(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INTERMEDIATE BOND
FUND - CLASS A AND CLASS B
(FORMERLY FIDELITY ADVISOR LIMITED TERM
BOND FUND - CLASS A AND CLASS B)
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 11 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 14 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 15 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and
liabilities, operations, and
changes in net assets, as well as
financial highlights.
NOTES 28 Notes to the financial statements.
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 ADVISOR FUND, INCLUDING CHARGES AND
EXPENSES,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first five
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and 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, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR INTERMEDIATE BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance. See page 6 for information regarding the computation
of Class A's performance figures. Effective January 1, 1996, the maximum
4.75% sales charge on Class A shares was reduced to 2.75%.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond - Class A -0.35% 3.93% 42.81% 112.88%
Advisor Intermediate Bond - Class A -3.09% 1.07% 38.89% 107.03%
(incl. max. 2.75% sales charge)
Lehman Brothers Intermediate -0.23% 4.60% 43.14% 118.49%
Government/Corporate Bond Index
Intermediate Investment Grade Debt -1.28% 3.75% 43.43% 110.88%
Funds Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, 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 Class A's returns to those of the Lehman Brothers
Intermediate Government/Corporate Bond Index, which is comprised of
government and corporate fixed-rate debt issues. Issues included in the
Index have maturities of one to 10 years. To measure how Class A's
performance stacked up against its peers, you can compare it to the
intermediate investment grade debt funds average, which reflects the
performance of 174 intermediate investment grade bond funds with similar
objectives tracked by Lipper Analytical Services over the past six months.
These benchmarks include reinvested dividends and capital gains, if any,
and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class A 3.93% 7.39% 7.85%
Advisor Intermediate Bond - Class A 1.07% 6.79% 7.55%
(incl. max. 2.75% sales charge)
Lehman Brothers Intermediate 4.60% 7.44% 8.13%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 3.75% 7.46% 7.74%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' actual (or cumulative)
return and show you what would have happened if Class A shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960531 19960614 112511 S00000000000001
FA Intermed Bond -CL A LB Intermediate Govt/Corp
00287 LB007
1986/05/31 9725.00 10000.00
1986/06/30 9959.25 10232.42
1986/07/31 10042.80 10336.13
1986/08/31 10261.86 10568.55
1986/09/30 10146.35 10482.26
1986/10/31 10275.94 10618.23
1986/11/30 10405.87 10719.62
1986/12/31 10453.41 10755.64
1987/01/31 10585.15 10864.88
1987/02/28 10648.86 10920.08
1987/03/31 10599.25 10897.42
1987/04/30 10325.77 10698.41
1987/05/31 10286.42 10673.72
1987/06/30 10423.88 10802.71
1987/07/31 10423.57 10827.40
1987/08/31 10372.92 10799.22
1987/09/30 10201.84 10659.19
1987/10/31 10456.14 10963.66
1987/11/30 10590.65 11033.38
1987/12/31 10696.04 11149.30
1988/01/31 11020.80 11434.59
1988/02/29 11185.80 11561.84
1988/03/31 11099.00 11517.39
1988/04/30 11075.55 11498.21
1988/05/31 11010.60 11447.37
1988/06/30 11214.35 11629.82
1988/07/31 11202.62 11605.12
1988/08/31 11234.33 11622.56
1988/09/30 11441.81 11824.18
1988/10/31 11595.15 11984.83
1988/11/30 11523.55 11882.57
1988/12/31 11534.15 11893.03
1989/01/31 11659.64 12017.95
1989/02/28 11632.03 11968.28
1989/03/31 11678.00 12019.99
1989/04/30 11874.44 12260.25
1989/05/31 12097.75 12503.70
1989/06/30 12392.51 12818.92
1989/07/31 12654.68 13082.13
1989/08/31 12483.78 12913.05
1989/09/30 12542.71 12974.06
1989/10/31 12804.42 13248.31
1989/11/30 12909.73 13374.97
1989/12/31 12931.02 13411.58
1990/01/31 12802.41 13325.59
1990/02/28 12844.52 13374.10
1990/03/31 12826.55 13391.53
1990/04/30 12743.63 13345.05
1990/05/31 13046.31 13173.64
1990/06/30 13220.73 13820.92
1990/07/31 13397.24 14012.67
1990/08/31 13285.41 13955.14
1990/09/30 13383.61 14062.93
1990/10/31 13509.74 14226.20
1990/11/30 13743.59 13942.65
1990/12/31 13954.18 14639.61
1991/01/31 14057.91 14788.07
1991/02/28 14170.66 14906.31
1991/03/31 14260.43 15007.70
1991/04/30 14419.49 15171.26
1991/05/31 14496.41 15264.52
1991/06/30 14500.77 15275.27
1991/07/31 14663.85 15445.51
1991/08/31 14971.71 15740.39
1991/09/30 15249.79 16011.16
1991/10/31 15430.24 16193.89
1991/11/30 15577.87 16379.83
1991/12/31 16069.30 16779.87
1992/01/31 15863.68 16627.93
1992/02/29 15904.83 16693.59
1992/03/31 15847.58 16627.93
1992/04/30 15936.63 16774.06
1992/05/31 16227.88 17034.08
1992/06/30 16456.71 17286.25
1992/07/31 16844.04 17629.94
1992/08/31 16999.78 17806.28
1992/09/30 17197.63 18047.99
1992/10/31 16943.82 17813.83
1992/11/30 16987.08 17746.14
1992/12/31 17214.69 17983.79
1993/01/31 17557.81 18333.58
1993/02/28 17908.13 18622.64
1993/03/31 18025.76 18696.73
1993/04/30 18136.44 18847.22
1993/05/31 18149.19 18805.38
1993/06/30 18509.01 19100.55
1993/07/31 18652.36 19147.32
1993/08/31 19062.67 19450.92
1993/09/30 19117.27 19531.68
1993/10/31 19220.20 19583.97
1993/11/30 19110.15 19474.74
1993/12/31 19193.22 19563.93
1994/01/31 19395.92 19781.24
1994/02/28 19021.04 19488.68
1994/03/31 18652.60 19167.08
1994/04/30 18578.44 19036.63
1994/05/31 18514.33 19049.42
1994/06/30 18509.19 19052.03
1994/07/31 18684.84 19326.28
1994/08/31 18682.62 19386.71
1994/09/30 18589.89 19208.33
1994/10/31 18591.02 19205.72
1994/11/30 18644.32 19118.56
1994/12/31 18719.82 19186.25
1995/01/31 18923.30 19509.60
1995/02/28 19157.25 19914.30
1995/03/31 19255.15 20028.18
1995/04/30 19444.98 20275.41
1995/05/31 19919.97 20888.41
1995/06/30 20037.83 21028.44
1995/07/31 20027.11 21031.35
1995/08/31 20187.85 21222.80
1995/09/30 20329.99 21376.49
1995/10/31 20534.05 21614.71
1995/11/30 20774.80 21898.84
1995/12/31 21002.46 22128.35
1996/01/31 21176.05 22319.22
1996/02/29 20914.44 22057.17
1996/03/31 20833.43 21943.58
1996/04/30 20728.15 21866.01
1996/05/31 20702.84 21849.45
IMATRL PRASUN SHR__CHT 19960531 19960614 112516 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Class A on May 31, 1986, and
the current maximum 2.75% sales charge was paid. As the chart shows, by May
31, 1996, the value of the investment would have grown to $20,703 - a
107.03% increase on the initial investment. For comparison, look at how the
Lehman Brothers Intermediate Government/Corporate Bond Index did over the
same period. With dividends reinvested, the same $10,000 investment would
have grown to $21,849 - a 118.49% increase.
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. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
The initial offering of Class A shares took place on September 10, 1992.
Class A shares bear a .25% 12b-1 fee that is not reflected in returns prior
to September 10, 1992. Returns prior to that date are those of
Institutional Class, the original class of the fund. Had Class A's 12b-1
fee been reflected, returns prior to September 10, 1992 would have been
lower. If Fidelity had not reimbursed certain expenses, the past one year,
past five years and past 10 years total returns and dividends would have
been lower.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1996 1995 1994 1993 1992 1991
Dividend return 3.18% 6.56% 5.46% A 7.80% 8.19% 9.30%
Capital appreciation -3.53% 4.87% -7.90% 4.70% 0.86% 4.05%
return
Total return -0.35% 11.43% -2.44% 12.50% 9.05% 13.35%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.72(cents) 34.59(cents) 67.50(cents)
Annualized dividend rate 6.46% 6.48% 6.34%
30-day annualized yield 5.46% - -
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.42 over the past month, $10.65
over the past six months and $10.65 over the past year, you can compare the
class' 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 to compare funds from different companies on an equal basis. The
offering share price used in the calculation of the yield includes the
effect of Class A's maximum 2.75% sales charge.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 5.8(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
ADVISOR INTERMEDIATE BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance.
The initial offering of Class B shares took place on June 30, 1994. Class B
shares bear a .90% 12b-1/shareholder service fee (1.00% prior to January 1,
1996). This fee is reflected in the returns on page 8 for periods after
June 30, 1994. Returns between September 10, 1992 (the date Class A shares
were first offered) and June 30, 1994 are those of Class A and reflect
Class A's .25% 12b-1 fee. Returns prior to September 10, 1992 are those of
Institutional Class, the original class of the fund. Had Class B's 12b-1
fee been reflected, returns prior to June 30, 1994 would have been lower.
Effective January 1, 1996, Class B's contingent deferred sales charge is
based on a declining scale that ranges from 3% to 1% on Class B shares
redeemed within three years of purchase. This scale is revised from the
previous scale of 4% to 1% on shares redeemed within five years of
purchase. Class B's contingent deferred sales charge included in the past
six months, past one year, past five years and past 10 years total return
figures are 3%, 3%, 0% and 0%, respectively. If Fidelity had not reimbursed
certain expenses, the past six months, past one year, past five years and
past 10 years total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond - Class B -0.77% 3.13% 40.48% 109.40%
Advisor Intermediate Bond - Class B -3.66% 0.21% 40.48% 109.40%
(incl. contingent deferred sales charge)
Lehman Brothers Intermediate Government/ -0.23% 4.60% 43.14% 118.49%
Corporate Bond Index
Intermediate Investment Grade Debt -1.28% 3.75% 43.43% 110.88%
Funds Average
</table
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, 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 Class B's returns to those of the Lehman Brothers
Intermediate Government/Corporate Bond Index, which is comprised of
government and corporate fixed-rate debt issues. Issues included in the
Index have maturities of one to 10 years. To measure how Class B's
performance stacked up against its peers, you can compare it to the
intermediate investment grade debt funds average, which reflects the
performance of 174 intermediate investment grade bond funds with similar
objectives tracked by Lipper Analytical Services over the past six months.
These benchmarks include reinvested dividends and capital gains, if any,
and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class B 3.13% 7.03% 7.67%
Advisor Intermediate Bond - Class B 0.21% 7.03% 7.67%
(incl. contingent deferred sales charge)
Lehman Brothers Intermediate Government/ 4.60% 7.44% 8.13%
Corporate Bond Index
Intermediate Investment Grade Debt 3.75% 7.46% 7.74%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' actual (or cumulative)
return and show you what would have happened if Class B shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960531 19960614 113813 S00000000000001
FA Intermed Bond -CL B LB Intermediate Govt/Corp
00687 LB007
1986/05/31 10000.00 10000.00
1986/06/30 10240.87 10232.42
1986/07/31 10326.79 10336.13
1986/08/31 10552.04 10568.55
1986/09/30 10433.26 10482.26
1986/10/31 10566.52 10618.23
1986/11/30 10700.12 10719.62
1986/12/31 10749.01 10755.64
1987/01/31 10884.47 10864.88
1987/02/28 10949.99 10920.08
1987/03/31 10898.97 10897.42
1987/04/30 10617.76 10698.41
1987/05/31 10577.29 10673.72
1987/06/30 10718.65 10802.71
1987/07/31 10718.33 10827.40
1987/08/31 10666.24 10799.22
1987/09/30 10490.32 10659.19
1987/10/31 10751.82 10963.66
1987/11/30 10890.13 11033.38
1987/12/31 10998.50 11149.30
1988/01/31 11332.44 11434.59
1988/02/29 11502.11 11561.84
1988/03/31 11412.85 11517.39
1988/04/30 11388.74 11498.21
1988/05/31 11321.96 11447.37
1988/06/30 11531.47 11629.82
1988/07/31 11519.40 11605.12
1988/08/31 11552.01 11622.56
1988/09/30 11765.36 11824.18
1988/10/31 11923.03 11984.83
1988/11/30 11849.41 11882.57
1988/12/31 11860.31 11893.03
1989/01/31 11989.35 12017.95
1989/02/28 11960.96 11968.28
1989/03/31 12008.22 12019.99
1989/04/30 12210.22 12260.25
1989/05/31 12439.85 12503.70
1989/06/30 12742.94 12818.92
1989/07/31 13012.53 13082.13
1989/08/31 12836.79 12913.05
1989/09/30 12897.39 12974.06
1989/10/31 13166.50 13248.31
1989/11/30 13274.79 13374.97
1989/12/31 13296.68 13411.58
1990/01/31 13164.43 13325.59
1990/02/28 13207.73 13374.10
1990/03/31 13189.26 13391.53
1990/04/30 13103.99 13345.05
1990/05/31 13415.23 13173.64
1990/06/30 13594.59 13820.92
1990/07/31 13776.09 14012.67
1990/08/31 13661.08 13955.14
1990/09/30 13762.07 14062.93
1990/10/31 13891.76 14226.20
1990/11/30 14132.23 13942.65
1990/12/31 14348.77 14639.61
1991/01/31 14455.44 14788.07
1991/02/28 14571.37 14906.31
1991/03/31 14663.68 15007.70
1991/04/30 14827.24 15171.26
1991/05/31 14906.33 15264.52
1991/06/30 14910.82 15275.27
1991/07/31 15078.51 15445.51
1991/08/31 15395.07 15740.39
1991/09/30 15681.02 16011.16
1991/10/31 15866.57 16193.89
1991/11/30 16018.37 16379.83
1991/12/31 16523.70 16779.87
1992/01/31 16312.26 16627.93
1992/02/29 16354.58 16693.59
1992/03/31 16295.71 16627.93
1992/04/30 16387.28 16774.06
1992/05/31 16686.77 17034.08
1992/06/30 16922.07 17286.25
1992/07/31 17320.35 17629.94
1992/08/31 17480.49 17806.28
1992/09/30 17683.94 18047.99
1992/10/31 17422.96 17813.83
1992/11/30 17467.43 17746.14
1992/12/31 17701.48 17983.79
1993/01/31 18054.30 18333.58
1993/02/28 18414.53 18622.64
1993/03/31 18535.48 18696.73
1993/04/30 18649.30 18847.22
1993/05/31 18662.40 18805.38
1993/06/30 19032.40 19100.55
1993/07/31 19179.81 19147.32
1993/08/31 19601.72 19450.92
1993/09/30 19657.86 19531.68
1993/10/31 19763.70 19583.97
1993/11/30 19650.54 19474.74
1993/12/31 19735.96 19563.93
1994/01/31 19944.39 19781.24
1994/02/28 19558.91 19488.68
1994/03/31 19180.05 19167.08
1994/04/30 19103.79 19036.63
1994/05/31 19037.87 19049.42
1994/06/30 19029.85 19052.03
1994/07/31 19189.76 19326.28
1994/08/31 19173.41 19386.71
1994/09/30 19065.14 19208.33
1994/10/31 19034.15 19205.72
1994/11/30 19076.15 19118.56
1994/12/31 19121.06 19186.25
1995/01/31 19316.43 19509.60
1995/02/28 19544.51 19914.30
1995/03/31 19650.30 20028.18
1995/04/30 19812.86 20275.41
1995/05/31 20303.85 20888.41
1995/06/30 20430.31 21028.44
1995/07/31 20388.36 21031.35
1995/08/31 20540.82 21222.80
1995/09/30 20674.53 21376.49
1995/10/31 20870.66 21614.71
1995/11/30 21102.06 21898.84
1995/12/31 21322.04 22128.35
1996/01/31 21468.13 22319.22
1996/02/29 21212.13 22057.17
1996/03/31 21097.89 21943.58
1996/04/30 20998.78 21866.01
1996/05/31 20939.81 21849.45
IMATRL PRASUN SHR__CHT 19960531 19960614 113818 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Class B on May 31, 1986. As
the chart shows, by May 31, 1996, the value of the investment would have
grown to $20,940 - a 109.40% increase on the initial investment. For
comparison, look at how the Lehman Brothers Intermediate
Government/Corporate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $21,849 - a
118.49% increase.
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. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31,
1996 1995 1994 1993 1992 1991
Dividend return 2.86% 5.74% 5.08% A 7.80% 8.19% 9.30%
Capital appreciation -3.63% 4.88% -7.99 4.70% 0.86% 4.05%
return %
Total return -0.77% 10.62% -2.91 12.50% 9.05% 13.35%
%
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.07(cents) 31.08(cents) 60.26(cents)
Annualized dividend rate 5.73% 5.83% 5.66%
30-day annualized yield 4.92% - -
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.41 over the past month, $10.63
over the past six months, and $10.64 over the past year you can compare the
Class' 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. The
offering share price used in the calculation of the yield excludes the
effect of Class B's contingent deferred sales charge.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 1.9(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. KEVIN, HOW HAS THE FUND PERFORMED?
A. For the six months ended May 31, 1996, Fidelity Advisor Intermediate
Bond Fund - Class A and Class B had a total return of -0.35% and -0.77%,
respectively. For the same period, the intermediate investment grade debt
funds average tracked by Lipper Analytical Services returned -1.28%, while
the Lehman Brothers Intermediate Government/Corporate Bond Index posted a
total return of -0.23%. For the 12 months ended May 31, 1996, Class A and
Class B had total returns of 3.93% and 3.13%, respectively, while the
Lipper funds average had a 3.75% total return and the Lehman Brothers index
returned 4.60%.
Q. WHAT HAS THE INVESTING ENVIRONMENT IN THE BOND MARKET BEEN LIKE OVER THE
PAST SIX MONTHS?
A. At the beginning of 1996, it seemed that the market expected the Federal
Reserve Board to continue the short-term interest rate decreases it had
pursued through much of 1995, or to take no action at all. That's because
the economy was weak, inflation was not on the horizon and Fed easing
usually helps prevent the economy from going into a recession. However, in
February, the market consensus began to change significantly. The February,
March, April and May employment growth statistics suggested an accelerating
economy. The market began to smell an inflation threat, and the chances of
the Fed tightening increased.
Q. WHAT HELPED THE FUND'S PERFORMANCE BEAT THAT OF THE LIPPER AVERAGE OVER
THE PAST SIX MONTHS?
A. It appears the fund's competitors within the universe of intermediate
bond funds tracked by Lipper had a longer duration than the fund did.
Duration is a measure of sensitivity to interest rates, and the longer the
duration the more sensitive a bond fund is to changes in rates. When
interest rates rise, a fund with a longer duration will drop more in value
than one with a shorter duration. For about a year, rates were falling and
the market maintained strong expectations of further Fed interest-rate
easing. In that kind of environment, it can be tempting for fund managers
to increase their funds' durations as a means of locking in higher yields.
Despite the fact that it was the widespread consensus that the Fed was
going to keep easing, I did not lengthen the fund's duration. This was due,
in part, to my attempt to seek to match the interest rate risk profile of
the market by maintaining a duration that is close to that of the fund's
benchmark index. By sticking to this discipline, the fund was not subject
to the same losses as many of its competitors.
Q. WHAT'S YOUR READ ON THE CORPORATE BOND MARKET AT THE END OF THE PERIOD?
A. I think the yield advantage offered by corporates over Treasuries has
been very small for some time. This has two negative consequences for the
fund. First, I believe owning corporates as opposed to government bonds
doesn't help the fund earn much more income. Second, I think that if
overall credit quality deteriorates, yields will rise - and prices will
fall - on corporate bonds. That's the danger of being too aggressive on
corporate bonds at their current valuations. Without corporate bonds,
though, the fund would sacrifice the additional yield they offer. As a
result, I'm being cautious with the fund's corporate bond investments,
taking special care to avoid securities issued by companies that might take
on further debt which could negatively affect their credit quality. It can
be hard to predict events like this, so I've invested in yankee bonds as a
substitute for corporates.
Q. WHAT EXACTLY ARE YANKEE BONDS?
A. They're bonds issued by foreign companies or governments, sold in the
U.S. and denominated in U.S. dollars. For example, the fund holds yankee
bonds issued by the Canadian government and provincial governments in
Canada. Historically, these issues have had yields similar to corporate
bonds, without as much event risk.
Q. ARE THERE OTHER PARTICULAR INVESTMENTS YOU'D LIKE TO HIGHLIGHT?
A. I've purchased some corporate issues known as put bonds, including
Burlington Northern Santa Fe Corp. and Wachovia Corp. While these are
long-term bonds maturing in 30 to 40 years, the fund can redeem them in a
much shorter time - nine years for some of them. They're currently trading
as if the market believes they are nine-year bonds. However, if interest
rates were to decline, the bonds probably would rise in price as if they
were 30-year issues - a price increase markedly higher than for a nine-year
bond. If interest rates rise, the price of the bond should fall like a
nine-year bond - that is, at a much lower rate. The fund holds these bonds
in place of those with average maturities between eight and 10 years that
it would ordinarily hold.
Q. WHAT ABOUT THE FUND'S INVESTMENTS IN MORTGAGE-BACKED SECURITIES?
A. I've been focusing on 15-year mortgage securities selling at deep
discounts. At current market rates these bonds are not very sensitive to
prepayment risk - the risk that mortgage owners will pay off the loan
before maturity. And because they have 15-year final maturities, they're
exposed to less extension-risk, or the risk that their durations will
increase when interest rates rise. They are a low-risk way to add return to
the fund.
Q. WHAT'S YOUR OUTLOOK?
A. My overall strategy won't change. That is, I won't try to predict
interest rates. Instead, I'll try to find value in the different sectors of
the market. I'll look for opportunities in the corporate market and may
reduce the fund's mortgage-backed securities during the summer. That's
because they tend to richen - or become more expensive relative to
Treasuries - during that season when supply typically dwindles and
volatility subsides. I'll take advantage of that situation if it arises.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks to provide a
high rate of income through
investment primarily in
investment-grade
fixed-income obligations
START DATE: February 2, 1984
SIZE: as of May 31, 1996,
more than $508 million
MANAGER: Kevin Grant,
since October 1995;
manager, Fidelity Advisor
World Intermediate Fund, since
December 1995; joined
Fidelity in 1993
(checkmark)
KEVIN GRANT ON INTEREST RATES:
"What you see in the market in
terms of yields - or interest
rates - is the consensus
view on inflation. If that
consensus view is shaken -
as it was during the period -
you'll see the market move.
Employment growth is one of
the more crucial elements
that the market pays attention
to. If you have strong
employment, more people are
earning and spending money
and there are more potential
home buyers. If payroll
growth is high and there is low
unemployment, there is wage
pressure because there is a
limited pool of people to hire.
All of these factors can lead to
inflation. That's why the
market was so affected by the
strong employment numbers
that started to come out in
March. Before that, market
yields reflected the
anticipation of Fed short-term
interest rate reductions to
stave off recession.
"While these factors affect the
fund, they don't affect its
strategy. I don't predict the
movement of interest rates,
instead keeping the fund's
duration neutral to the
intermediate bond market as
defined by the index, so that
the fund won't be caught on
the wrong side of an interest
rate move."
(solid bullet) As of June 24, 1996, the
fund will use two additional
agencies - Duff & Phelps
Credit Rating Co. and Fitch
Investors Service, as well as
Moody's Investors Service
and Standard & Poor's which
the fund already uses - to
determine the credit quality of
the fund's bonds.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 66.7 68.7
Aa 4.3 6.8
A 12.2 7.9
Baa 2.4 0.1
Ba 0.0 0.0
B 0.0 0.0
Not rated 1.8 0.8
TABLE EXCLUDES SHORT TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1996
6 MONTHS AGO
Years 5.8 5.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MAY 31, 1996
6 MONTHS AGO
Years 3.2 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MAY 31, 1996 * AS OF NOVEMBER 30, 1995 **
Row: 1, Col: 1, Value: 12.6
Row: 1, Col: 2, Value: 3.3
Row: 1, Col: 3, Value: 2.6
Row: 1, Col: 4, Value: 64.59999999999999
Row: 1, Col: 5, Value: 16.9
Row: 1, Col: 1, Value: 15.7
Row: 1, Col: 2, Value: 3.0
Row: 1, Col: 3, Value: 2.8
Row: 1, Col: 4, Value: 65.7
Row: 1, Col: 5, Value: 6.0
Row: 1, Col: 6, Value: 6.8
Corporate bonds 16.9%
U.S. government
and government
agency
obligations 64.6%
Foreign government
obligations 2.6%
Other 3.3%
Short-term
investments 12.6%
Corporate bonds 12.8%
U.S. government
and government
agency
obligations 65.7%
Foreign government
obligations 2.8%
Other 3.0%
Short-term
investments 15.7%
* FOREIGN
INVESTMENTS 8.4%
** FOREIGN
INVESTMENTS 7.4%
INVESTMENTS MAY 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 16.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp. 8 7/8%, 11/15/01 $ 2,790,000 $ 2,994,468
ENERGY - 0.6%
ENERGY SERVICES - 0.6%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (b) 3,160,000 3,083,402
FINANCE - 10.5%
ASSET-BACKED SECURITIES - 2.2%
Ford Credit Grantor Trust 5.90%, 10/15/00 4,127,990 4,103,480
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 267,401 265,596
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 512,459 512,459
Standard Credit Card Master Trust I:
participation certificate, 5 1/2%, 9/7/98 5,000,000 4,939,063
7.65%, 2/15/00 1,200,000 1,218,375
11,038,973
BANKS - 5.0%
Banponce Corp. 6 3/4%, 12/15/05 5,000,000 4,628,550
Citicorp 8.80%, 2/1/00 780,000 792,979
Export Import Bank of Korea 6 3/8%, 2/15/06 2,190,000 2,011,252
Kansallis-Osake-Pankki NY Branch 10%, 5/1/02 650,000 728,631
Korea Development Bank yankee 7 1/4%, 5/15/06 5,000,000 4,877,050
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,132,270
Provident Bank 6 1/8%, 12/15/00 5,000,000 4,787,900
Wachovia Corp. 6.605%, 10/1/25 5,000,000 4,773,000
25,731,632
CREDIT & OTHER FINANCE - 2.3%
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,650,125
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 104,213
Ford Motor Credit Co.:
8%, 6/15/02 100,000 103,758
7 3/4%, 11/15/02 100,000 102,702
Grand Metropolitan Investment Corp. 8 1/8%, 8/15/96 3,000,000 3,011,550
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,727,265
Secured Finance, Inc. secured 9.05%, 12/15/04 4,000,000 4,370,360
12,069,973
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 1.0%
Metropolitan Life Insurance Co. 6.30%, 11/1/03 (b) $ 4,260,000 $ 3,989,490
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,016,770
5,006,260
TOTAL FINANCE 53,846,838
MEDIA & LEISURE - 0.5%
RESTAURANTS - 0.5%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 2,830,000 2,584,215
NONDURABLES - 0.5%
FOODS - 0.5%
Quaker Oats Co.:
9 1/8, 10/1/99 440,000 467,966
6.91%, 5/15/03 650,000 633,978
9 1/8%, 7/15/04 210,000 231,519
7.51%, 5/2/05 600,000 599,490
7.30%, 8/29/05 530,000 517,423
2,450,376
TOBACCO - 0.0%
Philip Morris Companies, Inc.:
9 3/4%, 5/1/97 100,000 103,026
6 3/8%, 1/15/98 250,000 249,010
352,036
TOTAL NONDURABLES 2,802,412
TECHNOLOGY - 1.9%
COMPUTER SERVICES & SOFTWARE - 0.9%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,854,850
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc. 5 3/4%, 1/19/99 5,000,000 4,866,450
TOTAL TECHNOLOGY 9,721,300
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
Burlington Northern Santa Fe Corp. 7.29%, 6/1/36 $ 2,340,000 $ 2,309,791
UTILITIES - 1.8%
ELECTRIC UTILITY - 1.8%
British Columbia Hydro & Power Authority yankee:
15 1/2%, 11/15/11 7,070,000 7,828,752
12 1/2%, 1/15/14 940,000 1,097,422
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 150,894
9,077,068
TOTAL NONCONVERTIBLE BONDS
(Cost $90,159,774) 86,419,494
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 38.4%
U.S. TREASURY OBLIGATIONS - 33.0%
6 1/2%, 5/15/97 25,550,000 25,701,767
8 1/2%, 5/15/97 33,850,000 34,669,847
9 1/8%, 5/15/99 45,560,000 48,777,447
7 3/4%, 12/31/99 13,260,000 13,763,482
11 7/8%, 11/15/03 6,000,000 7,741,860
12 3/4%, 11/15/10 26,383,000 36,775,528
12%, 8/15/23 910,000 1,270,305
TOTAL U.S. TREASURY OBLIGATIONS 168,700,236
U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.4%
Federal Home Loan Bank:
5.77%, 2/03/04 740,000 683,113
7.38%, 8/05/04 1,930,000 1,962,270
7.70%, 9/20/04 1,250,000 1,296,088
Federal Home Loan Mortgage Corporation
8.115%, 1/31/05 5,460,000 5,790,166
Federal National Mortgage Association:
5.45%, 10/10/03 1,000,000 909,840
7.40%, 7/1/04 1,130,000 1,149,086
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trust Certificates (assets of Trust guaranteed by
U.S. Government through Defense Security Assistance
Agency) Class 2-E 9.40%, 5/15/02 $ 1,110,000 $ 1,186,479
Government Trust Certificates (assets of Trust guaranteed by
U.S. Government through Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 354,489 354,156
Series 1994-C, 6.61%, 9/15/99 109,009 109,343
Series 1994-F, 8.187%, 12/15/04 576,784 599,519
Series 1996-A, 6.55%, 6/15/04 1,500,000 1,481,835
Private Export Funding Corp. secured:
Series SS, 5.80%, 2/1/04 1,710,000 1,624,261
Series VV, 6.24%, 5/15/02 550,000 531,905
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
8%, 11/15/01 1,740,000 1,824,460
6 1/8%, 3/15/03 397,000 377,880
6 5/8%, 2/15/04 140,000 135,589
7 5/8%, 8/15/04 840,000 864,263
U.S. Housing & Urban Development:
8.24%, 8/1/04 1,030,000 1,097,517
6.92%, 8/1/04 5,360,000 5,302,755
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 27,280,525
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $202,634,962) 195,980,761
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 24.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.8%
5 1/2%, 3/1/01 to 6/1/03 12,483,794 11,934,955
9 1/2%, 1/1/17 100,364 107,274
10%, 4/1/05 to 12/1/05 561,073 606,057
10 1/4%, 12/1/09 61,965 67,095
10 1/2%, 5/1/21 1,070,791 1,168,158
11%, 12/1/11 58,499 63,923
11 1/2%, 10/1/15 144,648 160,731
11 3/4%, 10/1/10 138,876 153,970
14,262,163
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.3%
5 1/2%, 6/1/03 to 5/1/26 $ 34,478,472 $ 31,647,394
6%, 5/1/01 to 4/1/11 23,867,960 22,405,888
6 1/2%, 2/1/26 14,795,455 13,708,876
9 1/2%, 2/1/25 5,034,929 5,376,801
10%, 1/1/20 181,000 197,346
10 1/2%, 7/1/11 to 8/1/20 865,880 952,770
11%, 8/1/15 3,110,862 3,430,223
12 1/2%, 2/1/11 to 4/1/15 127,187 146,542
77,865,840
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.4%
7%, 11/15/22 to 11/15/25 6,383,947 6,101,817
8%, 2/15/02 to 6/15/25 5,661,446 5,773,259
8 1/2%, 4/15/17 to 12/15/21 924,596 950,359
9%, 6/15/16 to 8/15/17 4,703,519 4,968,638
10%, 8/15/19 to 1/15/26 6,082,939 6,659,405
11%, 12/15/09 to 10/15/20 1,874,151 2,085,259
11 1/2%, 3/15/10 to 2/15/19 5,642,096 6,349,895
32,888,632
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $128,409,478) 125,016,635
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 1.7%
Federal National Mortgage Association planned amortization
class Series X-188A Class H, 6%,
6/25/07 (Cost $9,078,033) 9,162,500 8,662,857
COMMERCIAL MORTGAGE SECURITIES - 2.4%
CBM Funding Corp. commercial Series 1996-1 Class A-1,
7.55%, 7/1/99 (b) 233,418 235,461
CS First Boston Mortgage Securities Corp. commercial:
Series 1995-AEWI Class A1, 6.665%, 11/25/27 1,197,427 1,162,814
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 4,801,563
Equitable Life Assurance Society of the United States commercial
Series 1996-1 Class C-1, 7.52%, 5/15/06 (b) 1,000,000 987,500
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 1,963 1,962
Kearny Street Mortgage commercial Class II-B, 6.60%,
10/15/02 (b) 207,047 206,788
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Resolution Trust Corp. commercial:
Series 1994-N2 Class 2, 7 1/2%, 12/15/04 (a)(b) $ 27,148 $ 27,114
Series 1994-N2 Class 3, 7 1/2%, 12/15/04 (a)(b) 400,000 399,500
Series 1995-C1 Class A2A, 6 1/4%, 2/25/27 352,976 352,535
Series 1995-C1 Class A4A, 6 1/4%, 2/25/27 1,417,817 1,409,177
Structured Asset Securities Corp. commercial:
Series 1995-C4 Class A1A, 6.90%, 6/25/26 1,174,137 1,161,112
Series 1996 Class A-1C, 5.944%, 2/25/28 1,489,000 1,421,995
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $12,504,675) 12,167,521
FOREIGN GOVERNMENT OBLIGATIONS - 2.6%
Ontario Province yankee:
7 3/4%, 6/4/02 6,000,000 6,208,620
17%, 11/5/11 2,000,000 2,218,040
Quebec Province yankee 6.86%, 4/15/26 (a) 5,000,000 4,795,750
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $13,686,540) 13,222,410
SUPRANATIONAL OBLIGATIONS - 0.9%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 4,813,695
REPURCHASE AGREEMENTS - 12.6%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.32%, dated
5/31/96 due 6/3/96 $ 64,623,638 64,595,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $525,445,342) $ 510,878,373
LEGEND
1. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
2. 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 $8,929,255 or 1.8% of net
assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.2% AAA, AA, A 82.1%
Baa 2.4% BBB 4.5%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.0%.
INCOME TAX INFORMATION
At May 31, 1996, the aggregate cost of investment securities for income tax
purposes was $525,445,342. Net unrealized depreciation aggregated
$14,566,969, of which $1,599,281 related to appreciated investment
securities and $16,166,250 related to depreciated investment securities.
At November 30, 1995, the fund had a capital loss carryforward of
approximately $4,010,000 of which $2,841,000, $1,035,000 and $134,000 will
expire on November 30, 1998, 1999 and 2002, respectively.
At November 30, 1995, the fund was required to defer $424,000 of losses on
futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 510,878,373
agreements of $64,595,000) (cost $525,445,342) -
See accompanying schedule
Cash 1,314
Receivable for investments sold 4,918,745
Receivable for fund shares sold 2,669,183
Interest receivable 4,178,967
TOTAL ASSETS 522,646,582
LIABILITIES
Payable for investments purchased $ 12,962,830
Distributions payable 797,138
Accrued management fee 183,276
Distribution fees payable 68,995
Other payables and accrued expenses 118,606
TOTAL LIABILITIES 14,130,845
NET ASSETS $ 508,515,737
Net Assets consist of:
Paid in capital $ 530,118,580
Distributions in excess of net investment income (2,128,135)
Accumulated undistributed net realized gain (loss) on (4,908,486)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (14,566,222)
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 508,515,737
CALCULATION OF MAXIMUM OFFERING PRICE $10.38
CLASS A:
NET ASSET VALUE, and redemption price per share
($268,534,048 (divided by) 25,877,895 shares)
Maximum offering price per share (100/97.25 of $10.38) $10.67
CLASS B: $10.36
NET ASSET VALUE, offering price and redemption price
per share ($18,784,491 (divided by) 1,813,000 shares) A
INSTITUTIONAL CLASS: $10.38
NET ASSET VALUE, offering price and redemption price
per share ($221,197,198 (divided by) 21,300,344 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 18,004,466
Interest
EXPENSES
Management fee $ 1,083,057
Transfer agent fees 232,208
Class A
Class B 20,660
Institutional Class 143,594
Distribution fees 311,400
Class A
Class B 80,896
Accounting fees and expenses 96,928
Non-interested trustees' compensation 941
Custodian fees and expenses 36,278
Registration fees 14,550
Class A
Class B 17,702
Institutional Class 11,548
Audit 18,568
Legal 4,251
Miscellaneous 8,249
Total expenses before reductions 2,080,830
Expense reductions (37,460) 2,043,370
NET INVESTMENT INCOME 15,961,096
REALIZED AND UNREALIZED GAIN (LOSS) (474,483)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (17,733,413)
investment securities
NET GAIN (LOSS) (18,207,896)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,246,800)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31,1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 15,961,096 $ 23,985,922
Net investment income
Net realized gain (loss) (474,483) 2,071,414
Change in net unrealized appreciation (depreciation) (17,733,413) 15,815,741
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,246,800) 41,873,077
FROM OPERATIONS
Distributions to shareholders (8,091,341) (11,358,854)
From net investment income
Class A
Class B (516,059) (469,092)
Institutional Class (7,368,554) (11,805,144)
TOTAL DISTRIBUTIONS (15,975,954) (23,633,090)
Share transactions - net increase (decrease) 73,609,069 117,745,547
TOTAL INCREASE (DECREASE) IN NET ASSETS 55,386,315 135,985,534
NET ASSETS
Beginning of period 453,129,422 317,143,888
End of period (including distributions in excess of net $ 508,515,737 $ 453,129,422
investment income of $2,128,135 and $2,113,277,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1996
(UNAUDITED) 1995 1994 F 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960
of period
Income from Investment
Operations
Net investment income .345 D .649 .609 .785 .170
Net realized and unrealized (.379) .491 (.876) .511 (.320)
gain (loss)
Total from investment (.034) 1.140 (.267) 1.296 (.150)
operations
Less Distributions
From net investment (.346) (.640) (.555) (.796) (.170)
income
Return of capital - - (.058) - -
Total distributions (.346) (.640) (.613) (.796) (.170)
Net asset value, end of period $ 10.380 $ 10.760 $ 10.260 $ 11.140 $ 10.640
TOTAL RETURN B, C (.35)% 11.43% (2.44)% 12.50% (1.37)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 268,534 $ 228,439 $ 141,866 $ 59,184 $ 2,583
(000 omitted)
Ratio of expenses to average .96% A .94% 1.02% 1.23% .82%
net assets G G A
Ratio of expenses to average .95% A, .94% 1.02% 1.23% .82%
net assets after expense H A
reductions
Ratio of net investment 6.47% A 6.20% 6.04% 6.81% 7.67%
income to average net A
assets
Portfolio turnover rate 236% A 189% 68% 59% 7%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
F EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEARS ENDED NOVEMBER
ENDED 30,
MAY 31, 1996
(UNAUDITED) 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .309 D .579 .204
Net realized and unrealized gain (loss) (.388) .483 (.178)
Total from investment operations (.079) 1.062 .026
Less Distributions
From net investment income (.311) (.562) (.187)
Return of capital - - (.019)
Total distributions (.311) (.562) (.206)
Net asset value, end of period $ 10.360 $ 10.750 $ 10.250
TOTAL RETURN B, C (0.77)% 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 18,784 $ 15,830 $ 3,156
Ratio of expenses to average net assets 1.67% A, 1.70% F 1.65% A,
F F
Ratio of net investment income to average net 5.76% A 5.44% 5.42% A
assets
Portfolio turnover rate 236% A 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED MAY 31,
1996
(UNAUDITED) 1995 1994 E 1993 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140
beginning of period
Income from Investment
Operations
Net investment income .360 D .671 .602 .832 .840 .884
Net realized and (.389) .499 (.833) .531 .102 .411
unrealized gain
(loss)
Total from investment (.029) 1.170 (.231) 1.363 .942 1.295
operations
Less Distributions
From net investment (.361) (.670) (.597) (.843) (.852) (.885)
income
Return of capital - - (.062) - - -
Total distributions (.361) (.670) (.659) (.843) (.852) (.885)
Net asset value, end $ 10.380 $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550
of period
TOTAL RETURN B, C (.30)% 11.73% (2.10) 13.17 9.21 13.35
% % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 221,197 $ 208,861 $ 172,122 $ 183,790 $ 160,156 $ 327,756
(000 omitted)
Ratio of expenses to .66% A .67% .61% .64 .57 .57
average net assets F % % %
Ratio of expenses to .65% A, .67% .61% .64 .57 .57
average net assets G % % %
after expense
reductions
Ratio of net investment 6.77% A 6.47% 6.45% 7.41 7.96 8.59
income to average % % %
net assets
Portfolio turnover rate 236% A 189% 68% 59 7 60
% % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the fund) (formerly Fidelity
Advisor Limited Term Bond Fund) is a fund of Fidelity Advisor Series IV
(the trust) and is authorized to issue an unlimited number of shares. The
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a
Massachusetts business trust.
The fund offers Class A, Class B, and Institutional Class shares, each of
which has equal rights as to assets and voting privileges. Each class has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the fund are allocated on a pro rata basis to each class based
on the relative net assets of each class to the total net assets of the
fund. Each class of shares differs in its respective distribution, transfer
agent, registration, and certain other class-specific fees and expenses.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit 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. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. 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.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends are declared
separately for each class, while capital gain distributions are declared at
the fund level and allocated to each class on a pro rata basis based on the
number of shares held by each class 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. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures
and options transactions, foreign currency transactions, market discount,
capital loss carryforwards and losses deferred due to futures and options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. 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. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates and currency values. Buying futures, writing puts, and
buying calls tend to increase the fund's exposure to the underlying
instrument. Selling futures, buying puts, and writing calls tend to
decrease the fund's exposure to the underlying instrument, or hedge other
fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $588,484,094 and $554,631,397, respectively, of which U.S.
government and government agency obligations aggregated $543,192,617 and
$533,393,026, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annualized rate of .45%
of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares (Class A Plan), Class B shares (Class B Plan),
and Institutional Class shares (collectively referred to as "the Plans").
Under the Class A Plan and Class B Plan, the fund pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. Under the Class A Plan, this fee is based on an annual rate of
.25% of the average net assets of the Class A shares. Under the Class B
Plan, this fee was based on an annual rate of 1.00% (of which .75%
represented a distribution fee and .25% represented a shareholder service
fee) of the average net assets of the Class B shares for the period
December 1, 1995, to December 31, 1995. Effective January 1, 1996, the
Board of Trustees approved a revised Class B distribution plan, under which
the fee is based on an annual rate of .90% (of which .65% represents a
distribution fee and .25% represents a shareholder service fee) of the
average net assets of the Class B shares. For the period, the fund paid FDC
$311,400 and $80,896 under the Class A Plan and Class B Plan, respectively,
of which $311,400 and $22,096 were paid to securities dealers, banks and
other financial institutions for the distribution of Class A and Class B
shares, respectively, and providing shareholder support services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class A, Class B,
and Institutional Class shares. The Plans also authorize payments to third
parties that assist in the sale of the fund's shares or render shareholder
support services.
SALES LOAD. For the period December 1, 1995 through December 31, 1995, FDC
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
received a front-end sales charge of up to 4.75% for selling Class A shares
of the fund and the proceeds of a contingent deferred sales charge levied
on Class B share redemptions occurring within five years of purchase. The
Class B charge was based on declining rates which ranged from 4% to 1% of
the lesser of the cost of shares at the initial date of purchase or the net
asset value of the redeemed shares, excluding any reinvested dividends and
capital gains. Effective January 1, 1996, the Board of Trustees approved
revised Class A and Class B sales charges. Under the revised arrangements,
FDC receives a front-end sales charge of up to 2.75% for selling Class A
shares of the fund, and receives the proceeds of a contingent deferred
sales charge levied on Class B shares redeemed within three years of
purchase. The contingent deferred sales charge is based on a declining
scale that ranges from 3% to 1% of the lesser of the original purchase
price or the redemption proceeds of the redeemed shares, excluding any
reinvested dividends and capital gains.
For the period, FDC received sales charges of $463,578 on sales of Class A
shares of the fund, of which $386,904 was paid to securities dealers,
banks, and other financial institutions. FDC also received contingent
deferred sales
charges of $27,772 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. State Street Bank and Trust Company (State Street) is
the transfer, dividend disbursing, and shareholder servicing agent for the
fund's Class A shares, while Fidelity Investments Institutional Operations
Company (FIIOC), an affiliate of FMR (collectively, with State Street,
referred to as the Transfer Agents) acts in that capacity for the fund's
Class B and Institutional Class shares. The Transfer Agents receive account
fees and asset-based fees that vary according to the account size and type
of account of the shareholders of the respective classes of the fund. With
respect to the Class A shares, State Street has delegated certain transfer,
dividend paying, and shareholder services to FIIOC for which FIIOC receives
its allocable share of all such fees. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.19%, .23%,and .13% of average net assets for Class A, Class B, and
Institutional Class, respectively.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, 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.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for each class.
(I) CLASS A. For the period, this expense limitation was 1.00% of average
net assets.
(II) CLASS B. Effective January 1, 1996, this expense limitation changed
from an annual rate of 1.75% to 1.65% of average net assets and the
reimbursement reduced expenses by $16,838.
(III) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the class' expenses. During the period, the fund's
custodian fees were reduced by $12,361 under the custodian arrangement, and
Class A , Class B, and Institutional Class expenses were reduced by $6,433
, $0, and $1,828, respectively, under the transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED NOVEMBER 30, ENDED
NOVEMBER 30,
MAY 31, 1996 1995 MAY 31, 1996 1995
CLASS A
Shares sold 9,700,021 13,972,712 $ 103,475,284 $ 146,736,790
Reinvestment of distributions 699,309 976,867 7,418,043 10,311,030
Shares redeemed (5,745,998) (7,555,004) (61,256,760) (79,370,108)
Net increase (decrease) 4,653,332 7,394,575 $ 49,636,567 $ 77,677,712
CLASS B
Shares sold 813,205 1,500,134 $ 8,676,518 $ 15,796,386
Reinvestment of distributions 37,831 34,530 400,923 365,409
Shares redeemed (510,415) (370,104) (5,458,466) (3,899,854)
Net increase (decrease) 340,621 1,164,560 $ 3,618,975 $ 12,261,941
INSTITUTIONAL CLASS
Shares sold 5,393,622 10,574,426 $ 57,525,177 $ 111,078,304
Reinvestment of distributions 285,534 373,768 3,031,160 3,947,462
Shares redeemed (3,772,455) (8,321,232) (40,202,810) (87,219,872)
Net increase (decrease) 1,906,701 2,626,962 $ 20,353,527 $ 27,805,894
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Kevin E. Grant, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA - Class A
Fidelity Investments Institutional Operations Company
Boston, MA - Class B
* INDEPENDENT TRUSTEES
CUSTODIAN
Bank of New York
New York, NY
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(registered trademark)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
(FORMERLY FIDELITY ADVISOR LIMITED TERM
BOND FUND - INSTITUTIONAL CLASS)
SEMIANNUAL REPORT
MAY 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and
liabilities, operations, and changes
in net assets, as well as financial
highlights.
NOTES 24 Notes to the financial statements.
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 FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES AND
EXPENSES,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first five
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in bond markets so far this year. In 1995,
both stock and bond markets posted strong results, while the year before,
stocks posted below-average returns and bonds had one of the worst years in
history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and 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, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance. If Fidelity had not reimbursed certain expenses, the
past one year, past five years and past 10 years total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond Fund - -0.30% 4.14% 44.85% 115.92%
Institutional Class
Lehman Brothers Intermediate Government/ -0.23% 4.60% 43.14% 118.49%
Corporate Bond Index
Intermediate Investment Grade Debt -1.28% 3.75% 43.43% 110.88%
Funds Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one year,
five years, or 10 years. For example, if you 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 Institutional Class' returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index, which is
comprised of government and corporate fixed-rate debt issues. Issues
included in the Index have maturities of one to 10 years. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the intermediate investment grade debt funds average, which
reflects the performance of 174 intermediate investment grade bond funds
with similar objectives tracked by Lipper Analytical Services over the past
six months. These benchmarks include reinvested dividends and capital
gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond Fund - 4.14% 7.69% 8.00%
Institutional Class
Lehman Brothers Intermediate Government/ 4.60% 7.44% 8.13%
Corporate Bond Index
Intermediate Investment Grade Debt 3.75% 7.46% 7.74%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class shares' actual (or
cumulative) return and show you what would have happened if Institutional
Class shares had performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960531 19960708 154535 S00000000000001
FA Intermed Bond -CL I LB Intermediate Govt/Corp
00087 LB007
1986/05/31 10000.00 10000.00
1986/06/30 10240.87 10232.42
1986/07/31 10326.79 10336.13
1986/08/31 10552.04 10568.55
1986/09/30 10433.26 10482.26
1986/10/31 10566.52 10618.23
1986/11/30 10700.12 10719.62
1986/12/31 10749.01 10755.64
1987/01/31 10884.47 10864.88
1987/02/28 10949.99 10920.08
1987/03/31 10898.97 10897.42
1987/04/30 10617.76 10698.41
1987/05/31 10577.29 10673.72
1987/06/30 10718.65 10802.71
1987/07/31 10718.33 10827.40
1987/08/31 10666.24 10799.22
1987/09/30 10490.32 10659.19
1987/10/31 10751.82 10963.66
1987/11/30 10890.13 11033.38
1987/12/31 10998.50 11149.30
1988/01/31 11332.44 11434.59
1988/02/29 11502.11 11561.84
1988/03/31 11412.85 11517.39
1988/04/30 11388.74 11498.21
1988/05/31 11321.96 11447.37
1988/06/30 11531.47 11629.82
1988/07/31 11519.40 11605.12
1988/08/31 11552.01 11622.56
1988/09/30 11765.36 11824.18
1988/10/31 11923.03 11984.83
1988/11/30 11849.41 11882.57
1988/12/31 11860.31 11893.03
1989/01/31 11989.35 12017.95
1989/02/28 11960.96 11968.28
1989/03/31 12008.22 12019.99
1989/04/30 12210.22 12260.25
1989/05/31 12439.85 12503.70
1989/06/30 12742.94 12818.92
1989/07/31 13012.53 13082.13
1989/08/31 12836.79 12913.05
1989/09/30 12897.39 12974.06
1989/10/31 13166.50 13248.31
1989/11/30 13274.79 13374.97
1989/12/31 13296.68 13411.58
1990/01/31 13164.43 13325.59
1990/02/28 13207.73 13374.10
1990/03/31 13189.26 13391.53
1990/04/30 13103.99 13345.05
1990/05/31 13415.23 13173.64
1990/06/30 13594.59 13820.92
1990/07/31 13776.09 14012.67
1990/08/31 13661.08 13955.14
1990/09/30 13762.07 14062.93
1990/10/31 13891.76 14226.20
1990/11/30 14132.23 13942.65
1990/12/31 14348.77 14639.61
1991/01/31 14455.44 14788.07
1991/02/28 14571.37 14906.31
1991/03/31 14663.68 15007.70
1991/04/30 14827.24 15171.26
1991/05/31 14906.33 15264.52
1991/06/30 14910.82 15275.27
1991/07/31 15078.51 15445.51
1991/08/31 15395.07 15740.39
1991/09/30 15681.02 16011.16
1991/10/31 15866.57 16193.89
1991/11/30 16018.37 16379.83
1991/12/31 16523.70 16779.87
1992/01/31 16312.26 16627.93
1992/02/29 16354.58 16693.59
1992/03/31 16295.71 16627.93
1992/04/30 16387.28 16774.06
1992/05/31 16686.77 17034.08
1992/06/30 16922.07 17286.25
1992/07/31 17320.35 17629.94
1992/08/31 17480.49 17806.28
1992/09/30 17703.17 18047.99
1992/10/31 17446.05 17813.83
1992/11/30 17494.39 17746.14
1992/12/31 17732.52 17983.79
1993/01/31 18106.31 18333.58
1993/02/28 18454.51 18622.64
1993/03/31 18579.69 18696.73
1993/04/30 18699.99 18847.22
1993/05/31 18722.16 18805.38
1993/06/30 19100.19 19100.55
1993/07/31 19276.09 19147.32
1993/08/31 19709.92 19450.92
1993/09/30 19773.82 19531.68
1993/10/31 19887.13 19583.97
1993/11/30 19798.65 19474.74
1993/12/31 19875.06 19563.93
1994/01/31 20092.29 19781.24
1994/02/28 19690.87 19488.68
1994/03/31 19316.00 19167.08
1994/04/30 19268.11 19036.63
1994/05/31 19217.67 19049.42
1994/06/30 19220.03 19052.03
1994/07/31 19406.75 19326.28
1994/08/31 19408.98 19386.71
1994/09/30 19319.08 19208.33
1994/10/31 19323.32 19205.72
1994/11/30 19383.03 19118.56
1994/12/31 19465.98 19186.25
1995/01/31 19681.11 19509.60
1995/02/28 19909.02 19914.30
1995/03/31 20034.20 20028.18
1995/04/30 20216.56 20275.41
1995/05/31 20734.17 20888.41
1995/06/30 20861.10 21028.44
1995/07/31 20855.72 21031.35
1995/08/31 21028.89 21222.80
1995/09/30 21162.69 21376.49
1995/10/31 21400.82 21614.71
1995/11/30 21657.13 21898.84
1995/12/31 21900.12 22128.35
1996/01/31 22065.95 22319.22
1996/02/29 21819.45 22057.17
1996/03/31 21719.28 21943.58
1996/04/30 21634.78 21866.01
1996/05/31 21591.83 21849.45
IMATRL PRASUN SHR__CHT 19960531 19960708 154541 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Institutional Class on May 31,
1986. As the chart shows, by May 31, 1996, the value of the investment
would have grown to $21,592 - a 115.92% increase on the initial investment.
For comparison, look at how the Lehman Brothers Intermediate
Government/Corporate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $21,849 - a
118.49% increase.
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. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31,
1996 1995 1994 1993 1992 1991
Dividend return 3.32% 6.86% 5.87% A 8.28% 8.36% 9.30%
Capital appreciation -3.62% 4.87% -7.97% 4.89% 0.85% 4.05%
return
Total return -0.30% 11.73% -2.10% 13.17% 9.21% 13.35%
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or capital gains are
reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.92(cents) 36.08(cents) 70.68(cents)
Annualized dividend rate 6.68% 6.76% 6.63%
30-day annualized yield 5.96% - -
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.43 over the past month, $10.65
over the past six months and $10.66 over the past year, you can compare the
class' 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.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 6.2(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. KEVIN, HOW HAS THE FUND PERFORMED?
A. For the six months ended May 31, 1996, Fidelity Advisor Intermediate
Bond Fund - Institutional Class had a total return of -0.30%. For the same
period, the intermediate investment grade debt funds average tracked by
Lipper Analytical Services returned -1.28%, while the Lehman Brothers
Intermediate Government/Corporate Bond Index posted a total return of
- -0.23%. For the 12 months ended May 31, 1996, the Institutional Class had a
total return of 4.14%, while the Lipper funds average had a 3.75% total
return and the Lehman Brothers index returned 4.60%.
Q. WHAT HAS THE INVESTING ENVIRONMENT IN THE BOND MARKET BEEN LIKE OVER THE
PAST SIX MONTHS?
A. At the beginning of 1996, it seemed that the market expected the Federal
Reserve Board to continue the short-term interest rate decreases it had
pursued through much of 1995, or to take no action at all. That's because
the economy was weak, inflation was not on the horizon and Fed easing
usually helps prevent the economy from going into a recession. However, in
February, the market consensus began to change significantly. The February,
March, April and May employment growth statistics suggested an accelerating
economy. The market began to smell an inflation threat, and the chances of
the Fed tightening increased.
Q. WHAT HELPED THE FUND'S PERFORMANCE BEAT THAT OF THE LIPPER AVERAGE OVER
THE PAST SIX MONTHS?
A. It appears the fund's competitors within the universe of intermediate
bond funds tracked by Lipper had a longer duration than the fund did.
Duration is a measure of sensitivity to interest rates, and the longer the
duration the more sensitive a bond fund is to changes in rates. When
interest rates rise, a fund with a longer duration will drop more in value
than one with a shorter duration. For about a year, rates were falling and
the market maintained strong expectations of further Fed interest-rate
easing. In that kind of environment, it can be tempting for fund managers
to increase their funds' durations as a means of locking in higher yields.
Despite the fact that it was the widespread consensus that the Fed was
going to keep easing, I did not lengthen the fund's duration. This was due,
in part, to my attempt to seek to match the interest rate risk profile of
the market by maintaining a duration that is close to that of the fund's
benchmark index. By sticking to this discipline, the fund was not subject
to the same losses as many of its competitors.
Q. WHAT'S YOUR READ ON THE CORPORATE BOND MARKET AT THE END OF THE PERIOD?
A. I think the yield advantage offered by corporates over Treasuries has
been very small for some time. This has two negative consequences for the
fund. First, I believe owning corporates as opposed to government bonds
doesn't help the fund earn much more income. Second, I think that if
overall credit quality deteriorates, yields will rise - and prices will
fall - on corporate bonds. That's the danger of being too aggressive on
corporate bonds at their current valuations. Without corporate bonds,
though, the fund would sacrifice the additional yield they offer. As a
result, I'm being cautious with the fund's corporate bond investments,
taking special care to avoid securities issued by companies that might take
on further debt which could negatively affect their credit quality. It can
be hard to predict events like this, so I've invested in yankee bonds as a
substitute for corporates.
Q. WHAT EXACTLY ARE YANKEE BONDS?
A. They're bonds issued by foreign companies or governments, sold in the
U.S. and denominated in U.S. dollars. For example, the fund holds yankee
bonds issued by the Canadian government and provincial governments in
Canada. Historically, these issues have had yields similar to corporate
bonds, without as much event risk.
Q. ARE THERE OTHER PARTICULAR INVESTMENTS YOU'D LIKE TO HIGHLIGHT?
A. I've purchased some corporate issues known as put bonds, including
Burlington Northern Santa Fe Corp. and Wachovia Corp. While these are
long-term bonds maturing in 30 to 40 years, the fund can redeem them in a
much shorter time - nine years for some of them. They're currently trading
as if the market believes they are nine-year bonds. However, if interest
rates were to decline, the bonds probably would rise in price as if they
were 30-year issues - a price increase markedly higher than for a nine-year
bond. If interest rates rise, the price of the bond should fall like a
nine-year bond - that is, at a much lower rate. The fund holds these bonds
in place of those with average maturities between eight and 10 years that
it would ordinarily hold.
Q. WHAT ABOUT THE FUND'S INVESTMENTS IN MORTGAGE-BACKED SECURITIES?
A. I've been focusing on 15-year mortgage securities selling at deep
discounts. At current market rates, these bonds are not very sensitive to
prepayment risk - the risk that mortgage owners will pay off the loan
before maturity. And because they have 15-year final maturities, they're
exposed to less extension-risk, or the risk that their durations will
increase when interest rates rise. They are a low-risk way to add return to
the fund.
Q. WHAT'S YOUR OUTLOOK?
A. My overall strategy won't change. That is, I won't try to predict
interest rates. Instead, I'll try to find value in the different sectors of
the market. I'll look for opportunities in the corporate market and may
reduce the fund's mortgage-backed securities during the summer. That's
because they tend to richen - or become more expensive relative to
Treasuries - during that season when supply typically dwindles and
volatility subsides. I'll take advantage of that situation if it arises.
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.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks to provide a
high rate of income through
investment primarily in
investment-grade
fixed-income obligations
START DATE: February 2, 1984
SIZE: as of May 31, 1996,
more than $508 million
MANAGER: Kevin Grant,
since October 1995;
manager, Fidelity Advisor
World Intermediate Fund, since
December 1995; joined
Fidelity in 1993
(checkmark)
KEVIN GRANT ON INTEREST RATES:
"What you see in the market in
terms of yields - or interest
rates - is the consensus
view on inflation. If that
consensus view is shaken -
as it was during the period -
you'll see the market move.
Employment growth is one of
the more crucial elements
that the market pays attention
to. If you have strong
employment, more people are
earning and spending money
and there are more potential
home buyers. If payroll
growth is high and there is low
unemployment, there is wage
pressure because there is a
limited pool of people to hire.
All of these factors can lead to
inflation. That's why the
market was so affected by the
strong employment numbers
that started to come out in
March. Before that, market
yields reflected the
anticipation of Fed short-term
interest rate reductions to
stave off recession.
"While these factors affect the
fund, they don't affect its
strategy. I don't predict the
movement of interest rates,
instead keeping the fund's
duration neutral to the
intermediate bond market as
defined by the index, so that
the fund won't be caught on
the wrong side of an interest
rate move."
(solid bullet) As of June 24, 1996, the
fund will use two additional
agencies - Duff & Phelps
Credit Rating Co. and Fitch
Investors Service, as well as
Moody's Investors Service
and Standard & Poor's which
the fund already uses - to
determine the credit quality of
the fund's bonds.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 66.7 68.7
Aa 4.3 6.8
A 12.2 7.9
Baa 2.4 0.1
Ba 0.0 0.0
B 0.0 0.0
Not rated 1.8 0.8
TABLE EXCLUDES SHORT TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1996
6 MONTHS AGO
Years 5.8 5.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MAY 31, 1996
6 MONTHS AGO
Years 3.2 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MAY 31, 1996 * AS OF NOVEMBER 30, 1995 **
Row: 1, Col: 1, Value: 12.6
Row: 1, Col: 2, Value: 3.3
Row: 1, Col: 3, Value: 2.6
Row: 1, Col: 4, Value: 64.59999999999999
Row: 1, Col: 5, Value: 16.9
Row: 1, Col: 1, Value: 15.7
Row: 1, Col: 2, Value: 3.0
Row: 1, Col: 3, Value: 2.8
Row: 1, Col: 4, Value: 65.7
Row: 1, Col: 5, Value: 6.0
Row: 1, Col: 6, Value: 6.8
Corporate bonds 16.9%
U.S. government
and government
agency
obligations 64.6%
Foreign government
obligations 2.6%
Other 3.3%
Short-term
investments 12.6%
Corporate bonds 12.8%
U.S. government
and government
agency
obligations 65.7%
Foreign government
obligations 2.8%
Other 3.0%
Short-term
investments 15.7%
* FOREIGN
INVESTMENTS 8.4%
** FOREIGN
INVESTMENTS 7.4%
INVESTMENTS MAY 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 16.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp. 8 7/8%, 11/15/01 $ 2,790,000 $ 2,994,468
ENERGY - 0.6%
ENERGY SERVICES - 0.6%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (b) 3,160,000 3,083,402
FINANCE - 10.5%
ASSET-BACKED SECURITIES - 2.2%
Ford Credit Grantor Trust 5.90%, 10/15/00 4,127,990 4,103,480
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 267,401 265,596
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 512,459 512,459
Standard Credit Card Master Trust I:
participation certificate, 5 1/2%, 9/7/98 5,000,000 4,939,063
7.65%, 2/15/00 1,200,000 1,218,375
11,038,973
BANKS - 5.0%
Banponce Corp. 6 3/4%, 12/15/05 5,000,000 4,628,550
Citicorp 8.80%, 2/1/00 780,000 792,979
Export Import Bank of Korea 6 3/8%, 2/15/06 2,190,000 2,011,252
Kansallis-Osake-Pankki NY Branch 10%, 5/1/02 650,000 728,631
Korea Development Bank yankee 7 1/4%, 5/15/06 5,000,000 4,877,050
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,132,270
Provident Bank 6 1/8%, 12/15/00 5,000,000 4,787,900
Wachovia Corp. 6.605%, 10/1/25 5,000,000 4,773,000
25,731,632
CREDIT & OTHER FINANCE - 2.3%
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,650,125
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 104,213
Ford Motor Credit Co.:
8%, 6/15/02 100,000 103,758
7 3/4%, 11/15/02 100,000 102,702
Grand Metropolitan Investment Corp. 8 1/8%, 8/15/96 3,000,000 3,011,550
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,727,265
Secured Finance, Inc. secured 9.05%, 12/15/04 4,000,000 4,370,360
12,069,973
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 1.0%
Metropolitan Life Insurance Co. 6.30%, 11/1/03 (b) $ 4,260,000 $ 3,989,490
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,016,770
5,006,260
TOTAL FINANCE 53,846,838
MEDIA & LEISURE - 0.5%
RESTAURANTS - 0.5%
Darden Restaurants, Inc. 6 3/8%, 2/1/06 2,830,000 2,584,215
NONDURABLES - 0.5%
FOODS - 0.5%
Quaker Oats Co.:
9 1/8, 10/1/99 440,000 467,966
6.91%, 5/15/03 650,000 633,978
9 1/8%, 7/15/04 210,000 231,519
7.51%, 5/2/05 600,000 599,490
7.30%, 8/29/05 530,000 517,423
2,450,376
TOBACCO - 0.0%
Philip Morris Companies, Inc.:
9 3/4%, 5/1/97 100,000 103,026
6 3/8%, 1/15/98 250,000 249,010
352,036
TOTAL NONDURABLES 2,802,412
TECHNOLOGY - 1.9%
COMPUTER SERVICES & SOFTWARE - 0.9%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,854,850
COMPUTERS & OFFICE EQUIPMENT - 1.0%
Comdisco, Inc. 5 3/4%, 1/19/99 5,000,000 4,866,450
TOTAL TECHNOLOGY 9,721,300
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
Burlington Northern Santa Fe Corp. 7.29%, 6/1/36 $ 2,340,000 $ 2,309,791
UTILITIES - 1.8%
ELECTRIC UTILITY - 1.8%
British Columbia Hydro & Power Authority yankee:
15 1/2%, 11/15/11 7,070,000 7,828,752
12 1/2%, 1/15/14 940,000 1,097,422
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 150,894
9,077,068
TOTAL NONCONVERTIBLE BONDS
(Cost $90,159,774) 86,419,494
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 38.4%
U.S. TREASURY OBLIGATIONS - 33.0%
6 1/2%, 5/15/97 25,550,000 25,701,767
8 1/2%, 5/15/97 33,850,000 34,669,847
9 1/8%, 5/15/99 45,560,000 48,777,447
7 3/4%, 12/31/99 13,260,000 13,763,482
11 7/8%, 11/15/03 6,000,000 7,741,860
12 3/4%, 11/15/10 26,383,000 36,775,528
12%, 8/15/23 910,000 1,270,305
TOTAL U.S. TREASURY OBLIGATIONS 168,700,236
U.S. GOVERNMENT AGENCY OBLIGATIONS - 5.4%
Federal Home Loan Bank:
5.77%, 2/03/04 740,000 683,113
7.38%, 8/05/04 1,930,000 1,962,270
7.70%, 9/20/04 1,250,000 1,296,088
Federal Home Loan Mortgage Corporation
8.115%, 1/31/05 5,460,000 5,790,166
Federal National Mortgage Association:
5.45%, 10/10/03 1,000,000 909,840
7.40%, 7/1/04 1,130,000 1,149,086
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trust Certificates (assets of Trust guaranteed by
U.S. Government through Defense Security Assistance
Agency) Class 2-E 9.40%, 5/15/02 $ 1,110,000 $ 1,186,479
Government Trust Certificates (assets of Trust guaranteed by
U.S. Government through Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 354,489 354,156
Series 1994-C, 6.61%, 9/15/99 109,009 109,343
Series 1994-F, 8.187%, 12/15/04 576,784 599,519
Series 1996-A, 6.55%, 6/15/04 1,500,000 1,481,835
Private Export Funding Corp. secured:
Series SS, 5.80%, 2/1/04 1,710,000 1,624,261
Series VV, 6.24%, 5/15/02 550,000 531,905
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
8%, 11/15/01 1,740,000 1,824,460
6 1/8%, 3/15/03 397,000 377,880
6 5/8%, 2/15/04 140,000 135,589
7 5/8%, 8/15/04 840,000 864,263
U.S. Housing & Urban Development:
8.24%, 8/1/04 1,030,000 1,097,517
6.92%, 8/1/04 5,360,000 5,302,755
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 27,280,525
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $202,634,962) 195,980,761
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 24.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.8%
5 1/2%, 3/1/01 to 6/1/03 12,483,794 11,934,955
9 1/2%, 1/1/17 100,364 107,274
10%, 4/1/05 to 12/1/05 561,073 606,057
10 1/4%, 12/1/09 61,965 67,095
10 1/2%, 5/1/21 1,070,791 1,168,158
11%, 12/1/11 58,499 63,923
11 1/2%, 10/1/15 144,648 160,731
11 3/4%, 10/1/10 138,876 153,970
14,262,163
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.3%
5 1/2%, 6/1/03 to 5/1/26 $ 34,478,472 $ 31,647,394
6%, 5/1/01 to 4/1/11 23,867,960 22,405,888
6 1/2%, 2/1/26 14,795,455 13,708,876
9 1/2%, 2/1/25 5,034,929 5,376,801
10%, 1/1/20 181,000 197,346
10 1/2%, 7/1/11 to 8/1/20 865,880 952,770
11%, 8/1/15 3,110,862 3,430,223
12 1/2%, 2/1/11 to 4/1/15 127,187 146,542
77,865,840
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.4%
7%, 11/15/22 to 11/15/25 6,383,947 6,101,817
8%, 2/15/02 to 6/15/25 5,661,446 5,773,259
8 1/2%, 4/15/17 to 12/15/21 924,596 950,359
9%, 6/15/16 to 8/15/17 4,703,519 4,968,638
10%, 8/15/19 to 1/15/26 6,082,939 6,659,405
11%, 12/15/09 to 10/15/20 1,874,151 2,085,259
11 1/2%, 3/15/10 to 2/15/19 5,642,096 6,349,895
32,888,632
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $128,409,478) 125,016,635
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 1.7%
Federal National Mortgage Association planned amortization
class Series X-188A Class H, 6%,
6/25/07 (Cost $9,078,033) 9,162,500 8,662,857
COMMERCIAL MORTGAGE SECURITIES - 2.4%
CBM Funding Corp. commercial Series 1996-1 Class A-1,
7.55%, 7/1/99 (b) 233,418 235,461
CS First Boston Mortgage Securities Corp. commercial:
Series 1995-AEWI Class A1, 6.665%, 11/25/27 1,197,427 1,162,814
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 4,801,563
Equitable Life Assurance Society of the United States commercial
Series 1996-1 Class C-1, 7.52%, 5/15/06 (b) 1,000,000 987,500
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 1,963 1,962
Kearny Street Mortgage commercial Class II-B, 6.60%,
10/15/02 (b) 207,047 206,788
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Resolution Trust Corp. commercial:
Series 1994-N2 Class 2, 7 1/2%, 12/15/04 (a)(b) $ 27,148 $ 27,114
Series 1994-N2 Class 3, 7 1/2%, 12/15/04 (a)(b) 400,000 399,500
Series 1995-C1 Class A2A, 6 1/4%, 2/25/27 352,976 352,535
Series 1995-C1 Class A4A, 6 1/4%, 2/25/27 1,417,817 1,409,177
Structured Asset Securities Corp. commercial:
Series 1995-C4 Class A1A, 6.90%, 6/25/26 1,174,137 1,161,112
Series 1996 Class A-1C, 5.944%, 2/25/28 1,489,000 1,421,995
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $12,504,675) 12,167,521
FOREIGN GOVERNMENT OBLIGATIONS - 2.6%
Ontario Province yankee:
7 3/4%, 6/4/02 6,000,000 6,208,620
17%, 11/5/11 2,000,000 2,218,040
Quebec Province yankee 6.86%, 4/15/26 (a) 5,000,000 4,795,750
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $13,686,540) 13,222,410
SUPRANATIONAL OBLIGATIONS - 0.9%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 4,813,695
REPURCHASE AGREEMENTS - 12.6%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.32%, dated
5/31/96 due 6/3/96 $ 64,623,638 64,595,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $525,445,342) $ 510,878,373
LEGEND
1. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
2. 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 $8,929,255 or 1.8% of net
assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.2% AAA, AA, A 82.1%
Baa 2.4% BBB 4.5%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.0%.
INCOME TAX INFORMATION
At May 31, 1996, the aggregate cost of investment securities for income tax
purposes was $525,445,342. Net unrealized depreciation aggregated
$14,566,969, of which $1,599,281 related to appreciated investment
securities and $16,166,250 related to depreciated investment securities.
At November 30, 1995, the fund had a capital loss carryforward of
approximately $4,010,000 of which $2,841,000, $1,035,000 and $134,000 will
expire on November 30, 1998, 1999 and 2002, respectively.
At November 30, 1995, the fund was required to defer $424,000 of losses on
futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 510,878,373
agreements of $64,595,000) (cost $525,445,342) -
See accompanying schedule
Cash 1,314
Receivable for investments sold 4,918,745
Receivable for fund shares sold 2,669,183
Interest receivable 4,178,967
TOTAL ASSETS 522,646,582
LIABILITIES
Payable for investments purchased $ 12,962,830
Distributions payable 797,138
Accrued management fee 183,276
Distribution fees payable 68,995
Other payables and accrued expenses 118,606
TOTAL LIABILITIES 14,130,845
NET ASSETS $ 508,515,737
Net Assets consist of:
Paid in capital $ 530,118,580
Distributions in excess of net investment income (2,128,135)
Accumulated undistributed net realized gain (loss) on (4,908,486)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (14,566,222)
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 508,515,737
CALCULATION OF MAXIMUM OFFERING PRICE $10.38
CLASS A:
NET ASSET VALUE, and redemption price per share
($268,534,048 (divided by) 25,877,895 shares)
Maximum offering price per share (100/97.25 of $10.38) $10.67
CLASS B: $10.36
NET ASSET VALUE, offering price and redemption price
per share ($18,784,491 (divided by) 1,813,000 shares) A
INSTITUTIONAL CLASS: $10.38
NET ASSET VALUE, offering price and redemption price
per share ($221,197,198 (divided by) 21,300,344 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 18,004,466
Interest
EXPENSES
Management fee $ 1,083,057
Transfer agent fees 232,208
Class A
Class B 20,660
Institutional Class 143,594
Distribution fees 311,400
Class A
Class B 80,896
Accounting fees and expenses 96,928
Non-interested trustees' compensation 941
Custodian fees and expenses 36,278
Registration fees 14,550
Class A
Class B 17,702
Institutional Class 11,548
Audit 18,568
Legal 4,251
Miscellaneous 8,249
Total expenses before reductions 2,080,830
Expense reductions (37,460) 2,043,370
NET INVESTMENT INCOME 15,961,096
REALIZED AND UNREALIZED GAIN (LOSS) (474,483)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (17,733,413)
investment securities
NET GAIN (LOSS) (18,207,896)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (2,246,800)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31,1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 15,961,096 $ 23,985,922
Net investment income
Net realized gain (loss) (474,483) 2,071,414
Change in net unrealized appreciation (depreciation) (17,733,413) 15,815,741
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,246,800) 41,873,077
FROM OPERATIONS
Distributions to shareholders (8,091,341) (11,358,854)
From net investment income
Class A
Class B (516,059) (469,092)
Institutional Class (7,368,554) (11,805,144)
TOTAL DISTRIBUTIONS (15,975,954) (23,633,090)
Share transactions - net increase (decrease) 73,609,069 117,745,547
TOTAL INCREASE (DECREASE) IN NET ASSETS 55,386,315 135,985,534
NET ASSETS
Beginning of period 453,129,422 317,143,888
End of period (including distributions in excess of net $ 508,515,737 $ 453,129,422
investment income of $2,128,135 and $2,113,277,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1996
(UNAUDITED) 1995 1994 F 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960
of period
Income from Investment
Operations
Net investment income .345 D .649 .609 .785 .170
Net realized and unrealized (.379) .491 (.876) .511 (.320)
gain (loss)
Total from investment (.034) 1.140 (.267) 1.296 (.150)
operations
Less Distributions
From net investment (.346) (.640) (.555) (.796) (.170)
income
Return of capital - - (.058) - -
Total distributions (.346) (.640) (.613) (.796) (.170)
Net asset value, end of period $ 10.380 $ 10.760 $ 10.260 $ 11.140 $ 10.640
TOTAL RETURN B, C (.35)% 11.43% (2.44)% 12.50% (1.37)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 268,534 $ 228,439 $ 141,866 $ 59,184 $ 2,583
(000 omitted)
Ratio of expenses to average .96% A .94% 1.02% 1.23% .82%
net assets G G A
Ratio of expenses to average .95% A, .94% 1.02% 1.23% .82%
net assets after expense H A
reductions
Ratio of net investment 6.47% A 6.20% 6.04% 6.81% 7.67%
income to average net A
assets
Portfolio turnover rate 236% A 189% 68% 59% 7%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
F EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEARS ENDED NOVEMBER
ENDED 30,
MAY 31, 1996
(UNAUDITED) 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .309 D .579 .204
Net realized and unrealized gain (loss) (.388) .483 (.178)
Total from investment operations (.079) 1.062 .026
Less Distributions
From net investment income (.311) (.562) (.187)
Return of capital - - (.019)
Total distributions (.311) (.562) (.206)
Net asset value, end of period $ 10.360 $ 10.750 $ 10.250
TOTAL RETURN B, C (0.77)% 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 18,784 $ 15,830 $ 3,156
Ratio of expenses to average net assets 1.67% A, 1.70% F 1.65% A,
F F
Ratio of net investment income to average net 5.76% A 5.44% 5.42% A
assets
Portfolio turnover rate 236% A 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED MAY 31,
1996
(UNAUDITED) 1995 1994 E 1993 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140
beginning of period
Income from Investment
Operations
Net investment income .360 D .671 .602 .832 .840 .884
Net realized and (.389) .499 (.833) .531 .102 .411
unrealized gain
(loss)
Total from investment (.029) 1.170 (.231) 1.363 .942 1.295
operations
Less Distributions
From net investment (.361) (.670) (.597) (.843) (.852) (.885)
income
Return of capital - - (.062) - - -
Total distributions (.361) (.670) (.659) (.843) (.852) (.885)
Net asset value, end $ 10.380 $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550
of period
TOTAL RETURN B, C (.30)% 11.73% (2.10) 13.17 9.21 13.35
% % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 221,197 $ 208,861 $ 172,122 $ 183,790 $ 160,156 $ 327,756
(000 omitted)
Ratio of expenses to .66% A .67% .61% .64 .57 .57
average net assets F % % %
Ratio of expenses to .65% A, .67% .61% .64 .57 .57
average net assets G % % %
after expense
reductions
Ratio of net investment 6.77% A 6.47% 6.45% 7.41 7.96 8.59
income to average % % %
net assets
Portfolio turnover rate 236% A 189% 68% 59 7 60
% % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the fund) (formerly Fidelity
Advisor Limited Term Bond Fund) is a fund of Fidelity Advisor Series IV
(the trust) and is authorized to issue an unlimited number of shares. The
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a
Massachusetts business trust.
The fund offers Class A, Class B, and Institutional Class shares, each of
which has equal rights as to assets and voting privileges. Each class has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the fund are allocated on a pro rata basis to each class based
on the relative net assets of each class to the total net assets of the
fund. Each class of shares differs in its respective distribution, transfer
agent, registration, and certain other class-specific fees and expenses.
The financial statements have been prepared in conformity with generally
accepted accounting principles which permit 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. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. 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.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends are declared
separately for each class, while capital gain distributions are declared at
the fund level and allocated to each class on a pro rata basis based on the
number of shares held by each class 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. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures
and options transactions, foreign currency transactions, market discount,
capital loss carryforwards and losses deferred due to futures and options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. 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. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the bond market and to fluctuations in
interest rates and currency values. Buying futures, writing puts, and
buying calls tend to increase the fund's exposure to the underlying
instrument. Selling futures, buying puts, and writing calls tend to
decrease the fund's exposure to the underlying instrument, or hedge other
fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $588,484,094 and $554,631,397, respectively, of which U.S.
government and government agency obligations aggregated $543,192,617 and
$533,393,026, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annualized rate of .45%
of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares (Class A Plan), Class B shares (Class B Plan),
and Institutional Class shares (collectively referred to as "the Plans").
Under the Class A Plan and Class B Plan, the fund pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. Under the Class A Plan, this fee is based on an annual rate of
.25% of the average net assets of the Class A shares. Under the Class B
Plan, this fee was based on an annual rate of 1.00% (of which .75%
represented a distribution fee and .25% represented a shareholder service
fee) of the average net assets of the Class B shares for the period
December 1, 1995, to December 31, 1995. Effective January 1, 1996, the
Board of Trustees approved a revised Class B distribution plan, under which
the fee is based on an annual rate of .90% (of which .65% represents a
distribution fee and .25% represents a shareholder service fee) of the
average net assets of the Class B shares. For the period, the fund paid FDC
$311,400 and $80,896 under the Class A Plan and Class B Plan, respectively,
of which $311,400 and $22,096 were paid to securities dealers, banks and
other financial institutions for the distribution of Class A and Class B
shares, respectively, and providing shareholder support services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class A, Class B,
and Institutional Class shares. The Plans also authorize payments to third
parties that assist in the sale of the fund's shares or render shareholder
support services.
SALES LOAD. For the period December 1, 1995 through December 31, 1995, FDC
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
received a front-end sales charge of up to 4.75% for selling Class A shares
of the fund and the proceeds of a contingent deferred sales charge levied
on Class B share redemptions occurring within five years of purchase. The
Class B charge was based on declining rates which ranged from 4% to 1% of
the lesser of the cost of shares at the initial date of purchase or the net
asset value of the redeemed shares, excluding any reinvested dividends and
capital gains. Effective January 1, 1996, the Board of Trustees approved
revised Class A and Class B sales charges. Under the revised arrangements,
FDC receives a front-end sales charge of up to 2.75% for selling Class A
shares of the fund, and receives the proceeds of a contingent deferred
sales charge levied on Class B shares redeemed within three years of
purchase. The contingent deferred sales charge is based on a declining
scale that ranges from 3% to 1% of the lesser of the original purchase
price or the redemption proceeds of the redeemed shares, excluding any
reinvested dividends and capital gains.
For the period, FDC received sales charges of $463,578 on sales of Class A
shares of the fund, of which $386,904 was paid to securities dealers,
banks, and other financial institutions. FDC also received contingent
deferred sales
charges of $27,772 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. State Street Bank and Trust Company (State Street) is
the transfer, dividend disbursing, and shareholder servicing agent for the
fund's Class A shares, while Fidelity Investments Institutional Operations
Company (FIIOC), an affiliate of FMR (collectively, with State Street,
referred to as the Transfer Agents) acts in that capacity for the fund's
Class B and Institutional Class shares. The Transfer Agents receive account
fees and asset-based fees that vary according to the account size and type
of account of the shareholders of the respective classes of the fund. With
respect to the Class A shares, State Street has delegated certain transfer,
dividend paying, and shareholder services to FIIOC for which FIIOC receives
its allocable share of all such fees. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annualized rate of
.19%, .23%,and .13% of average net assets for Class A, Class B, and
Institutional Class, respectively.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, 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.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for each class.
(I) CLASS A. For the period, this expense limitation was 1.00% of average
net assets.
(II) CLASS B. Effective January 1, 1996, this expense limitation changed
from an annual rate of 1.75% to 1.65% of average net assets and the
reimbursement reduced expenses by $16,838.
(III) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the class' expenses. During the period, the fund's
custodian fees were reduced by $12,361 under the custodian arrangement, and
Class A , Class B, and Institutional Class expenses were reduced by $6,433
, $0, and $1,828, respectively, under the transfer agent arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED NOVEMBER 30, ENDED
NOVEMBER 30,
MAY 31, 1996 1995 MAY 31, 1996 1995
CLASS A
Shares sold 9,700,021 13,972,712 $ 103,475,284 $ 146,736,790
Reinvestment of distributions 699,309 976,867 7,418,043 10,311,030
Shares redeemed (5,745,998) (7,555,004) (61,256,760) (79,370,108)
Net increase (decrease) 4,653,332 7,394,575 $ 49,636,567 $ 77,677,712
CLASS B
Shares sold 813,205 1,500,134 $ 8,676,518 $ 15,796,386
Reinvestment of distributions 37,831 34,530 400,923 365,409
Shares redeemed (510,415) (370,104) (5,458,466) (3,899,854)
Net increase (decrease) 340,621 1,164,560 $ 3,618,975 $ 12,261,941
INSTITUTIONAL CLASS
Shares sold 5,393,622 10,574,426 $ 57,525,177 $ 111,078,304
Reinvestment of distributions 285,534 373,768 3,031,160 3,947,462
Shares redeemed (3,772,455) (8,321,232) (40,202,810) (87,219,872)
Net increase (decrease) 1,906,701 2,626,962 $ 20,353,527 $ 27,805,894
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Kevin E. Grant, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
Bank of New York
New York, NY
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
STATE MUNICIPAL FUNDS
Fidelity Advisor California Municipal Income Fund
Fidelity Advisor New York Municipal Income Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(registered trademark)
