"We regret to advise that on the interest payment date of 15 January 2008 a Capital Guaranteed Bond shortfall will arise. Thus, the scheduled payment of interest will be suspended in full," the company says in a letter.
Earlier the fund warned the suspension was imminent.
In a Stock Exchange announcement it said: "Investment markets have remained erratic and although the fund has continued to increase since the annual report was issued, the anticipated growth may not be quite sufficient to cover the full coupon," it says in a statement to the NZX.
"Any suspended interest will continue to earn interest and will be paid at the next coupon date when the fund has accrued sufficient income to cover the arrears after paying the current coupon and fees."
It says the capital guarantee provided by Westpac is unaffected by this trading activity.
Fidelity raised $75 million in the bond offer last year.
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