating expenses of the fund. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from directed brokerage or other expense offset arrangements and do not represent the amount paid by the fund during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflects expenses after reimbursement by the investment adviser but prior to reductions from directed brokerage or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the fund.

D Effective October 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The effect of this change during the period was to decrease net investment income (loss) per share by $.005 and increase net realized and unrealized gain (loss) per share by $.005. Without this change the ratio of net investment income (loss) to average net assets would have been 5.00%. Per share data, ratios and supplemental data for prior periods have not been restated to reflect this change.

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

Annual Report

Notes to Financial Statements

For the period ended September 30, 2002

(Amounts in thousands except ratios)

1. Significant Accounting Policies.

Spartan Investment Grade Bond Fund (the fund) is a fund of Fidelity Charles Street 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 financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:

Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and electronic data processing techniques. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.

Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income, which includes amortization of premium and accretion of discount on debt securities, as required, is accrued as earned. 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, under the general supervision of the Board of Trustees. 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 the funds in the trust.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

1. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount and losses deferred due to wash sales and futures transactions.

The tax-basis components of distributable earnings and the federal tax cost as of period end was as follows:

Unrealized appreciation

$ 111,971

Unrealized depreciation

(44,257)

Net unrealized appreciation (depreciation)

67,714

Undistributed ordinary income

43,245

Undistributed long-term capital gain

10,972

Total Distributable earnings

$ 121,931

Cost for federal income tax purposes

$ 3,021,870

The tax character of distributions paid during the year was as follows:

Ordinary Income

$ 144,667

Long-term Capital Gains

1,275

Total

$ 145,942

Change in Accounting Principle. Effective October 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities, as required. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $1,030 decrease to the cost of securities held and a corresponding decrease to accumulated net undistributed realized gain (loss), based on securities held by the fund on October 1, 2001.

The effect of this change during the period, was to decrease net investment income (loss) by $1,231; increase net unrealized appreciation/depreciation by $1,526; and decrease net realized gain (loss) by $295. The Statement of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

Annual Report

2. Operating Policies.

Repurchase Agreements. Fidelity Management and Research Company (FMR) has received an Exemptive order from the Securities and Exchange Commission which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. The custodian bank receives the collateral, which is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).

Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is "marked to market" daily and equivalent deliverable securities are held for the transaction. The values of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.

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

3. Purchases and Sales of Investments.

Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

Annual Report

Notes to Financial Statements - continued

(Amounts in thousands except ratios)

4. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (FMR) and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee of .60% of the fund's average net assets. FMR pays all other expenses, except the compensation of the non-interested Trustees and certain exceptions such as interest expense. The management fee paid to FMR by the fund is reduced by an amount equal to the fees and expenses paid by the fund to the non-interested Trustees.

Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $6,067 for the period.

Interfund Lending Program. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.

5. Security Lending.

The fund lends portfolio securities from time to time in order to earn additional income. 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. Cash collateral is invested in cash equivalents. At the end of the period there were no security loans outstanding.

Annual Report

6. Expense Reductions.

FMR agreed to reimburse the fund to the extent operating expenses exceeded .50% of average net assets. Some expenses, for example interest expense, are excluded from this reimbursement. During the period, this reimbursement reduced the fund's expenses by $2,721.

In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's expenses by $36.

Annual Report

Independent Auditors' Report

To the Trustees of Fidelity Charles Street Trust and Shareholders of Spartan Investment Grade Bond Fund:

We have audited the accompanying statement of assets and liabilities of Spartan Investment Grade Bond Fund (the Fund), a fund of Fidelity Charles Street Trust, including the portfolio of investments, as of September 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2002, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Spartan Investment Grade Bond Fund as of September 30, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Boston, Massachusetts

November 11, 2002

Annual Report

Trustees and Officers

The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy and William S. Stavropoulos, each of the Trustees oversees 266 funds advised by FMR or an affiliate. Mr. McCoy oversees 268 funds advised by FMR or an affiliate, and Mr. Stavropoulos oversees 231 funds advised by FMR or an affiliate.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers hold office without limit in time, except that any officer may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-800-544-8544.

Interested Trustees*:

Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Edward C. Johnson 3d (72)**

Year of Election or Appointment: 1981

President of Spartan Investment Grade Bond. Mr. Johnson also serves as President of other Fidelity funds. He is Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; a Director of Fidelity Management & Research (U.K.) Inc.; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director (1997) of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc.

Abigail P. Johnson (40)**

Year of Election or Appointment: 2001

Senior Vice President of Spartan Investment Grade Bond. Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds.

Peter S. Lynch (59)

Year of Election or Appointment: 1990

Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston.

* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.

** Edward C. Johnson 3d, Trustee and President of the funds, is Abigail P. Johnson's father.

Annual Report

Non-Interested Trustees:

Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Age; Principal Occupation

J. Michael Cook (60)

Year of Election or Appointment: 2001

Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of AT&T (2001), International Flavors & Fragrances, Inc. (2000), Rockwell Automation International (2000), The Dow Chemical Company (2000), and HCA - The Healthcare Company (1999). He is a Member of the Advisory Board of the Securities Regulation Institute and of the Directorship Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Panel to the Comptroller General of the United States. He also serves as a member of the Board of Overseers of the Columbia Business School and a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater.

Ralph F. Cox (70)

Year of Election or Appointment: 1991

Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin.

Phyllis Burke Davis (70)

Year of Election or Appointment: 1992

Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Toshiba International Advisory Group of Toshiba Corporation (2001) and a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc.

Robert M. Gates (59)

Year of Election or Appointment: 1997

Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of Charles Stark Draper Laboratory (non-profit), NACCO Industries, Inc. (mining and manufacturing), TRW Inc. (automotive, space, defense, and information technology), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines) and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy.

Donald J. Kirk (69)

Year of Election or Appointment: 1987

Mr. Kirk is a Public Governor of the National Association of Securities Dealers, Inc., and of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, and a Director of the Yale-New Haven Health Services Corp. (1998), a Director Emeritus and former Chairman of the Board of Directors of National Arts Stabilization Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations).

Marie L. Knowles (55)

Year of Election or Appointment: 2001

Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California.

Ned C. Lautenbach (58)

Year of Election or Appointment: 2000

Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and Chief Executive Officer (1999) and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman and C.E.O. of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997), Axcelis Technologies (semiconductors, 2000), and the Philharmonic Center for the Arts in Naples, Florida (1999). He also serves on the Board of Trustees of Fairfield University and is a member of the Council on Foreign Relations.

Marvin L. Mann (69)

Year of Election or Appointment: 1993

Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage, 1997) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama.

William O. McCoy (68)

Year of Election or Appointment: 1997

Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm, 1997) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998).

William S. Stavropoulos (63)

Year of Election or Appointment: 2001

Mr. Stavropoulos also serves as a Trustee (2001) or Member of the Advisory Board (2000) of other investment companies advised by FMR. He is Chairman of the Board and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions, 1997), BellSouth Corporation (telecommunications, 1997), and the Chemical Financial Corporation. He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research and Fordham University. In addition, Mr. Stavropoulos is a member of the American Chemical Society, The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science.

Executive Officers:

Correspondence intended for each executive officer may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.

Name, Age; Principal Occupation

Dwight D. Churchill (48)

Year of Election or Appointment: 1997

Vice President of Spartan Investment Grade Bond. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments.

Kevin E. Grant (42)

Year of Election or Appointment: 1997

Vice President of Spartan Investment Grade Bond. He serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Grant managed a variety of Fidelity funds.

Charles A. Morrison (41)

Year of Election or Appointment: 2002

Vice President of Spartan Investment Grade Bond. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division.

Eric D. Roiter (53)

Year of Election or Appointment: 1998

Secretary of Spartan Investment Grade Bond. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter was an Adjunct Member, Faculty of Law, at Columbia University Law School (1996-1997).

Maria F. Dwyer (43)

Year of Election or Appointment: 2002

Treasurer of Spartan Investment Grade Bond. She also serves as Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management.

Stanley N. Griffith (55)

Year of Election or Appointment: 1998

Assistant Vice President of Spartan Investment Grade Bond. Mr. Griffith is Assistant Vice President of Fidelity's Fixed-Income Funds (1998), Assistant Secretary of FIMM (1998), Vice President of Fidelity Investments' Fixed-Income Division (1998), and is an employee of FMR.

John H. Costello (56)

Year of Election or Appointment: 1986

Assistant Treasurer of Spartan Investment Grade Bond. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR.

Francis V. Knox, Jr. (55)

Year of Election or Appointment: 2002

Assistant Treasurer of Spartan Investment Grade Bond. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), Compliance Officer of FMR Corp., and Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002) and Fidelity Management & Research (Far East) Inc. (1991-2002).

Thomas J. Simpson (44)

Year of Election or Appointment: 1998

Assistant Treasurer of Spartan Investment Grade Bond. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995).

Annual Report

Distributions

A total of 9.12% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

The fund will notify shareholders in January 2003 of amounts for use in preparing 2002 income tax returns.

Annual Report

Managing Your Investments

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

By Phone

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

(phone_graphic)

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

Press

1   For mutual fund and brokerage trading.

2   For quotes.*

3   For account balances and holdings.

4   To review orders and mutual
fund activity.

5   To change your PIN.

*0   To speak to a Fidelity representative.

By PC

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

(computer_graphic)

Fidelity's Web Site
www.fidelity.com

If you are not currently on the Internet, call EarthLink Sprint at 1-800-EarthLink, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider.

* 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.

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To Write Fidelity

We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.

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Making Changes
To Your Account

(such as changing name, address, bank, etc.)

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002

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For Non-Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Overnight Express
Fidelity Investments
2300 Litton Lane - KH2B
Hebron, KY 41048

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
2300 Litton Lane - KH2GC
Hebron, KY 41048-9397

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

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For Retirement
Accounts

Buying shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003

Selling shares

Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035

Overnight Express
Fidelity Investments
Attn: Distribution Services
2300 Litton Lane - KH2GC
Hebron, KY 41048-9397

General Correspondence

Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500

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To Visit Fidelity

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

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7001 West Ray Road
Chandler, AZ

7373 N. Scottsdale Road
Scottsdale, AZ

California

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1411 Chapin Avenue
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851 East Hamilton Avenue
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527 North Brand Boulevard
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Delaware

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4400 N. Federal Highway
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3501 PGA Boulevard
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8065 Beneva Road
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Georgia

3445 Peachtree Road, N.E.
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1000 Abernathy Road
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1700 East Golf Road
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Maine

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Maryland

7401 Wisconsin Avenue
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One W. Pennsylvania Ave.
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Massachusetts

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Boston, MA

155 Congress Street
Boston, MA

25 State Street
Boston, MA

300 Granite Street
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44 Mall Road
Burlington, MA

416 Belmont Street
Worcester, MA

Annual Report

Michigan

280 Old N. Woodward Ave.
Birmingham, MI

43420 Grand River Avenue
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29155 Northwestern Hwy.
Southfield, MI

Minnesota

7600 France Avenue South
Edina, MN

Missouri

8885 Ladue Road
Ladue, MO

New Jersey

150 Essex Street
Millburn, NJ

56 South Street
Morristown, NJ

501 Route 17, South
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New York

1055 Franklin Avenue
Garden City, NY

37 West Jericho Turnpike
Huntington Station, NY

1271 Avenue of the Americas
New York, NY

61 Broadway
New York, NY

350 Park Avenue
New York, NY

North Carolina

4611 Sharon Road
Charlotte, NC

Ohio

3805 Edwards Road
Cincinnati, OH

28699 Chagrin Boulevard
Woodmere Village, OH

Oregon

16850 SW 72nd Avenue
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Pennsylvania

600 West DeKalb Pike
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1735 Market Street
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12001 Perry Highway
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Rhode Island

47 Providence Place
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Tennessee

6150 Poplar Avenue
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10000 Research Boulevard
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4017 Northwest Parkway
Dallas, TX

12532 Memorial Drive
Houston, TX

2701 Drexel Drive
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400 East Las Colinas Blvd.
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14100 San Pedro
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19740 IH 45 North
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Utah

215 South State Street
Salt Lake City, UT

Virginia

1861 International Drive
McLean, VA

Washington

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

1518 6th Avenue
Seattle, WA

Washington, DC

1900 K Street, N.W.
Washington, DC

Wisconsin

595 North Barker Road
Brookfield, WI

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

Annual Report

Investment Adviser

Fidelity Management & Research
Company

Boston, MA

Investment Sub-Advisers

Fidelity Management & Research
(U.K.) Inc.

Fidelity Management & Research
(Far East) Inc.

Fidelity Investments
Money Management, Inc.

Fidelity Investments Japan Limited

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Fidelity Distributors Corporation

Boston, MA

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Boston, MA

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The Bank of New York

New York, NY

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Target Timeline® 2003

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The Fidelity Telephone Connection

Mutual Fund 24-Hour Service

Exchanges/Redemptions
and Account Assistance 1-800-544-6666

Product Information 1-800-544-6666

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