(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INTERMEDIATE BOND
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
MAY 31, 1997
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 15 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 18 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 19 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and
liabilities, operations, and
changes in net assets, as well as
financial highlights.
NOTES 35 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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first five months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them from time to time.
After climbing steadily upward for more than two years, stock prices saw a
sharp correction in late March and early April. Returns in the bond market
were essentially stagnant as the Federal Reserve Board implemented a
long-expected increase in short-term interest rates at the end of March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield to measure performance. The initial
offering of Class A shares took place on September 3, 1996. Class A shares
bear a 0.15% 12b-1 fee that is reflected in returns after September 3,
1996. Returns between September 10, 1992 (the date Class T shares were
first offered) and September 3, 1996 are those of Class T and reflect Class
T's 0.25% 12b-1 fee. Returns prior to September 10, 1992 are those of the
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 class expenses, total returns
and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond - Class A 1.07% 6.36% 35.69% 114.06%
Advisor Intermediate Bond - Class A -2.21% 2.90% 31.28% 107.10%
(incl. max. 3.25% sales charge)
Lehman Brothers Intermediate 1.25% 7.38% 37.73% 119.80%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 0.71% 7.56% 37.00% 118.94%
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 - a market value weighted
performance benchmark for government and corporate fixed-rate debt issues
with maturities between one and 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 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 192 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class A 6.36% 6.29% 7.91%
Advisor Intermediate Bond - Class A 2.90% 5.59% 7.55%
(incl. max. 3.25% sales charge)
Lehman Brothers Intermediate 7.38% 6.61% 8.19%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 7.56% 6.48% 8.13%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class A 's cumulative return and show you
what would have happened if Class A had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/05/31 9675.00 10000.00
1987/06/30 9804.30 10120.85
1987/07/31 9804.01 10143.98
1987/08/31 9756.36 10117.58
1987/09/30 9595.45 9986.39
1987/10/31 9834.64 10271.64
1987/11/30 9961.15 10336.96
1987/12/31 10060.28 10445.56
1988/01/31 10365.74 10712.85
1988/02/29 10520.92 10832.06
1988/03/31 10439.28 10790.42
1988/04/30 10417.23 10772.46
1988/05/31 10356.14 10724.82
1988/06/30 10547.78 10895.75
1988/07/31 10536.74 10872.62
1988/08/31 10566.57 10888.95
1988/09/30 10761.72 11077.84
1988/10/31 10905.94 11228.36
1988/11/30 10838.60 11132.55
1988/12/31 10848.57 11142.35
1989/01/31 10966.61 11259.39
1989/02/28 10940.63 11212.85
1989/03/31 10983.87 11261.30
1989/04/30 11168.63 11486.39
1989/05/31 11378.67 11714.48
1989/06/30 11655.91 12009.80
1989/07/31 11902.50 12256.40
1989/08/31 11741.75 12097.99
1989/09/30 11797.18 12155.14
1989/10/31 12043.33 12412.08
1989/11/30 12142.39 12530.76
1989/12/31 12162.41 12565.05
1990/01/31 12041.44 12484.49
1990/02/28 12081.05 12529.94
1990/03/31 12064.15 12546.27
1990/04/30 11986.16 12502.72
1990/05/31 12270.85 12342.13
1990/06/30 12434.91 12948.56
1990/07/31 12600.92 13128.20
1990/08/31 12495.73 13074.31
1990/09/30 12588.10 13175.29
1990/10/31 12706.73 13328.25
1990/11/30 12926.69 13062.60
1990/12/31 13124.75 13715.57
1991/01/31 13222.32 13854.65
1991/02/28 13328.36 13965.43
1991/03/31 13412.81 14060.42
1991/04/30 13562.41 14213.66
1991/05/31 13634.75 14301.03
1991/06/30 13638.86 14311.11
1991/07/31 13792.25 14470.60
1991/08/31 14081.80 14746.87
1991/09/30 14343.35 15000.54
1991/10/31 14513.08 15171.75
1991/11/30 14651.93 15345.94
1991/12/31 15114.16 15720.74
1992/01/31 14920.75 15578.39
1992/02/29 14959.46 15639.90
1992/03/31 14905.61 15578.39
1992/04/30 14989.37 15715.30
1992/05/31 15263.31 15958.90
1992/06/30 15478.54 16195.16
1992/07/31 15842.85 16517.15
1992/08/31 15989.33 16682.36
1992/09/30 16175.42 16908.82
1992/10/31 15936.70 16689.44
1992/11/30 15977.38 16626.02
1992/12/31 16191.47 16848.67
1993/01/31 16514.19 17176.37
1993/02/28 16843.69 17447.20
1993/03/31 16954.32 17516.60
1993/04/30 17058.43 17657.59
1993/05/31 17070.41 17618.40
1993/06/30 17408.85 17894.94
1993/07/31 17543.68 17938.76
1993/08/31 17929.60 18223.19
1993/09/30 17980.96 18298.86
1993/10/31 18077.77 18347.85
1993/11/30 17974.26 18245.51
1993/12/31 18052.39 18329.07
1994/01/31 18243.04 18532.66
1994/02/28 17890.45 18258.57
1994/03/31 17543.90 17957.27
1994/04/30 17474.15 17835.06
1994/05/31 17413.85 17847.03
1994/06/30 17409.02 17849.48
1994/07/31 17574.23 18106.42
1994/08/31 17572.14 18163.04
1994/09/30 17484.92 17995.92
1994/10/31 17485.99 17993.47
1994/11/30 17536.12 17911.81
1994/12/31 17607.13 17975.23
1995/01/31 17798.51 18278.17
1995/02/28 18018.56 18657.32
1995/03/31 18110.64 18764.02
1995/04/30 18289.18 18995.65
1995/05/31 18735.94 19569.95
1995/06/30 18846.80 19701.14
1995/07/31 18836.72 19703.86
1995/08/31 18987.90 19883.23
1995/09/30 19121.60 20027.22
1995/10/31 19313.52 20250.41
1995/11/30 19539.96 20516.60
1995/12/31 19754.10 20731.63
1996/01/31 19917.36 20910.45
1996/02/29 19671.30 20664.94
1996/03/31 19595.11 20558.52
1996/04/30 19496.09 20485.85
1996/05/31 19472.28 20470.33
1996/06/30 19650.59 20687.81
1996/07/31 19702.09 20749.32
1996/08/31 19735.11 20765.65
1996/09/30 19940.97 21054.98
1996/10/31 20256.45 21427.05
1996/11/30 20490.12 21709.58
1996/12/31 20378.76 21570.50
1997/01/31 20464.95 21654.33
1997/02/28 20484.26 21695.70
1997/03/31 20356.76 21546.00
1997/04/30 20581.38 21799.13
1997/05/30 20710.33 21980.13
$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, 1987, and
the current maximum 3.25% sales charge was paid. As the chart shows, by May
31, 1997, the value of the investment would have grown to $20,710 - a
107.10% 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 $21,980 - a 119.80% 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31,
1997 1996 1995 1994 1993 1992
Dividend return 3.05% 6.44% 6.56% 5.46% A 7.80% 8.19%
Capital appreciation -1.98% -1.58% 4.87% -7.90% 4.70% 0.86%
return
Total return 1.07% 4.86% 11.43% -2.44% 12.50% 9.05%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 5.50(cents) 32.05(cents) 47.45(cents)
Annualized dividend rate 6.24% 6.17% 6.13%
30-day annualized yield 5.63% - -
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 $10.37 over the past one month,
$10.42 over the past six months and $10.43 over the life of the class, 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 3.25%
sales charge. If Fidelity had not reimbursed certain class expenses, the
yield would have been 4.47%.
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 T
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. The initial
offering of Class T shares took place on September 10, 1992. Class T shares
bear a 0.25% 12b-1 fee that is reflected in returns after September 10,
1992. Returns prior to that date are those of the Institutional Class, the
original class of the fund. Had Class T's 12b-1 fee been reflected, returns
prior to September 10, 1992 would have been lower. If Fidelity had not
reimbursed certain class expenses, the past five year and past 10 year
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond - Class T 0.96% 6.48% 35.84% 114.31%
Advisor Intermediate Bond - Class T -1.82% 3.55% 32.11% 108.42%
(incl. max. 2.75% sales charge)
Lehman Brothers Intermediate 1.25% 7.38% 37.73% 119.80%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 0.71% 7.56% 37.00% 118.94%
Funds Average
CUMULATIVE TOTAL RETURNS show Class T'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 T's returns to those of the Lehman Brothers
Intermediate Government/Corporate Bond Index - a market value weighted
performance benchmark for government and corporate fixed-rate debt issues
with maturities between one and 10 years. To measure how Class T's
performance stacked up against its peers, you can compare it to the
intermediate investment grade debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 192 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class T 6.48% 6.32% 7.92%
Advisor Intermediate Bond - Class T 3.55% 5.73% 7.62%
(incl. max. 2.75% sales charge)
Lehman Brothers Intermediate 7.38% 6.61% 8.19%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 7.56% 6.48% 8.13%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show you
what would have happened if Class T had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/05/31 9725.00 10000.00
1987/06/30 9854.97 10120.85
1987/07/31 9854.67 10143.98
1987/08/31 9806.78 10117.58
1987/09/30 9645.04 9986.39
1987/10/31 9885.46 10271.64
1987/11/30 10012.63 10336.96
1987/12/31 10112.27 10445.56
1988/01/31 10419.31 10712.85
1988/02/29 10575.30 10832.06
1988/03/31 10493.23 10790.42
1988/04/30 10471.06 10772.46
1988/05/31 10409.66 10724.82
1988/06/30 10602.29 10895.75
1988/07/31 10591.20 10872.62
1988/08/31 10621.17 10888.95
1988/09/30 10817.34 11077.84
1988/10/31 10962.30 11228.36
1988/11/30 10894.61 11132.55
1988/12/31 10904.63 11142.35
1989/01/31 11023.28 11259.39
1989/02/28 10997.17 11212.85
1989/03/31 11040.63 11261.30
1989/04/30 11226.35 11486.39
1989/05/31 11437.48 11714.48
1989/06/30 11716.15 12009.80
1989/07/31 11964.01 12256.40
1989/08/31 11802.43 12097.99
1989/09/30 11858.15 12155.14
1989/10/31 12105.57 12412.08
1989/11/30 12205.14 12530.76
1989/12/31 12225.27 12565.05
1990/01/31 12103.67 12484.49
1990/02/28 12143.48 12529.94
1990/03/31 12126.50 12546.27
1990/04/30 12048.10 12502.72
1990/05/31 12334.26 12342.13
1990/06/30 12499.17 12948.56
1990/07/31 12666.04 13128.20
1990/08/31 12560.31 13074.31
1990/09/30 12653.16 13175.29
1990/10/31 12772.40 13328.25
1990/11/30 12993.49 13062.60
1990/12/31 13192.58 13715.57
1991/01/31 13290.65 13854.65
1991/02/28 13397.24 13965.43
1991/03/31 13482.12 14060.42
1991/04/30 13632.50 14213.66
1991/05/31 13705.22 14301.03
1991/06/30 13709.34 14311.11
1991/07/31 13863.53 14470.60
1991/08/31 14154.58 14746.87
1991/09/30 14417.48 15000.54
1991/10/31 14588.08 15171.75
1991/11/30 14727.65 15345.94
1991/12/31 15192.27 15720.74
1992/01/31 14997.86 15578.39
1992/02/29 15036.77 15639.90
1992/03/31 14982.65 15578.39
1992/04/30 15066.84 15715.30
1992/05/31 15342.19 15958.90
1992/06/30 15558.53 16195.16
1992/07/31 15924.72 16517.15
1992/08/31 16071.96 16682.36
1992/09/30 16259.01 16908.82
1992/10/31 16019.06 16689.44
1992/11/30 16059.95 16626.02
1992/12/31 16275.14 16848.67
1993/01/31 16599.53 17176.37
1993/02/28 16930.74 17447.20
1993/03/31 17041.94 17516.60
1993/04/30 17146.58 17657.59
1993/05/31 17158.63 17618.40
1993/06/30 17498.82 17894.94
1993/07/31 17634.35 17938.76
1993/08/31 18022.26 18223.19
1993/09/30 18073.88 18298.86
1993/10/31 18171.20 18347.85
1993/11/30 18067.15 18245.51
1993/12/31 18145.69 18329.07
1994/01/31 18337.32 18532.66
1994/02/28 17982.91 18258.57
1994/03/31 17634.57 17957.27
1994/04/30 17564.46 17835.06
1994/05/31 17503.85 17847.03
1994/06/30 17498.99 17849.48
1994/07/31 17665.05 18106.42
1994/08/31 17662.95 18163.04
1994/09/30 17575.28 17995.92
1994/10/31 17576.35 17993.47
1994/11/30 17626.74 17911.81
1994/12/31 17698.12 17975.23
1995/01/31 17890.50 18278.17
1995/02/28 18111.68 18657.32
1995/03/31 18204.24 18764.02
1995/04/30 18383.70 18995.65
1995/05/31 18832.77 19569.95
1995/06/30 18944.20 19701.14
1995/07/31 18934.07 19703.86
1995/08/31 19086.03 19883.23
1995/09/30 19220.42 20027.22
1995/10/31 19413.33 20250.41
1995/11/30 19640.94 20516.60
1995/12/31 19856.18 20731.63
1996/01/31 20020.29 20910.45
1996/02/29 19772.96 20664.94
1996/03/31 19696.37 20558.52
1996/04/30 19596.84 20485.85
1996/05/31 19572.91 20470.33
1996/06/30 19752.15 20687.81
1996/07/31 19803.91 20749.32
1996/08/31 19837.10 20765.65
1996/09/30 20073.79 21054.98
1996/10/31 20389.92 21427.05
1996/11/30 20643.40 21709.58
1996/12/31 20533.07 21570.50
1997/01/31 20599.11 21654.33
1997/02/28 20616.51 21695.70
1997/03/31 20487.98 21546.00
1997/04/30 20712.71 21799.13
1997/05/30 20841.59 21980.13
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Class T on May 31, 1987, and
the current maximum 2.75% sales charge was paid. As the chart shows, by May
31, 1997, the value of the investment would have grown to $20,842 - a
108.42% 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 $21,980 - a 119.80% 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 YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1997 1996 1995 1994 1993 1992
Dividend return 3.03% 6.49% 6.56% 5.46% A 7.80% 8.19%
Capital appreciation -2.07% -1.39% 4.87% -7.90% 4.70% 0.86%
return
Total return 0.96% 5.10% 11.43% -2.44% 12.50% 9.05%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.46(cents) 31.86(cents) 64.69(cents)
Annualized dividend rate 6.19% 6.13% 6.20%
30-day annualized yield 5.61% - -
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 $10.38 over the past one month,
$10.43 over the past six months and $10.43 over the past one 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 T'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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, 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) that is reflected in returns after June 30, 1994. Returns between
September 10, 1992 (the date Class T shares were first offered) and June
30, 1994 are those of Class T and reflect Class T's 0.25% 12b-1 fee.
Returns prior to September 10, 1992 are those of the 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. 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 class expenses, the
total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<catpion>
<S> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond - Class B 0.70% 5.86% 32.85% 109.58%
Advisor Intermediate Bond - Class B -2.24% 2.86% 32.85% 109.58%
(incl. contingent deferred sales charge)
Lehman Brothers Intermediate Government/ 1.25% 7.38% 37.73% 119.80%
Corporate Bond Index
Intermediate Investment Grade Debt 0.71% 7.56% 37.00% 118.94%
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 - a market value weighted
performance benchmark for government and corporate fixed-rate debt issues
with maturities between one and 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 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 192 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class B 5.86% 5.84% 7.68%
Advisor Intermediate Bond - Class B 2.86% 5.84% 7.68%
(incl. contingent deferred sales charge)
Lehman Brothers Intermediate Government/ 7.38% 6.61% 8.19%
Corporate Bond Index
Intermediate Investment Grade Debt 7.56% 6.48% 8.13%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show you
what would have happened if Class B had performed at a constant rate each
year.
$10,000 OVER 10 YEARS
1987/05/31 10000.00 10000.00
1987/06/30 10133.64 10120.85
1987/07/31 10133.34 10143.98
1987/08/31 10084.09 10117.58
1987/09/30 9917.78 9986.39
1987/10/31 10165.00 10271.64
1987/11/30 10295.76 10336.96
1987/12/31 10398.22 10445.56
1988/01/31 10713.94 10712.85
1988/02/29 10874.34 10832.06
1988/03/31 10789.96 10790.42
1988/04/30 10767.16 10772.46
1988/05/31 10704.02 10724.82
1988/06/30 10902.10 10895.75
1988/07/31 10890.69 10872.62
1988/08/31 10921.52 10888.95
1988/09/30 11123.23 11077.84
1988/10/31 11272.29 11228.36
1988/11/30 11202.69 11132.55
1988/12/31 11212.99 11142.35
1989/01/31 11334.99 11259.39
1989/02/28 11308.15 11212.85
1989/03/31 11352.84 11261.30
1989/04/30 11543.80 11486.39
1989/05/31 11760.90 11714.48
1989/06/30 12047.45 12009.80
1989/07/31 12302.33 12256.40
1989/08/31 12136.18 12097.99
1989/09/30 12193.47 12155.14
1989/10/31 12447.89 12412.08
1989/11/30 12550.28 12530.76
1989/12/31 12570.97 12565.05
1990/01/31 12445.94 12484.49
1990/02/28 12486.87 12529.94
1990/03/31 12469.41 12546.27
1990/04/30 12388.79 12502.72
1990/05/31 12683.04 12342.13
1990/06/30 12852.62 12948.56
1990/07/31 13024.21 13128.20
1990/08/31 12915.49 13074.31
1990/09/30 13010.96 13175.29
1990/10/31 13133.58 13328.25
1990/11/30 13360.92 13062.60
1990/12/31 13565.64 13715.57
1991/01/31 13666.48 13854.65
1991/02/28 13776.09 13965.43
1991/03/31 13863.36 14060.42
1991/04/30 14017.99 14213.66
1991/05/31 14092.77 14301.03
1991/06/30 14097.01 14311.11
1991/07/31 14255.55 14470.60
1991/08/31 14554.84 14746.87
1991/09/30 14825.17 15000.54
1991/10/31 15000.60 15171.75
1991/11/30 15144.12 15345.94
1991/12/31 15621.87 15720.74
1992/01/31 15421.97 15578.39
1992/02/29 15461.97 15639.90
1992/03/31 15406.32 15578.39
1992/04/30 15492.89 15715.30
1992/05/31 15776.03 15958.90
1992/06/30 15998.49 16195.16
1992/07/31 16375.04 16517.15
1992/08/31 16526.44 16682.36
1992/09/30 16718.78 16908.82
1992/10/31 16472.04 16689.44
1992/11/30 16514.09 16626.02
1992/12/31 16735.37 16848.67
1993/01/31 17068.93 17176.37
1993/02/28 17409.50 17447.20
1993/03/31 17523.85 17516.60
1993/04/30 17631.45 17657.59
1993/05/31 17643.84 17618.40
1993/06/30 17993.64 17894.94
1993/07/31 18133.01 17938.76
1993/08/31 18531.89 18223.19
1993/09/30 18584.97 18298.86
1993/10/31 18685.03 18347.85
1993/11/30 18578.05 18245.51
1993/12/31 18658.80 18329.07
1994/01/31 18855.86 18532.66
1994/02/28 18491.42 18258.57
1994/03/31 18133.23 17957.27
1994/04/30 18061.14 17835.06
1994/05/31 17998.81 17847.03
1994/06/30 17991.23 17849.48
1994/07/31 18142.42 18106.42
1994/08/31 18126.96 18163.04
1994/09/30 18024.60 17995.92
1994/10/31 17995.29 17993.47
1994/11/30 18035.01 17911.81
1994/12/31 18077.46 17975.23
1995/01/31 18262.17 18278.17
1995/02/28 18477.80 18657.32
1995/03/31 18577.81 18764.02
1995/04/30 18731.51 18995.65
1995/05/31 19195.70 19569.95
1995/06/30 19315.26 19701.14
1995/07/31 19275.60 19703.86
1995/08/31 19419.74 19883.23
1995/09/30 19546.15 20027.22
1995/10/31 19731.58 20250.41
1995/11/30 19950.34 20516.60
1995/12/31 20158.32 20731.63
1996/01/31 20296.44 20910.45
1996/02/29 20054.41 20664.94
1996/03/31 19946.40 20558.52
1996/04/30 19852.70 20485.85
1996/05/31 19796.95 20470.33
1996/06/30 19986.99 20687.81
1996/07/31 20008.06 20749.32
1996/08/31 20029.59 20765.65
1996/09/30 20258.17 21054.98
1996/10/31 20586.21 21427.05
1996/11/30 20811.46 21709.58
1996/12/31 20688.08 21570.50
1997/01/31 20763.51 21654.33
1997/02/28 20769.49 21695.70
1997/03/31 20625.84 21546.00
1997/04/30 20820.36 21799.13
1997/05/30 20957.74 21980.13
$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, 1987. As
the chart shows, by May 31, 1997 the value of the investment would have
been $20,958 - a 109.58% 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 $21,980 - a
119.80% 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,
1997 1996 1995 1994 1993 1992
Dividend return 2.68% 5.81% 5.74% 5.08% A 7.80% 8.19%
Capital appreciation -1.98% -1.49% 4.88% -7.99 4.70% 0.86%
return %
Total return 0.70% 4.32% 10.62% -2.91 12.50% 9.05%
%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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
paid by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.84(cents) 28.19(cents) 57.49(cents)
Annualized dividend rate 5.50% 5.43% 5.52%
30-day annualized yield 5.07% - -
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 $10.37 over the past one month,
$10.42 over the past six months and $10.42 over the past one 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. HOW DID THE FUND PERFORM, KEVIN?
A. For the six months that ended May 31, 1997, Fidelity Advisor
Intermediate Bond Fund's Class A, Class T and Class B shares had total
returns of 1.07%, 0.96%, and 0.70%, respectively. For the same period, the
intermediate investment grade debt funds average tracked by Lipper
Analytical Services returned 0.71%, while the Lehman Brothers Intermediate
Government/Corporate Bond Index posted a total return of 1.25%. For the 12
months ended May 31, 1997, the fund's Class A, Class T and Class B shares
had total returns of 6.36%, 6.48%, and 5.86%, respectively, while the
Lipper funds average had a 7.56% total return and the Lehman Brothers index
returned 7.38%.
Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE FOR BONDS OVER THE PAST SIX
MONTHS?
A. In the first couple months of the period, strong economic growth and
increasing concerns about inflation acted as a drag on the bond market's
performance. In March, the Federal Reserve Board raised the rate banks
charge each other for overnight loans in order to head off inflation that
might be caused by a tight labor market. That overnight bank rate - known
as the fed funds target rate - was increased by 0.25% to 5.50%. But because
this move had already been factored into bond prices, the market didn't
really react. In April and May, producer and consumer price indexes
continued to point to a favorable inflation outlook and the bond market
rallied. Because interest rates finished the period only slightly higher
than where they began the period, income - in contrast to price gains or
losses - accounted for most of the total return on bonds.
Q. WHAT CHOICES DID YOU MAKE IN THE CORPORATE BOND SECTOR?
A. I continued to remain cautious in choosing the fund's corporate bond
holdings. The period saw a continuation of the trends that have dominated
the stock and corporate bond markets over the past two years: strong
corporate earnings, rising cash flows and improving balance sheets. While
stocks can go higher and higher, corporate bond prices - which generally
move in the opposite direction of their yields - basically cannot rise to
the point where they yield less than Treasuries because of corporates'
additional risk. However, the compensation for the additional risk inherent
in corporate bonds relative to Treasuries - what we refer to as the
"spread" - has diminished. About the only upside investors have been able
to get with corporate bonds over the past six months is that yield
advantage. So rather than overweight corporate bonds relative to the index,
I've maintained a defensive posture.
Q. WAS THAT DEFENSIVE STRATEGY EVIDENT IN THE INDIVIDUAL CORPORATE BONDS
YOU CHOSE DURING THE PERIOD?
A. Yes. In selecting individual corporate bonds, one of my main concerns
was that a company's credit rating could be compromised if it acquired a
debt-laden or lower-quality company. So I focused on more defensive issues,
meaning those that I thought offered enough yield to adequately compensate
investors for the risk they carried. These issues included companies that I
believed would avoid acquisitions that would hurt their current
creditworthiness.
Q. WHAT WAS YOUR STRATEGY WITH MORTGAGE-BACKED SECURITIES?
A. I sold some mortgage securities in late 1996 because they had done well
and I wanted to lock in their gains. So far in 1997, mortgages have
remained expensive by historical standards - as expensive as they've ever
been relative to Treasuries in fact. As a result, I haven't added many back
into the fund. But the mortgages I do own are very "seasoned" bonds, which
means they were issued 10 to 15 years ago. These mortgages have minimal
exposure to mortgage prepayment risk.
Q. WHERE DID YOU FIND OPPORTUNITIES IN THE TREASURY SECTOR OF THE MARKET?
A. Treasury securities of various maturities tend to be very efficiently
priced relative to one another, so there aren't many opportunities to
exploit price inefficiencies in this sector of the market. However, I have
been finding some pockets where prices temporarily fall out of line and
present opportunities. For example, 13- and 14-month Treasury securities
get a small price bounce as time goes by and they become eligible to be
included in money market funds, so I added those when I thought the market
would reward me for doing so. But even as I buy and sell securities of
various maturities, my goal is to keep the fund's duration - which measures
the fund's sensitivity to changing interest rates - neutral to the
benchmark.
Q. WHAT'S YOUR OUTLOOK?
A. The way bonds are priced at present, it appears that investors are
expecting the best-case scenario: relatively stable interest rates, low
inflation, improving corporate profits and low market volatility. Because
it's impossible to predict when spreads will widen out again if conditions
don't follow the best-case scenario, I'll continue to maintain a defensive
posture.
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
current income by
investing in investment
grade debt securities
START DATE: February 2, 1984
SIZE: as of May 31, 1997,
more than $470 million
MANAGER: Kevin Grant, since
1995; manager, Fidelity
Advisor World Limited Bond
Fund, since 1995; joined
Fidelity in 1993
(checkmark)
KEVIN GRANT ON YANKEE AND
PUT BONDS:
"Yankee bonds and put bonds
are two areas of the bond
market that have been
especially attractive recently.
Yankee bonds are issued by
foreign companies or
governments, are sold in the
U.S. and are denominated in
U.S. dollars. During the
period, the fund held yankee
bonds issued by provincial
governments in Canada.
Historically, these issues have
had yields similar to corporate
bonds, without the
accompanying risks. Put
bonds also can offer attractive
yields as well as favorable
price action. Let's use the
example of Wachovia Corp.
put bonds, which have a
maturity date of October
2025. These bonds are
puttable - which means the
fund can redeem them - in
2005. So in roughly eight and
a half years, if interest rates
are higher, we can redeem
the bond at par (face) value
and reinvest the proceeds at
higher interest rates. On the
other hand, if interest rates
are much lower, the fund can
continue to hold these
higher-yielding bonds that
could potentially rise in price
as if they had a 30 year
maturity - a price increase
markedly higher than for a
bond with a maturity of 8.5
years. In my experience, put
bonds have been chronically
undervalued because the
market doesn't really
understand them. As a result,
I'm often able to buy them at
attractive prices."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1997
(MOODY'S RATINGS) % % OF FUND'S
O INVESTMENTS
F 6 MONTHS AGO
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S
Aaa 6 71.8
3
.
0
Aa 8 6.2
.
3
A 2 17.5
1
.
5
Baa 4 1.9
.
7
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1997
6 MONTHS AGO
Years 5.6 5.7
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, 1997
6 MONTHS AGO
Years 3.2 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1997 * AS OF NOVEMBER 30, 1996 **
Corporate bonds 33.9%
U.S. government
and agency
obligations 38.8%
Mortgage-backed
securities 20.2%
Foreign government
obligations 3.6%
Other 1.0%
Short-term
investments 2.5%
Corporate bonds 25.5%
U.S. government
and agency
obligations 46.2%
Mortgage-backed
securities 20.5%
Foreign government
obligations 4.2%
Other 1.0%
Short-term
investments 2.6%
Row: 1, Col: 1, Value: 2.5
Row: 1, Col: 2, Value: 1.0
Row: 1, Col: 3, Value: 3.6
Row: 1, Col: 4, Value: 20.2
Row: 1, Col: 5, Value: 38.8
Row: 1, Col: 6, Value: 33.9
Row: 1, Col: 1, Value: 2.6
Row: 1, Col: 2, Value: 1.0
Row: 1, Col: 3, Value: 4.2
Row: 1, Col: 4, Value: 20.5
Row: 1, Col: 5, Value: 46.2
Row: 1, Col: 6, Value: 25.5
* FOREIGN
INVESTMENTS 9.9%
** FOREIGN
INVESTMENTS 7.2%
INVESTMENTS MAY 31, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 33.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp. yankee 8 7/8%, 11/15/01 $ 2,790,000 $ 2,961,976
ENERGY - 2.4%
ENERGY SERVICES - 0.7%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (a) 3,160,000 3,127,073
OIL & GAS - 1.7%
Apache Corp. 9 1/4%, 6/1/02 7,075,000 7,732,621
TOTAL ENERGY 10,859,694
FINANCE - 23.7%
ASSET-BACKED SECURITIES - 5.3%
Capital Equipment Receivables Trust 6.11%, 7/15/99 7,670,000 7,653,222
Chase Manhattan Grantor Trust:
6.61%, 9/15/02 3,116,380 3,128,066
6.76%, 9/15/02 1,168,642 1,172,842
Ford Credit Grantor Trust 5.90%, 10/15/00 2,521,163 2,514,860
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 125,852 125,374
Sears Credit Account Master Trust II
6 1/2%, 10/15/03 3,400,000 3,404,250
SCFC Recreational Vehicle Loan Trust
7 1/4%, 9/15/06 373,512 373,045
Standard Credit Card Master Trust I:
participation certificate 5 1/2%, 9/7/98 5,000,000 4,996,875
7.62%, 2/15/00 1,200,000 1,221,750
24,590,284
BANKS - 8.6%
ABN Amro Bank NV 6 5/8%, 10/31/01 2,750,000 2,724,645
Banc One Corp. 6.70%, 3/24/00 1,900,000 1,902,508
Banponce Financial Corp.:
6.69%, 9/21/00 2,250,000 2,233,778
6 3/4%, 8/9/01 3,850,000 3,813,079
Kansallis-Osake-Pankki 10%, 5/1/02 650,000 726,414
Korea Development Bank yankee 6 3/4%, 12/1/05 5,000,000 4,792,050
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,146,010
Provident Bank 6 1/8%, 12/15/00 5,000,000 4,884,050
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Skandinaviska Enskilda Banken yankee
8.45%, 5/15/02 $ 4,600,000 $ 4,872,458
Star Banc Corp. 6.80%, 5/1/99 2,400,000 2,407,944
Union Planters National Bank 6.81%, 8/20/01 1,500,000 1,501,875
U.S. Bancorp Ore 7 1/2%, 6/1/26 2,000,000 2,055,320
Wachovia Corp. 6.605%, 10/1/25 5,000,000 4,873,000
39,933,131
CREDIT & OTHER FINANCE - 7.6%
Associates Corp. of North America 6 1/2%, 9/9/98 5,000,000 5,013,350
CIT Group Holdings, Inc. 6 1/4%, 9/30/99 4,560,000 4,534,646
Chrysler Financial Corp. 6 3/8%, 1/28/00 2,580,000 2,564,004
DR Investment yankee 7.10%, 5/15/02 (a) 5,000,000 5,009,300
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,607,900
Ford Motor Credit Co. 7 3/4%, 11/15/02 100,000 103,271
General Electric Capital Corp. 6.94%, 4/13/09 (b) 2,530,000 2,549,810
General Motors Acceptance Corp. 6.65%, 5/24/00 2,000,000 1,994,020
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,720,845
Sears, Roebuck Acceptance Corp. 6.15%, 11/15/05 5,000,000 4,908,100
Secured Finance, Inc. gtd. secured 9.05%, 12/15/04 4,000,000 4,410,480
35,415,726
INSURANCE - 2.2%
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,035,890
SunAmerica, Inc. 6.20%, 10/31/99 9,300,000 9,202,350
10,238,240
TOTAL FINANCE 110,177,381
HEALTH - 0.7%
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 1,420,000 1,422,528
6.73%, 7/15/45 2,000,000 1,978,060
3,400,588
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
POLLUTION CONTROL - 1.3%
WMX Technologies, Inc. 7.10%, 8/1/26 $ 6,000,000 $ 6,022,560
NONDURABLES - 1.3%
TOBACCO - 1.3%
Philip Morris Companies, Inc.:
6 3/8%, 1/15/98 250,000 250,220
6.95%, 6/1/06 6,000,000 5,989,260
6,239,480
RETAIL & WHOLESALE - 0.4%
GENERAL MERCHANDISE STORES - 0.4%
Penney (J.C.), Inc. 6.95%, 4/1/00 1,800,000 1,809,306
TECHNOLOGY - 3.2%
COMPUTER SERVICES & SOFTWARE - 1.1%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,921,800
ELECTRONICS - 2.1%
Motorola, Inc. 6 1/2%, 9/1/25 5,000,000 4,881,050
Texas Instruments, Inc. 6 7/8%, 7/15/00 5,000,000 5,023,550
9,904,600
TOTAL TECHNOLOGY 14,826,400
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.3%
British Columbia Hydro & Power Authority
yankee 12 1/2%, 1/15/14 940,000 1,061,542
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 152,786
1,214,328
TOTAL NONCONVERTIBLE BONDS
(Cost $140,159,659) 157,511,713
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 38.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 31.5%
9 1/8%, 5/15/99 $ 23,920,000 $ 25,183,215
8%, 8/15/99 62,870,000 65,089,940
7 3/4%, 12/31/99 17,130,000 17,705,397
5 3/4%, 10/31/00 505,000 495,057
6 5/8%, 6/30/01 4,340,000 4,362,394
7%, 7/15/06 18,148,000 18,539,271
12 3/4%, 11/15/10 (callable) 10,998,000 15,184,059
146,559,333
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.3%
Financing Corp. stripped principal:
0%, 5/30/00 1,000,000 824,540
0%, 10/6/01 2,000,000 1,500,160
0%, 6/6/02 2,800,000 2,012,976
Federal Farm Credit Banks Consolidated
Systemwide 6.55%, 2/7/04 740,000 731,557
Federal Home Loan Bank:
7.31%, 6/16/04 3,830,000 3,932,338
7.38%, 8/5/04 1,930,000 1,989,714
7.70%, 9/20/04 1,250,000 1,311,713
Federal Home Loan Mortgage Corporation
8.115%, 1/31/05 5,460,000 5,850,718
Federal National Mortgage Association
6.72%, 8/1/05 2,230,000 2,203,864
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency)
Class 2-E, 9.40%, 5/15/02 1,097,044 1,163,579
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 329,208 333,014
Series 1994-C, 6.61%, 9/15/99 74,809 75,004
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
8%, 11/15/01 1,740,000 1,827,261
6 1/8%, 3/15/03 680,000 657,852
6 5/8%, 2/15/04 140,000 138,848
7 5/8%, 8/15/04 840,000 874,348
5.89%, 8/15/05 2,070,000 1,931,426
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
U.S. Department of Housing and Urban Development
Government guaranteed participation certificates:
Series 1995-A, 8.24%, 8/1/04 $ 1,030,000 $ 1,105,077
Series 1996-A, 6.92%, 8/1/04 5,360,000 5,371,685
33,835,674
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $183,225,034) 180,395,007
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 10.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.5%
5 1/2%, 12/1/02 to 6/1/03 2,353,150 2,238,950
7%, 11/1/00 to 7/1/01 3,054,562 3,066,689
9 1/2%, 1/1/17 53,855 57,978
10%, 4/1/05 to 8/1/10 445,617 480,129
10 1/4%, 12/1/09 46,700 50,485
10 1/2%, 5/1/21 820,479 898,778
11%, 12/1/11 46,431 50,923
11 1/2%, 10/1/15 135,993 151,046
11 3/4%, 10/1/10 92,933 102,987
7,097,965
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.0%
5 1/2%, 5/1/03 to 5/1/26 4,155,112 3,932,293
6%, 5/1/01 to 3/1/11 2,075,729 2,016,046
9 1/2%, 2/1/25 3,966,645 4,274,021
10%, 1/1/20 109,839 119,587
10 1/2%, 7/1/11 to 8/1/20 617,876 677,808
11%, 8/1/15 2,466,937 2,723,770
12 1/2%, 2/1/11 to 4/1/15 116,957 135,497
13,879,022
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.9%
7%, 11/15/22 to 6/15/27 5,737,854 5,622,791
8%, 2/15/02 to 6/15/25 4,638,468 4,747,220
8 1/2%, 4/15/17 to 5/15/26 869,143 909,188
9%, 5/15/16 to 10/15/18 3,922,502 4,196,338
10%, 8/15/18 to 4/15/25 4,874,537 5,329,560
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - CONTINUED
11%, 2/15/10 to 10/15/20 $ 1,488,970 $ 1,620,799
11 1/2%, 10/15/10 to 1/15/16 4,309,451 4,870,495
27,296,391
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $70,120,719) 48,273,378
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 4.8%
Federal Home Loan Mortgage Corporation:
planned amortization class:
Series 1645 Class ZA, 5 1/2%, 4/15/05 10,841,543 10,529,848
Series 1727 Class D, 6 1/2%, 8/15/14 4,750,000 4,754,453
sequential pay Series 1838 Class A,
6 1/2%, 12/15/02 6,953,292 6,964,157
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $22,236,550) 22,248,458
COMMERCIAL MORTGAGE SECURITIES - 5.0%
BKB Commercial Mortgage Trust Series 1997-C1 (a):
Class A-1, 6 7/8%, 2/25/43 4,610,623 4,653,848
Class B, 7.21%, 2/25/43 (c) 4,000,000 4,016,250
CBM Funding Corp. sequential pay Series 1996-1
Class A-1, 7.55%, 7/1/99 163,903 166,080
Chevy Chase Auto Receivables Trust:
6.60%, 12/15/02 1,110,647 1,114,112
5.90%, 7/15/03 3,037,880 3,014,147
CS First Boston Mortgage Securities Corp.:
Series 1995-AEWI Class A-1, 6.665%, 11/25/27 266,508 266,258
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 4,856,250
Equitable Life Assurance Society of the United States
(The) Series 1996-1 Class C1,
7.52%, 5/15/06 (a) 1,000,000 1,013,530
Resolution Trust Corp. Series 1995-C1 Class A-4A,
6 1/4%, 2/25/27 407,968 407,458
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Structured Asset Securities Corp. sequential pay:
Series 1995-C4 Class A-1A, 6.90%, 6/25/26 $ 646,263 $ 646,061
Series 1996 Class A-1C, 5.944%, 2/25/28 1,489,000 1,472,016
Wells Fargo Capital Markets Apartment Financing
Trust 6.56%, 12/29/05 (a) 1,625,000 1,592,841
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $19,157,124) 23,218,851
FOREIGN GOVERNMENT OBLIGATIONS - 3.6%
Alberta Province yankee 9 1/4%, 4/1/00 2,200,000 2,349,688
Export Development Corp. yankee 8 1/8%, 8/10/99 740,000 764,912
Manitoba Province yankee 6 3/8%, 10/15/99 2,590,000 2,582,463
Ontario Province yankee 7 3/4%, 6/4/02 6,000,000 6,237,600
Quebec Province yankee 6.86%, 4/15/26 (b) 5,000,000 4,865,050
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $16,556,799) 16,799,713
SUPRANATIONAL OBLIGATIONS - 1.0%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 4,790,881
CASH EQUIVALENTS - 2.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.54%, dated
5/30/97 due 6/2/97 $ 11,343,234 11,338,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $467,170,765) $ 464,576,001
LEGEND
1. 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 $19,412,842 or 4.1% of net
assets.
2. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
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 89.4% AAA, AA, A 89.8%
Baa 4.7% BBB 6.2%
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
both S&P and Moody's amounted to 0.0%.
INCOME TAX INFORMATION
At May 31, 1997, the aggregate cost of investment securities for income tax
purposes was $467,170,765. Net unrealized depreciation aggregated
$2,594,764, of which $2,426,899 related to appreciated investment
securities and $5,021,663 related to depreciated investment securities.
At November 30, 1996, the fund had a capital loss carryforward of
approximately $13,667,000 of which $2,841,000, $1,035,000, $134,000 and
$9,657,000 will expire on November 30, 1998, 1999, 2002 and 2004,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 464,576,001
agreements of $11,338,000) (cost $467,170,765) -
See accompanying schedule
Cash 193
Receivable for fund shares sold 124,196
Interest receivable 7,195,373
Prepaid expenses 5,031
TOTAL ASSETS 471,900,794
LIABILITIES
Payable for investments purchased $ 104,072
Distributions payable 701,347
Accrued management fee 159,911
Distribution fees payable 67,760
Other payables and accrued expenses 113,003
TOTAL LIABILITIES 1,146,093
NET ASSETS $ 470,754,701
Net Assets consist of:
Paid in capital $ 491,397,737
Distributions in excess of net investment income (1,899,714)
Accumulated undistributed net realized gain (loss) on (16,149,305)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (2,594,017)
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 470,754,701
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
MAY 31, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $10.38
CLASS A:
NET ASSET VALUE and redemption price per share
($1,826,042 (divided by) 175,837 shares)
Maximum offering price per share (100/96.75 of $10.38) $10.73
CLASS T: $10.39
NET ASSET VALUE and redemption price per share
($257,655,500 (divided by) 24,789,406 shares)
Maximum offering price per share (100/97.25 of $10.39) $10.68
CLASS B: $10.38
NET ASSET VALUE and offering price per share
($19,446,419 (divided by) 1,873,523 shares) A
INSTITUTIONAL CLASS: $10.40
NET ASSET VALUE, offering price and redemption price
per share ($191,826,740 (divided by) 18,443,141 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 16,856,459
Interest
EXPENSES
Management fee $ 1,047,913
Transfer agent fees 422,542
Distribution fees 404,351
Accounting fees and expenses 98,223
Non-interested trustees' compensation 1,762
Custodian fees and expenses 12,170
Registration fees 60,276
Audit 22,710
Legal 6,676
Miscellaneous 6,798
Total expenses before reductions 2,083,421
Expense reductions (41,167) 2,042,254
NET INVESTMENT INCOME 14,814,205
REALIZED AND UNREALIZED GAIN (LOSS) (1,891,855)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (8,169,500)
investment securities
NET GAIN (LOSS) (10,061,355)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 4,752,850
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 14,814,205 $ 31,675,872
Net investment income
Net realized gain (loss) (1,891,855) (9,733,480)
Change in net unrealized appreciation (depreciation) (8,169,500) 2,408,292
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,752,850 24,350,684
FROM OPERATIONS
Distributions to shareholders from net investment income (14,697,171) (31,669,310)
Share transactions - net increase (decrease) (12,928,448) 47,816,674
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,872,769) 40,498,048
NET ASSETS
Beginning of period 493,627,470 453,129,422
End of period (including distributions in excess $ 470,754,701 $ 493,627,470
of net investment income of $1,899,714 and
$2,016,748, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.590 $ 10.350
Income from Investment Operations
Net investment income D .318 .159
Net realized and unrealized gain (loss) (.208) .235 G
Total from investment operations .110 .394
Less Distributions
From net investment income (.320) (.154)
Net asset value, end of period $ 10.380 $ 10.590
TOTAL RETURN B, C 1.07% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,826 $ 687
Ratio of expenses to average net assets .90% A, F .90% A,
F
Ratio of net investment income to average net assets 6.29% A 6.45% A
Portfolio turnover rate 121% A 200%
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 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO NOVEMBER 30, 1996.
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).
G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1997
(UNAUDITED) 1996 1995 1994 F 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960
beginning of period
Income from
Investment
Operations
Net investment .320 D .671 D .649 .609 .785 .170
income
Net realized and (.221) (.147) .491 (.876) .511 (.320)
unrealized gain
(loss)
Total from investment .099 .524 1.140 (.267) 1.296 (.150)
operations
Less Distributions
From net investment (.319) (.674) (.640) (.555) (.796) (.170)
income
From return of capital - - - (.058) - -
Total distributions (.319) (.674) (.640) (.613) (.796) (.170)
Net asset value, end $ 10.390 $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640
of period
TOTAL RETURN B, C 0.96% 5.10% 11.43% (2.44) 12.50% (1.37)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 257,656 $ 262,103 $ 228,439 $ 141,866 $ 59,184 $ 2,583
period (000 omitted)
Ratio of expenses to .96% A .97% .94% 1.02% 1.23% .82%
average net assets G G A
Ratio of expenses to .96% A .96% .94% 1.02% 1.23% .82%
average net assets H A
after expense
reductions
Ratio of net investment 6.18% A 6.38% 6.20% 6.04% 6.81% 7.67%
income to average A
net assets
Portfolio turnover rate 121% A 200% 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 T
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 FUND'S EXPENSES.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.590 $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .283 D .597 D .579 .204
Net realized and unrealized gain (loss) (.211) (.153) .483 (.178)
Total from investment operations .072 .444 1.062 .026
Less Distributions
From net investment income (.282) (.604) (.562) (.187)
From return of capital - - - (.019)
Total distributions (.282) (.604) (.562) (.206)
Net asset value, end of period $ 10.380 $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 0.70% 4.32% 10.62% 0.24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 19,446 $ 18,972 $ 15,830 $ 3,156
Ratio of expenses to average net assets 1.65% A, 1.66% 1.70% 1.65% A,
F F F F
Ratio of net investment income to 5.48% A 5.69% 5.44% 5.42% A
average
net assets
Portfolio turnover rate 121% A 200% 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, 1997
(UNAUDITED) 1996 1995 1994 E 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550
beginning of period
Income from Investment
Operations
Net investment .334 D .705 D .671 .602 .832 .840
income
Net realized and (.220) (.151) .499 (.833) .531 .102
unrealized gain
(loss)
Total from investment .114 .554 1.170 (.231) 1.363 .942
operations
Less Distributions
From net investment (.334) (.704) (.670) (.597) (.843) (.852)
income
From return of capital - - - (.062) - -
Total distributions (.334) (.704) (.670) (.659) (.843) (.852)
Net asset value, end $ 10.400 $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640
of period
TOTAL RETURN B, C 1.10% 5.40% 11.73% (2.10) 13.17% 9.21%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 191,827 $ 211,866 $ 208,861 $ 172,122 $ 183,790 $ 160,156
period (000 omitted)
Ratio of expenses to .67% .66% .67% .61% .64% .57%
average net assets A F
Ratio of net investment 6.45% 6.69% 6.47% 6.45% 7.41% 7.96%
income to average A
net assets
Portfolio turnover rate 121% 200% 189% 68% 59% 7%
A
</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.
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.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1997 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the 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 T, 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, the
common expenses of the fund, and certain fund-level expense reductions 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, expenses, and expense
reductions.
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. 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. Short-term securities with remaining maturities of sixty days
or less for which quotations are not readily available are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
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.
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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
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 and capital
gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. 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,
market discount, capital loss carryforwards and losses deferred due to
futures and options and wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements for 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.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $277,267,794 and $288,603,148, respectively, of which U.S.
government and government agency obligations aggregated $211,287,377 and
$251,087,485, 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. The annual individual
fund fee rate is .30%. In the event that these rates were lower than the
contractual rates in
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
effect during the period, FMR voluntarily implemented the above rates, as
they resulted in the same or a lower management fee. For the period, the
management fee was equivalent to an annualized rate of .44% 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
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $
828 828
CLASS T 319,258 319,258
CLASS B 84,265 23,407
$ $
404,351 343,493
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 3.25% and 2.75%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within three years of purchase. The Class B charge is
based on declining rates which range from 3% 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $
28,579 17,595
CLASS T 62,023 46,617
CLASS B 36,418 0 *
$ $
127,020 64,212
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 0.38% **
2,083
CLASS T *** FIIOC * 244,513 0.19% **
CLASS B FIIOC * 22,964 0.25% **
INSTITUTIONAL CLASS FIIOC * 152,982 0.15% **
$
422,542
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AN
AFFILIATE OF FMR.
** ANNUALIZED
*** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED CERTAIN TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER
SERVICES TO FIIOC FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH
FEES.
ACCOUNTING FEES. Fidelity Service Company, Inc., 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 or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A .90% $
22,478
CLASS B 1.65% 13,690
$
36,168
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $4,999 under the
custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED
MAY 31, NOVEMBER 30,
CLASS A 1997 1996 A
From net investment income $ $
33,997 6,183
CLASS T
From net investment income 7,800,665 16,284,509
CLASS B
From net investment income 506,377 1,037,161
INSTITUTIONAL CLASS
From net investment income 6,356,132 14,341,457
TOTAL $ $
14,697,171 31,669,310
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30, ENDED MAY 31, NOVEMBER 30,
1997 1996 A 1997 1996 A
CLASS A 175,667 72,448 $ $
Shares sold 1,822,757 756,142
Reinvestment of 2,907 475 30,211 4,998
distributions
Shares redeemed (67,580) (8,080) (698,143) (84,516)
Net increase (decrease) 110,994 64,843 $ $
1,154,825 676,624
CLASS T 6,369,295 14,999,140 $ $
Shares sold 66,462,313 158,724,547
Reinvestment of 679,892 1,411,416 7,082,430 14,860,075
distributions
Shares redeemed (6,963,419) (12,931,481) (72,669,279) (136,183,619)
Net increase (decrease) 85,768 3,479,075 $ $
875,464 37,401,003
CLASS B 413,585 1,114,235 $ $
Shares sold 4,301,104 11,808,349
Reinvestment of 37,431 76,373 389,487 803,087
distributions
Shares redeemed (368,178) (872,302) (3,837,601) (9,227,658)
Net increase (decrease) 82,838 318,306 $ $
852,990 3,383,778
INSTITUTIONAL CLASS 2,318,668 9,022,232 $ $
Shares sold 24,200,731 95,376,649
Reinvestment of 255,308 561,358 2,662,225 5,915,605
distributions
Shares redeemed (4,085,452) (9,022,616) (42,674,683) (94,936,985)
Net increase (decrease) (1,511,476) 560,974 $ (15,811,727) $
6,355,269
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $
22,442
CLASS T 12,767
CLASS B 13,702
INSTITUTIONAL CLASS 11,365
$
60,276
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 *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1997
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 19 Statements of assets and
liabilities, operations, and changes
in net assets, as well as financial
highlights.
NOTES 27 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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first five months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them from time to time.
After climbing steadily upward for more than two years, stock prices saw a
sharp correction in late March and early April. Returns in the bond market
were essentially stagnant as the Federal Reserve Board implemented a
long-expected increase in short-term interest rates at the end of March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR INTERMEDIATE BOND FUND - INSTITUTIONAL CLASS
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. Total return reflects
the change in the value of an investment, assuming reinvestment of the
class' dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at the class'
income, as reflected in its yield, to measure performance. If Fidelity had
not reimbursed certain class expenses, the past five year and past 10 year
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Intermediate Bond Fund - 1.10% 6.89% 38.31% 118.19%
Institutional Class
Lehman Brothers Intermediate Government/ 1.25% 7.38% 37.73% 119.80%
Corporate Bond Index
Intermediate Investment Grade Debt 0.71% 7.56% 37.00% 118.94%
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 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 Institutional Class' returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a market
value weighted performance benchmark for government and corporate
fixed-rate debt issues with maturities between one and 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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past six months average
represents a peer group of 192 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond Fund - 6.89% 6.70% 8.11%
Institutional Class
Lehman Brothers Intermediate Government/ 7.38% 6.61% 8.19%
Corporate Bond Index
Intermediate Investment Grade Debt 7.56% 6.48% 8.13%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative return
and show you what would have happened if Institutional Class had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
1987/05/31 10000.00 10000.00
1987/06/30 10133.64 10120.85
1987/07/31 10133.34 10143.98
1987/08/31 10084.09 10117.58
1987/09/30 9917.78 9986.39
1987/10/31 10165.00 10271.64
1987/11/30 10295.76 10336.96
1987/12/31 10398.22 10445.56
1988/01/31 10713.94 10712.85
1988/02/29 10874.34 10832.06
1988/03/31 10789.96 10790.42
1988/04/30 10767.16 10772.46
1988/05/31 10704.02 10724.82
1988/06/30 10902.10 10895.75
1988/07/31 10890.69 10872.62
1988/08/31 10921.52 10888.95
1988/09/30 11123.23 11077.84
1988/10/31 11272.29 11228.36
1988/11/30 11202.69 11132.55
1988/12/31 11212.99 11142.35
1989/01/31 11334.99 11259.39
1989/02/28 11308.15 11212.85
1989/03/31 11352.84 11261.30
1989/04/30 11543.80 11486.39
1989/05/31 11760.90 11714.48
1989/06/30 12047.45 12009.80
1989/07/31 12302.33 12256.40
1989/08/31 12136.18 12097.99
1989/09/30 12193.47 12155.14
1989/10/31 12447.89 12412.08
1989/11/30 12550.28 12530.76
1989/12/31 12570.97 12565.05
1990/01/31 12445.94 12484.49
1990/02/28 12486.87 12529.94
1990/03/31 12469.41 12546.27
1990/04/30 12388.79 12502.72
1990/05/31 12683.04 12342.13
1990/06/30 12852.62 12948.56
1990/07/31 13024.21 13128.20
1990/08/31 12915.49 13074.31
1990/09/30 13010.96 13175.29
1990/10/31 13133.58 13328.25
1990/11/30 13360.92 13062.60
1990/12/31 13565.64 13715.57
1991/01/31 13666.48 13854.65
1991/02/28 13776.09 13965.43
1991/03/31 13863.36 14060.42
1991/04/30 14017.99 14213.66
1991/05/31 14092.77 14301.03
1991/06/30 14097.01 14311.11
1991/07/31 14255.55 14470.60
1991/08/31 14554.84 14746.87
1991/09/30 14825.17 15000.54
1991/10/31 15000.60 15171.75
1991/11/30 15144.12 15345.94
1991/12/31 15621.87 15720.74
1992/01/31 15421.97 15578.39
1992/02/29 15461.97 15639.90
1992/03/31 15406.32 15578.39
1992/04/30 15492.89 15715.30
1992/05/31 15776.03 15958.90
1992/06/30 15998.49 16195.16
1992/07/31 16375.04 16517.15
1992/08/31 16526.44 16682.36
1992/09/30 16736.96 16908.82
1992/10/31 16493.88 16689.44
1992/11/30 16539.58 16626.02
1992/12/31 16764.71 16848.67
1993/01/31 17118.10 17176.37
1993/02/28 17447.29 17447.20
1993/03/31 17565.64 17516.60
1993/04/30 17679.38 17657.59
1993/05/31 17700.34 17618.40
1993/06/30 18057.74 17894.94
1993/07/31 18224.03 17938.76
1993/08/31 18634.18 18223.19
1993/09/30 18694.59 18298.86
1993/10/31 18801.73 18347.85
1993/11/30 18718.07 18245.51
1993/12/31 18790.31 18329.07
1994/01/31 18995.69 18532.66
1994/02/28 18616.17 18258.57
1994/03/31 18261.76 17957.27
1994/04/30 18216.49 17835.06
1994/05/31 18168.80 17847.03
1994/06/30 18171.03 17849.48
1994/07/31 18347.56 18106.42
1994/08/31 18349.67 18163.04
1994/09/30 18264.67 17995.92
1994/10/31 18268.68 17993.47
1994/11/30 18325.13 17911.81
1994/12/31 18403.56 17975.23
1995/01/31 18606.95 18278.17
1995/02/28 18822.42 18657.32
1995/03/31 18940.76 18764.02
1995/04/30 19113.17 18995.65
1995/05/31 19602.53 19569.95
1995/06/30 19722.53 19701.14
1995/07/31 19717.45 19703.86
1995/08/31 19881.16 19883.23
1995/09/30 20007.66 20027.22
1995/10/31 20232.80 20250.41
1995/11/30 20475.12 20516.60
1995/12/31 20704.85 20731.63
1996/01/31 20861.63 20910.45
1996/02/29 20628.58 20664.94
1996/03/31 20533.88 20558.52
1996/04/30 20453.99 20485.85
1996/05/31 20413.38 20470.33
1996/06/30 20624.48 20687.81
1996/07/31 20683.49 20749.32
1996/08/31 20703.50 20765.65
1996/09/30 20975.70 21054.98
1996/10/31 21311.01 21427.05
1996/11/30 21581.06 21709.58
1996/12/31 21471.36 21570.50
1997/01/31 21545.47 21654.33
1997/02/28 21568.75 21695.70
1997/03/31 21439.44 21546.00
1997/04/30 21679.34 21799.13
1997/05/30 21819.35
$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,
1987. As the chart shows, by May 31, 1997, the value of the investment
would have grown to $21,819 - a 118.19% 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 $21,980 - a
119.80% 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,
1997 1996 1995 1994 1993 1992
Dividend return 3.17% 6.79% 6.86% 5.87% A 8.28% 8.36%
Capital appreciation -2.07% -1.39% 4.87% -7.97% 4.89% 0.85%
return
Total return 1.10% 5.40% 11.73% -2.10% 13.17% 9.21%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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
paid by the class are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.71(cents) 33.37(cents) 67.73(cents)
Annualized dividend rate 6.47% 6.41% 6.49%
30-day annualized yield 6.06% - -
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 $10.39 over the past one month,
$10.44 over the past six months and $10.44 over the past one 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. HOW DID THE FUND PERFORM, KEVIN?
A. For the six months that ended May 31, 1997, the fund's Institutional
Class shares had a total return of 1.10%. For the same period, the
intermediate investment grade debt funds average tracked by Lipper
Analytical Services returned 0.71%, while the Lehman Brothers Intermediate
Government/Corporate Bond Index posted a total return of 1.25%. For the 12
months ended May 31, 1997, the fund's Institutional Class shares had a
total return of 6.89%, while the Lipper funds average had a 7.56% total
return and the Lehman Brothers index returned 7.38%.
Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE FOR BONDS OVER THE PAST SIX
MONTHS?
A. In the first couple months of the period, strong economic growth and
increasing concerns about inflation acted as a drag on the bond market's
performance. In March, the Federal Reserve Board raised the rate banks
charge each other for overnight loans in order to head off inflation that
might be caused by a tight labor market. That overnight bank rate - known
as the fed funds target rate - was increased by 0.25% to 5.50%. But because
this move had already been factored into bond prices, the market didn't
really react. In April and May, producer and consumer price indexes
continued to point to a favorable inflation outlook and the bond market
rallied. Because interest rates finished the period only slightly higher
than where they began the period, income - in contrast to price gains or
losses - accounted for most of the total return on bonds.
Q. WHAT CHOICES DID YOU MAKE IN THE CORPORATE BOND SECTOR?
A. I continued to remain cautious in choosing the fund's corporate bond
holdings. The period saw a continuation of the trends that have dominated
the stock and corporate bond markets over the past two years: strong
corporate earnings, rising cash flows and improving balance sheets. While
stocks can go higher and higher, corporate bond prices - which generally
move in the opposite direction of their yields - basically cannot rise to
the point where they yield less than Treasuries because of corporates'
additional risk. However, the compensation for the additional risk inherent
in corporate bonds relative to Treasuries - what we refer to as the
"spread" - has diminished. About the only upside investors have been able
to get with corporate bonds over the past six months is that yield
advantage. So rather than overweight corporate bonds relative to the index,
I've maintained a defensive posture.
Q. WAS THAT DEFENSIVE STRATEGY EVIDENT IN THE INDIVIDUAL CORPORATE BONDS
YOU CHOSE DURING THE PERIOD?
A. Yes. In selecting individual corporate bonds, one of my main concerns
was that a company's credit rating could be compromised if it acquired a
debt-laden or lower-quality company. So I focused on more defensive issues,
meaning those that I thought offered enough yield to adequately compensate
investors for the risk they carried. These issues included companies that I
believed would avoid acquisitions that would hurt their current
creditworthiness.
Q. WHAT WAS YOUR STRATEGY WITH MORTGAGE-BACKED SECURITIES?
A. I sold some mortgage securities in late 1996 because they had done well
and I wanted to lock in their gains. So far in 1997, mortgages have
remained expensive by historical standards - as expensive as they've ever
been relative to Treasuries in fact. As a result, I haven't added many back
into the fund. But the mortgages I do own are very "seasoned" bonds, which
means they were issued 10 to 15 years ago. These mortgages have minimal
exposure to mortgage prepayment risk.
Q. WHERE DID YOU FIND OPPORTUNITIES IN THE TREASURY SECTOR OF THE MARKET?
A. Treasury securities of various maturities tend to be very efficiently
priced relative to one another, so there aren't many opportunities to
exploit price inefficiencies in this sector of the market. However, I have
been finding some pockets where prices temporarily fall out of line and
present opportunities. For example, 13- and 14-month Treasury securities
get a small price bounce as time goes by and they become eligible to be
included in money market funds, so I added those when I thought the market
would reward me for doing so. But even as I buy and sell securities of
various maturities, my goal is to keep the fund's duration - which measures
the fund's sensitivity to changing interest rates - neutral to the
benchmark.
Q. WHAT'S YOUR OUTLOOK?
A. The way bonds are priced at present, it appears that investors are
expecting the best-case scenario: relatively stable interest rates, low
inflation, improving corporate profits and low market volatility. Because
it's impossible to predict when spreads will widen out again if conditions
don't follow the best-case scenario, I'll continue to maintain a defensive
posture.
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
current income by
investing in investment
grade debt securities
START DATE: February 2, 1984
SIZE: as of May 31, 1997,
more than $470 million
MANAGER: Kevin Grant, since
1995; manager, Fidelity
Advisor World Limited Bond
Fund, since 1995; joined
Fidelity in 1993
(checkmark)
KEVIN GRANT ON YANKEE AND
PUT BONDS:
"Yankee bonds and put bonds
are two areas of the bond
market that have been
especially attractive recently.
Yankee bonds are issued by
foreign companies or
governments, are sold in the
U.S. and are denominated in
U.S. dollars. During the
period, the fund held yankee
bonds issued by provincial
governments in Canada.
Historically, these issues have
had yields similar to corporate
bonds, without the
accompanying risks. Put
bonds also can offer attractive
yields as well as favorable
price action. Let's use the
example of Wachovia Corp.
put bonds, which have a
maturity date of October
2025. These bonds are
puttable - which means the
fund can redeem them - in
2005. So in roughly eight and
a half years, if interest rates
are higher, we can redeem
the bond at par (face) value
and reinvest the proceeds at
higher interest rates. On the
other hand, if interest rates
are much lower, the fund can
continue to hold these
higher-yielding bonds that
could potentially rise in price
as if they had a 30 year
maturity - a price increase
markedly higher than for a
bond with a maturity of 8.5
years. In my experience, put
bonds have been chronically
undervalued because the
market doesn't really
understand them. As a result,
I'm often able to buy them at
attractive prices."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1997
(MOODY'S RATINGS) % % OF FUND'S
O INVESTMENTS
F 6 MONTHS AGO
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S
Aaa 6 71.8
3
.
0
Aa 8 6.2
.
3
A 2 17.5
1
.
5
Baa 4 1.9
.
7
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1997
6 MONTHS AGO
Years 5.6 5.7
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, 1997
6 MONTHS AGO
Years 3.2 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1997 * AS OF NOVEMBER 30, 1996 **
Corporate bonds 33.9%
U.S. government
and agency
obligations 38.8%
Mortgage-backed
securities 20.2%
Foreign government
obligations 3.6%
Other 1.0%
Short-term
investments 2.5%
Corporate bonds 25.5%
U.S. government
and agency
obligations 46.2%
Mortgage-backed
securities 20.5%
Foreign government
obligations 4.2%
Other 1.0%
Short-term
investments 2.6%
Row: 1, Col: 1, Value: 2.5
Row: 1, Col: 2, Value: 1.0
Row: 1, Col: 3, Value: 3.6
Row: 1, Col: 4, Value: 20.2
Row: 1, Col: 5, Value: 38.8
Row: 1, Col: 6, Value: 33.9
Row: 1, Col: 1, Value: 2.6
Row: 1, Col: 2, Value: 1.0
Row: 1, Col: 3, Value: 4.2
Row: 1, Col: 4, Value: 20.5
Row: 1, Col: 5, Value: 46.2
Row: 1, Col: 6, Value: 25.5
* FOREIGN
INVESTMENTS 9.9%
** FOREIGN
INVESTMENTS 7.2%
INVESTMENTS MAY 31, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 33.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp. yankee 8 7/8%, 11/15/01 $ 2,790,000 $ 2,961,976
ENERGY - 2.4%
ENERGY SERVICES - 0.7%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (a) 3,160,000 3,127,073
OIL & GAS - 1.7%
Apache Corp. 9 1/4%, 6/1/02 7,075,000 7,732,621
TOTAL ENERGY 10,859,694
FINANCE - 23.7%
ASSET-BACKED SECURITIES - 5.3%
Capital Equipment Receivables Trust 6.11%, 7/15/99 7,670,000 7,653,222
Chase Manhattan Grantor Trust:
6.61%, 9/15/02 3,116,380 3,128,066
6.76%, 9/15/02 1,168,642 1,172,842
Ford Credit Grantor Trust 5.90%, 10/15/00 2,521,163 2,514,860
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 125,852 125,374
Sears Credit Account Master Trust II
6 1/2%, 10/15/03 3,400,000 3,404,250
SCFC Recreational Vehicle Loan Trust
7 1/4%, 9/15/06 373,512 373,045
Standard Credit Card Master Trust I:
participation certificate 5 1/2%, 9/7/98 5,000,000 4,996,875
7.62%, 2/15/00 1,200,000 1,221,750
24,590,284
BANKS - 8.6%
ABN Amro Bank NV 6 5/8%, 10/31/01 2,750,000 2,724,645
Banc One Corp. 6.70%, 3/24/00 1,900,000 1,902,508
Banponce Financial Corp.:
6.69%, 9/21/00 2,250,000 2,233,778
6 3/4%, 8/9/01 3,850,000 3,813,079
Kansallis-Osake-Pankki 10%, 5/1/02 650,000 726,414
Korea Development Bank yankee 6 3/4%, 12/1/05 5,000,000 4,792,050
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,146,010
Provident Bank 6 1/8%, 12/15/00 5,000,000 4,884,050
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Skandinaviska Enskilda Banken yankee
8.45%, 5/15/02 $ 4,600,000 $ 4,872,458
Star Banc Corp. 6.80%, 5/1/99 2,400,000 2,407,944
Union Planters National Bank 6.81%, 8/20/01 1,500,000 1,501,875
U.S. Bancorp Ore 7 1/2%, 6/1/26 2,000,000 2,055,320
Wachovia Corp. 6.605%, 10/1/25 5,000,000 4,873,000
39,933,131
CREDIT & OTHER FINANCE - 7.6%
Associates Corp. of North America 6 1/2%, 9/9/98 5,000,000 5,013,350
CIT Group Holdings, Inc. 6 1/4%, 9/30/99 4,560,000 4,534,646
Chrysler Financial Corp. 6 3/8%, 1/28/00 2,580,000 2,564,004
DR Investment yankee 7.10%, 5/15/02 (a) 5,000,000 5,009,300
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,607,900
Ford Motor Credit Co. 7 3/4%, 11/15/02 100,000 103,271
General Electric Capital Corp. 6.94%, 4/13/09 (b) 2,530,000 2,549,810
General Motors Acceptance Corp. 6.65%, 5/24/00 2,000,000 1,994,020
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,720,845
Sears, Roebuck Acceptance Corp. 6.15%, 11/15/05 5,000,000 4,908,100
Secured Finance, Inc. gtd. secured 9.05%, 12/15/04 4,000,000 4,410,480
35,415,726
INSURANCE - 2.2%
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,035,890
SunAmerica, Inc. 6.20%, 10/31/99 9,300,000 9,202,350
10,238,240
TOTAL FINANCE 110,177,381
HEALTH - 0.7%
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 1,420,000 1,422,528
6.73%, 7/15/45 2,000,000 1,978,060
3,400,588
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
POLLUTION CONTROL - 1.3%
WMX Technologies, Inc. 7.10%, 8/1/26 $ 6,000,000 $ 6,022,560
NONDURABLES - 1.3%
TOBACCO - 1.3%
Philip Morris Companies, Inc.:
6 3/8%, 1/15/98 250,000 250,220
6.95%, 6/1/06 6,000,000 5,989,260
6,239,480
RETAIL & WHOLESALE - 0.4%
GENERAL MERCHANDISE STORES - 0.4%
Penney (J.C.), Inc. 6.95%, 4/1/00 1,800,000 1,809,306
TECHNOLOGY - 3.2%
COMPUTER SERVICES & SOFTWARE - 1.1%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,921,800
ELECTRONICS - 2.1%
Motorola, Inc. 6 1/2%, 9/1/25 5,000,000 4,881,050
Texas Instruments, Inc. 6 7/8%, 7/15/00 5,000,000 5,023,550
9,904,600
TOTAL TECHNOLOGY 14,826,400
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.3%
British Columbia Hydro & Power Authority
yankee 12 1/2%, 1/15/14 940,000 1,061,542
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 152,786
1,214,328
TOTAL NONCONVERTIBLE BONDS
(Cost $140,159,659) 157,511,713
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 38.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 31.5%
9 1/8%, 5/15/99 $ 23,920,000 $ 25,183,215
8%, 8/15/99 62,870,000 65,089,940
7 3/4%, 12/31/99 17,130,000 17,705,397
5 3/4%, 10/31/00 505,000 495,057
6 5/8%, 6/30/01 4,340,000 4,362,394
7%, 7/15/06 18,148,000 18,539,271
12 3/4%, 11/15/10 (callable) 10,998,000 15,184,059
146,559,333
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.3%
Financing Corp. stripped principal:
0%, 5/30/00 1,000,000 824,540
0%, 10/6/01 2,000,000 1,500,160
0%, 6/6/02 2,800,000 2,012,976
Federal Farm Credit Banks Consolidated
Systemwide 6.55%, 2/7/04 740,000 731,557
Federal Home Loan Bank:
7.31%, 6/16/04 3,830,000 3,932,338
7.38%, 8/5/04 1,930,000 1,989,714
7.70%, 9/20/04 1,250,000 1,311,713
Federal Home Loan Mortgage Corporation
8.115%, 1/31/05 5,460,000 5,850,718
Federal National Mortgage Association
6.72%, 8/1/05 2,230,000 2,203,864
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency)
Class 2-E, 9.40%, 5/15/02 1,097,044 1,163,579
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 329,208 333,014
Series 1994-C, 6.61%, 9/15/99 74,809 75,004
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
8%, 11/15/01 1,740,000 1,827,261
6 1/8%, 3/15/03 680,000 657,852
6 5/8%, 2/15/04 140,000 138,848
7 5/8%, 8/15/04 840,000 874,348
5.89%, 8/15/05 2,070,000 1,931,426
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
U.S. Department of Housing and Urban Development
Government guaranteed participation certificates:
Series 1995-A, 8.24%, 8/1/04 $ 1,030,000 $ 1,105,077
Series 1996-A, 6.92%, 8/1/04 5,360,000 5,371,685
33,835,674
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $183,225,034) 180,395,007
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 10.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.5%
5 1/2%, 12/1/02 to 6/1/03 2,353,150 2,238,950
7%, 11/1/00 to 7/1/01 3,054,562 3,066,689
9 1/2%, 1/1/17 53,855 57,978
10%, 4/1/05 to 8/1/10 445,617 480,129
10 1/4%, 12/1/09 46,700 50,485
10 1/2%, 5/1/21 820,479 898,778
11%, 12/1/11 46,431 50,923
11 1/2%, 10/1/15 135,993 151,046
11 3/4%, 10/1/10 92,933 102,987
7,097,965
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.0%
5 1/2%, 5/1/03 to 5/1/26 4,155,112 3,932,293
6%, 5/1/01 to 3/1/11 2,075,729 2,016,046
9 1/2%, 2/1/25 3,966,645 4,274,021
10%, 1/1/20 109,839 119,587
10 1/2%, 7/1/11 to 8/1/20 617,876 677,808
11%, 8/1/15 2,466,937 2,723,770
12 1/2%, 2/1/11 to 4/1/15 116,957 135,497
13,879,022
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.9%
7%, 11/15/22 to 6/15/27 5,737,854 5,622,791
8%, 2/15/02 to 6/15/25 4,638,468 4,747,220
8 1/2%, 4/15/17 to 5/15/26 869,143 909,188
9%, 5/15/16 to 10/15/18 3,922,502 4,196,338
10%, 8/15/18 to 4/15/25 4,874,537 5,329,560
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - CONTINUED
11%, 2/15/10 to 10/15/20 $ 1,488,970 $ 1,620,799
11 1/2%, 10/15/10 to 1/15/16 4,309,451 4,870,495
27,296,391
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $70,120,719) 48,273,378
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 4.8%
Federal Home Loan Mortgage Corporation:
planned amortization class:
Series 1645 Class ZA, 5 1/2%, 4/15/05 10,841,543 10,529,848
Series 1727 Class D, 6 1/2%, 8/15/14 4,750,000 4,754,453
sequential pay Series 1838 Class A,
6 1/2%, 12/15/02 6,953,292 6,964,157
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $22,236,550) 22,248,458
COMMERCIAL MORTGAGE SECURITIES - 5.0%
BKB Commercial Mortgage Trust Series 1997-C1 (a):
Class A-1, 6 7/8%, 2/25/43 4,610,623 4,653,848
Class B, 7.21%, 2/25/43 (c) 4,000,000 4,016,250
CBM Funding Corp. sequential pay Series 1996-1
Class A-1, 7.55%, 7/1/99 163,903 166,080
Chevy Chase Auto Receivables Trust:
6.60%, 12/15/02 1,110,647 1,114,112
5.90%, 7/15/03 3,037,880 3,014,147
CS First Boston Mortgage Securities Corp.:
Series 1995-AEWI Class A-1, 6.665%, 11/25/27 266,508 266,258
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 4,856,250
Equitable Life Assurance Society of the United States
(The) Series 1996-1 Class C1,
7.52%, 5/15/06 (a) 1,000,000 1,013,530
Resolution Trust Corp. Series 1995-C1 Class A-4A,
6 1/4%, 2/25/27 407,968 407,458
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Structured Asset Securities Corp. sequential pay:
Series 1995-C4 Class A-1A, 6.90%, 6/25/26 $ 646,263 $ 646,061
Series 1996 Class A-1C, 5.944%, 2/25/28 1,489,000 1,472,016
Wells Fargo Capital Markets Apartment Financing
Trust 6.56%, 12/29/05 (a) 1,625,000 1,592,841
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $19,157,124) 23,218,851
FOREIGN GOVERNMENT OBLIGATIONS - 3.6%
Alberta Province yankee 9 1/4%, 4/1/00 2,200,000 2,349,688
Export Development Corp. yankee 8 1/8%, 8/10/99 740,000 764,912
Manitoba Province yankee 6 3/8%, 10/15/99 2,590,000 2,582,463
Ontario Province yankee 7 3/4%, 6/4/02 6,000,000 6,237,600
Quebec Province yankee 6.86%, 4/15/26 (b) 5,000,000 4,865,050
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $16,556,799) 16,799,713
SUPRANATIONAL OBLIGATIONS - 1.0%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 4,790,881
CASH EQUIVALENTS - 2.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.54%, dated
5/30/97 due 6/2/97 $ 11,343,234 11,338,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $467,170,765) $ 464,576,001
LEGEND
1. 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 $19,412,842 or 4.1% of net
assets.
2. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
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 89.4% AAA, AA, A 89.8%
Baa 4.7% BBB 6.2%
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
both S&P and Moody's amounted to 0.0%.
INCOME TAX INFORMATION
At May 31, 1997, the aggregate cost of investment securities for income tax
purposes was $467,170,765. Net unrealized depreciation aggregated
$2,594,764, of which $2,426,899 related to appreciated investment
securities and $5,021,663 related to depreciated investment securities.
At November 30, 1996, the fund had a capital loss carryforward of
approximately $13,667,000 of which $2,841,000, $1,035,000, $134,000 and
$9,657,000 will expire on November 30, 1998, 1999, 2002 and 2004,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 464,576,001
agreements of $11,338,000) (cost $467,170,765) -
See accompanying schedule
Cash 193
Receivable for fund shares sold 124,196
Interest receivable 7,195,373
Prepaid expenses 5,031
TOTAL ASSETS 471,900,794
LIABILITIES
Payable for investments purchased $ 104,072
Distributions payable 701,347
Accrued management fee 159,911
Distribution fees payable 67,760
Other payables and accrued expenses 113,003
TOTAL LIABILITIES 1,146,093
NET ASSETS $ 470,754,701
Net Assets consist of:
Paid in capital $ 491,397,737
Distributions in excess of net investment income (1,899,714)
Accumulated undistributed net realized gain (loss) on (16,149,305)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (2,594,017)
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 470,754,701
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
MAY 31, 1997 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $10.38
CLASS A:
NET ASSET VALUE and redemption price per share
($1,826,042 (divided by) 175,837 shares)
Maximum offering price per share (100/96.75 of $10.38) $10.73
CLASS T: $10.39
NET ASSET VALUE and redemption price per share
($257,655,500 (divided by) 24,789,406 shares)
Maximum offering price per share (100/97.25 of $10.39) $10.68
CLASS B: $10.38
NET ASSET VALUE and offering price per share
($19,446,419 (divided by) 1,873,523 shares) A
INSTITUTIONAL CLASS: $10.40
NET ASSET VALUE, offering price and redemption price
per share ($191,826,740 (divided by) 18,443,141 shares)
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, 1997 (UNAUDITED)
INVESTMENT INCOME $ 16,856,459
Interest
EXPENSES
Management fee $ 1,047,913
Transfer agent fees 422,542
Distribution fees 404,351
Accounting fees and expenses 98,223
Non-interested trustees' compensation 1,762
Custodian fees and expenses 12,170
Registration fees 60,276
Audit 22,710
Legal 6,676
Miscellaneous 6,798
Total expenses before reductions 2,083,421
Expense reductions (41,167) 2,042,254
NET INVESTMENT INCOME 14,814,205
REALIZED AND UNREALIZED GAIN (LOSS) (1,891,855)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (8,169,500)
investment securities
NET GAIN (LOSS) (10,061,355)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 4,752,850
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 14,814,205 $ 31,675,872
Net investment income
Net realized gain (loss) (1,891,855) (9,733,480)
Change in net unrealized appreciation (depreciation) (8,169,500) 2,408,292
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,752,850 24,350,684
FROM OPERATIONS
Distributions to shareholders from net investment income (14,697,171) (31,669,310)
Share transactions - net increase (decrease) (12,928,448) 47,816,674
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,872,769) 40,498,048
NET ASSETS
Beginning of period 493,627,470 453,129,422
End of period (including distributions in excess $ 470,754,701 $ 493,627,470
of net investment income of $1,899,714 and
$2,016,748, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1997
(UNAUDITED) 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.590 $ 10.350
Income from Investment Operations
Net investment income D .318 .159
Net realized and unrealized gain (loss) (.208) .235 G
Total from investment operations .110 .394
Less Distributions
From net investment income (.320) (.154)
Net asset value, end of period $ 10.380 $ 10.590
TOTAL RETURN B, C 1.07% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,826 $ 687
Ratio of expenses to average net assets .90% A, F .90% A,
F
Ratio of net investment income to average net assets 6.29% A 6.45% A
Portfolio turnover rate 121% A 200%
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 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO NOVEMBER 30, 1996.
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).
G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES
AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1997
(UNAUDITED) 1996 1995 1994 F 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960
beginning of period
Income from
Investment
Operations
Net investment .320 D .671 D .649 .609 .785 .170
income
Net realized and (.221) (.147) .491 (.876) .511 (.320)
unrealized gain
(loss)
Total from investment .099 .524 1.140 (.267) 1.296 (.150)
operations
Less Distributions
From net investment (.319) (.674) (.640) (.555) (.796) (.170)
income
From return of capital - - - (.058) - -
Total distributions (.319) (.674) (.640) (.613) (.796) (.170)
Net asset value, end $ 10.390 $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640
of period
TOTAL RETURN B, C 0.96% 5.10% 11.43% (2.44) 12.50% (1.37)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 257,656 $ 262,103 $ 228,439 $ 141,866 $ 59,184 $ 2,583
period (000 omitted)
Ratio of expenses to .96% A .97% .94% 1.02% 1.23% .82%
average net assets G G A
Ratio of expenses to .96% A .96% .94% 1.02% 1.23% .82%
average net assets H A
after expense
reductions
Ratio of net investment 6.18% A 6.38% 6.20% 6.04% 6.81% 7.67%
income to average A
net assets
Portfolio turnover rate 121% A 200% 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 T
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 FUND'S EXPENSES.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1997
(UNAUDITED) 1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.590 $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .283 D .597 D .579 .204
Net realized and unrealized gain (loss) (.211) (.153) .483 (.178)
Total from investment operations .072 .444 1.062 .026
Less Distributions
From net investment income (.282) (.604) (.562) (.187)
From return of capital - - - (.019)
Total distributions (.282) (.604) (.562) (.206)
Net asset value, end of period $ 10.380 $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 0.70% 4.32% 10.62% 0.24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 19,446 $ 18,972 $ 15,830 $ 3,156
Ratio of expenses to average net assets 1.65% A, 1.66% 1.70% 1.65% A,
F F F F
Ratio of net investment income to 5.48% A 5.69% 5.44% 5.42% A
average
net assets
Portfolio turnover rate 121% A 200% 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, 1997
(UNAUDITED) 1996 1995 1994 E 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550
beginning of period
Income from Investment
Operations
Net investment .334 D .705 D .671 .602 .832 .840
income
Net realized and (.220) (.151) .499 (.833) .531 .102
unrealized gain
(loss)
Total from investment .114 .554 1.170 (.231) 1.363 .942
operations
Less Distributions
From net investment (.334) (.704) (.670) (.597) (.843) (.852)
income
From return of capital - - - (.062) - -
Total distributions (.334) (.704) (.670) (.659) (.843) (.852)
Net asset value, end $ 10.400 $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640
of period
TOTAL RETURN B, C 1.10% 5.40% 11.73% (2.10) 13.17% 9.21%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 191,827 $ 211,866 $ 208,861 $ 172,122 $ 183,790 $ 160,156
period (000 omitted)
Ratio of expenses to .67% .66% .67% .61% .64% .57%
average net assets A F
Ratio of net investment 6.45% 6.69% 6.47% 6.45% 7.41% 7.96%
income to average A
net assets
Portfolio turnover rate 121% 200% 189% 68% 59% 7%
A
</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.
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.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1997 (Unaudited)
9. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the 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 T, 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, the
common expenses of the fund, and certain fund-level expense reductions 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, expenses, and expense
reductions.
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. 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. Short-term securities with remaining maturities of sixty days
or less for which quotations are not readily available are valued at
amortized cost or original cost plus accrued interest, both of which
approximate current value.
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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, and the difference between
the amount of net investment income accrued
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
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.
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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all
organizational expenses except for registering and qualifying Class A and
shares of Class A for distribution under federal and state securities law.
These expenses are borne by Class A and amortized over one year.
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 and capital
gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. 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,
market discount, capital loss carryforwards and losses deferred due to
futures and options and wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
10. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms. The U.S.
dollar value of foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements for 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.
RESTRICTED SECURITIES. The fund is permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period, the
fund had no investments in restricted securities (excluding 144A issues).
11. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $277,267,794 and $288,603,148, respectively, of which U.S.
government and government agency obligations aggregated $211,287,377 and
$251,087,485, respectively.
12. 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. The annual individual
fund fee rate is .30%. In the event that these rates were lower than the
contractual rates in
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
effect during the period, FMR voluntarily implemented the above rates, as
they resulted in the same or a lower management fee. For the period, the
management fee was equivalent to an annualized rate of .44% 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
each class of shares (collectively referred to as "the Plans"). Under
certain of the Plans, the class pays Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee. This fee is
based on the following annual rates of the average net assets of each
applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90% *
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion of
which was paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares, and
providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $
828 828
CLASS T 319,258 319,258
CLASS B 84,265 23,407
$ $
404,351 343,493
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The Plans
also authorize payments to third parties that assist in the sale of each
class' shares or render shareholder support services.
SALES LOAD. FDC receives a front-end sales charge of up to 3.25% and 2.75%
for selling Class A and Class T shares of the fund, respectively, and the
proceeds of a contingent deferred sales charge levied on Class B share
redemptions occurring within three years of purchase. The Class B charge is
based on declining rates which range from 3% 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, FDC received the following sales charge amounts related to
each class, a portion of which is paid to securities dealers, banks, and
other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ $
28,579 17,595
CLASS T 62,023 46,617
CLASS B 36,418 0 *
$ $
127,020 64,212
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM ITS OWN
RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT FEES. Each class of the fund has entered into a separate
transfer, dividend disbursing, and shareholder servicing agent
(collectively referred to as the Transfer Agents) contract with respect to
its 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. For the period, the
following amounts were paid to each transfer agent:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A FIIOC * $ 0.38% **
2,083
CLASS T *** FIIOC * 244,513 0.19% **
CLASS B FIIOC * 22,964 0.25% **
INSTITUTIONAL CLASS FIIOC * 152,982 0.15% **
$
422,542
* FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC. (FIIOC) AN
AFFILIATE OF FMR.
** ANNUALIZED
*** PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER, HAD
DELEGATED CERTAIN TRANSFER, DIVIDEND DISBURSING, AND SHAREHOLDER
SERVICES TO FIIOC FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL SUCH
FEES.
ACCOUNTING FEES. Fidelity Service Company, Inc., 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.
13. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates or range of annual rates of average net assets for
each class:
FMR REIMBURSEME
EXPENSE NT
LIMITATIONS
CLASS A .90% $
22,478
CLASS B 1.65% 13,690
$
36,168
In addition, the fund has entered into arrangements with its custodian and
each class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses. During
the period, the fund's custodian fees were reduced by $4,999 under the
custodian arrangement.
14. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED
MAY 31, NOVEMBER 30,
CLASS A 1997 1996 A
From net investment income $ $
33,997 6,183
CLASS T
From net investment income 7,800,665 16,284,509
CLASS B
From net investment income 506,377 1,037,161
INSTITUTIONAL CLASS
From net investment income 6,356,132 14,341,457
TOTAL $ $
14,697,171 31,669,310
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
15. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30, ENDED MAY 31, NOVEMBER 30,
1997 1996 A 1997 1996 A
CLASS A 175,667 72,448 $ $
Shares sold 1,822,757 756,142
Reinvestment of 2,907 475 30,211 4,998
distributions
Shares redeemed (67,580) (8,080) (698,143) (84,516)
Net increase (decrease) 110,994 64,843 $ $
1,154,825 676,624
CLASS T 6,369,295 14,999,140 $ $
Shares sold 66,462,313 158,724,547
Reinvestment of 679,892 1,411,416 7,082,430 14,860,075
distributions
Shares redeemed (6,963,419) (12,931,481) (72,669,279) (136,183,619)
Net increase (decrease) 85,768 3,479,075 $ $
875,464 37,401,003
CLASS B 413,585 1,114,235 $ $
Shares sold 4,301,104 11,808,349
Reinvestment of 37,431 76,373 389,487 803,087
distributions
Shares redeemed (368,178) (872,302) (3,837,601) (9,227,658)
Net increase (decrease) 82,838 318,306 $ $
852,990 3,383,778
INSTITUTIONAL CLASS 2,318,668 9,022,232 $ $
Shares sold 24,200,731 95,376,649
Reinvestment of 255,308 561,358 2,662,225 5,915,605
distributions
Shares redeemed (4,085,452) (9,022,616) (42,674,683) (94,936,985)
Net increase (decrease) (1,511,476) 560,974 $ (15,811,727) $
6,355,269
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
16. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $
22,442
CLASS T 12,767
CLASS B 13,702
INSTITUTIONAL CLASS 11,365
$
60,276
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 *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor TechnoQuant(trademark)
Growth Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities 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 Municipal Bond 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
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
FIDELITY INSTITUTIONAL
SHORT-INTERMEDIATE
GOVERNMENT FUND
SEMIANNUAL REPORT
MAY 31, 1997
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 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 12 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 16 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 FUND INCLUDING CHARGES AND EXPENSES,
CALL 1-800-843-3001. READ THE PROSPECTUS
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Through the first five months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them from time to time.
After climbing steadily upward for more than two years, stock prices saw a
sharp correction in late March and early April. Returns in the bond market
were essentially stagnant as the Federal Reserve Board implemented a
long-expected increase in short-term interest rates at the end of March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
The longer your investment time frame, the less likely it is that you will
be affected by short-term market volatility. A 10-year investment horizon
appropriate for saving for a college education, for example, enables you to
weather market cycles in a long-term fund, which may have a higher risk
potential, but also has a higher potential rate of return.
An intermediate-length fund could make sense if your investment horizon is
two to four years, while a short-term bond fund could be the right choice
if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund. These funds seek
income and a stable share price by investing in high-quality, short-term
investments. Of course, it's important to remember that there is no
assurance that a money market fund will achieve its goal of maintaining a
stable net asset value of $1.00 per share, and that these types of funds
are neither insured nor guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
Remember to contact your investment professional if you need help with your
funds.
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 $100,000 investment. Total return reflects
the change in the value of an investment, assuming reinvestment of the
fund's dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value). You can also look at income, as
reflected in the fund's yield, to measure performance. If Fidelity had not
reimbursed certain fund expenses, the past one year, five year and past 10
year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Institutional Short-Intermediate Government Fund 1.76% 6.92% 32.02% 104.24%
Salomon Brothers Treasury/Agency 1-5 Year Index 1.79% 6.80% 33.76% 109.64%
Short-Intermediate U.S. Government Funds Average 1.37% 6.37% 30.35% 103.05%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund'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 the fund's returns to the performance of the Salomon
Brothers Treasury/Agency 1-5 Year Index - a market capitalization weighted
index of U.S. Treasury and U.S. government agency securities with
fixed-rate coupons and weighted average lives between one and five years.
To measure how the fund's performance stacked up against its peers, you can
compare it to the short-intermediate U.S. government funds average, which
reflects the performance of mutual funds with similar objectives tracked by
Lipper Analytical Services, Inc. The past six months average represents a
peer group of 97 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Institutional Short-Intermediate Government Fund 6.92% 5.71% 7.40%
Salomon Brothers Treasury/Agency 1-5 Year Index 6.80% 5.99% 7.68%
Short-Intermediate U.S. Government Funds Average 6.37% 5.42% 7.33%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking an arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$100,000 OVER 10 YEARS
1987/05/31 100000.00 100000.00
1987/06/30 100996.26 101109.98
1987/07/31 101604.95 101537.70
1987/08/31 101826.87 101595.56
1987/09/30 101727.43 100879.95
1987/10/31 103128.84 103325.52
1987/11/30 103888.03 103957.76
1987/12/31 104779.06 104765.59
1988/01/31 106619.71 106830.06
1988/02/29 107712.60 107798.80
1988/03/31 107617.50 107777.70
1988/04/30 107681.90 107772.28
1988/05/31 107544.50 107563.34
1988/06/30 108766.30 108853.33
1988/07/31 108989.00 108790.05
1988/08/31 109095.30 108949.97
1988/09/30 110455.50 110411.13
1988/10/31 111343.20 111688.86
1988/11/30 111373.70 111123.32
1988/12/31 111636.30 111253.30
1989/01/31 112594.00 112224.46
1989/02/28 112701.70 112065.55
1989/03/31 113122.80 112513.36
1989/04/30 114772.80 114338.96
1989/05/31 116418.90 116337.72
1989/06/30 118548.60 118904.44
1989/07/31 120094.70 120960.70
1989/08/31 119508.30 119775.50
1989/09/30 120207.70 120449.80
1989/10/31 122142.80 122589.80
1989/11/30 123193.50 123733.10
1989/12/31 123742.70 124177.10
1990/01/31 123637.60 123959.30
1990/02/28 124240.40 124474.40
1990/03/31 124788.60 124796.90
1990/04/30 124945.60 124872.30
1990/05/31 126832.40 127033.30
1990/06/30 128118.10 128532.50
1990/07/31 129571.80 130287.30
1990/08/31 130073.60 130371.10
1990/09/30 130953.00 131568.80
1990/10/31 132259.00 133181.20
1990/11/30 133713.30 134676.30
1990/12/31 135222.60 136447.80
1991/01/31 136454.10 137729.30
1991/02/28 137482.30 138449.60
1991/03/31 138338.50 139375.20
1991/04/30 139723.00 140845.10
1991/05/31 140752.30 141645.00
1991/06/30 141051.60 142026.10
1991/07/31 142393.20 143512.90
1991/08/31 144637.10 145770.20
1991/09/30 145851.20 147797.10
1991/10/31 147418.10 149447.20
1991/11/30 148839.80 151197.78
1991/12/31 152453.40 154074.49
1992/01/31 151001.60 153287.50
1992/02/29 151684.00 153744.00
1992/03/31 151621.10 153358.70
1992/04/30 152749.20 154925.00
1992/05/31 154697.30 156730.00
1992/06/30 156534.60 158761.20
1992/07/31 158184.50 161181.80
1992/08/31 159887.40 162873.80
1992/09/30 161845.20 164808.60
1992/10/31 160006.10 163192.10
1992/11/30 160329.80 162597.40
1992/12/31 162110.80 164435.90
1993/01/31 164040.10 167078.50
1993/02/28 165550.40 168929.60
1993/03/31 166324.40 169515.90
1993/04/30 166947.00 170872.80
1993/05/31 167304.20 170273.90
1993/06/30 168634.30 172116.60
1993/07/31 169138.80 172443.30
1993/08/31 170194.50 174499.50
1993/09/30 170601.60 175102.60
1993/10/31 170872.50 175408.30
1993/11/30 170800.90 175056.50
1993/12/31 171620.80 175764.30
1994/01/31 173189.70 177175.60
1994/02/28 171701.90 175479.50
1994/03/31 168824.10 173703.80
1994/04/30 167955.80 172723.80
1994/05/31 168127.80 172945.80
1994/06/30 168326.90 173230.60
1994/07/31 170188.20 175060.70
1994/08/31 170655.60 175605.20
1994/09/30 169888.60 174662.90
1994/10/31 170207.70 174884.80
1994/11/30 169595.90 173963.50
1994/12/31 170149.30 174407.40
1995/01/31 172562.60 177125.40
1995/02/28 175448.70 180040.20
1995/03/31 176332.10 181024.40
1995/04/30 178296.66 182862.90
1995/05/31 181941.60 187046.70
1995/06/30 183098.90 188148.10
1995/07/31 183537.10 188612.90
1995/08/31 184979.30 189881.90
1995/09/30 186014.80 190874.40
1995/10/31 187912.50 192725.50
1995/11/30 189593.30 194765.10
1995/12/31 191319.90 196402.50
1996/01/31 193069.00 198136.40
1996/02/29 191743.60 196938.60
1996/03/31 191276.90 196310.40
1996/04/30 190941.20 196034.00
1996/05/31 191013.60 196289.50
1996/06/30 192874.00 197964.70
1996/07/31 193540.00 198643.10
1996/08/31 193970.70 199166.60
1996/09/30 196054.50 201315.00
1996/10/31 198805.70 204108.40
1996/11/30 200706.30 205951.10
1996/12/31 200328.10 205452.70
1997/01/31 201012.70 206420.10
1997/02/28 201601.90 206746.80
1997/03/31 200819.70 206273.60
1997/04/30 202843.50 208145.60
1997/05/30 204238.20 209636.50
$100,000 OVER 10 YEARS: Let's say hypothetically that $100,000 was
invested in Fidelity Institutional Short-Intermediate Government Fund on
May 31, 1987. As the chart shows, by May 31, 1997, the value of the
investment would have grown to $204,238 - a 104.24% increase on the initial
investment. For comparison, look at how the Salomon Brothers
Treasury/Agency 1-5 Year Index did over the same period. With dividends
reinvested, the same $100,000 would have grown to $209,636 - a 109.64%
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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31,
1997 1996 1995 1994 1993 1992
Dividend return 3.44% 6.90% 7.56% 6.07% 6.12% 6.90%
Capital appreciation return -1.68% -1.04% 4.23% -6.78% 0.41% 0.82%
Total return 1.76% 5.86% 11.79% -0.71% 6.53% 7.72%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or capital gains paid
by the fund are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.42(cents) 32.32(cents) 62.97(cents)
Annualized dividend rate 6.84% 6.92% 6.71%
30-day annualized yield 6.31% - -
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $9.33 over the past one month, $9.37
over the past six months and $9.38 over the past one year, you can compare
the fund's income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's investments
at the end of the period. It also helps you compare funds from different
companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Curt
Hollingsworth,
Portfolio Manager
of Fidelity
Institutional
Short-Intermediat
e Government
Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the six- and 12-month periods ended May 31, 1997, the fund had total
returns of 1.76% and 6.92%, respectively. To gauge how the fund did
relative to its peer group, the short-intermediate U.S. government funds
average had a total return of 1.37% for the same six-month period and 6.37%
for the same one-year period, as tracked by Lipper Analytical Services. The
fund's benchmark, the Salomon Brothers Treasury/Agency 1-5 Year Index, had
six- and 12-month returns of 1.79% and 6.80%, respectively, as of May 31,
1997.
Q. THERE WAS A PRONOUNCED SHIFT IN THE BOND MARKET DURING THE PAST SIX
MONTHS. CAN YOU DESCRIBE THAT SHIFT AND TALK ABOUT SOME OF THE REASONS
BEHIND IT?
A. Sure. Beginning in December, bond prices began to come under pressure as
evidence mounted that the economy was growing at a stronger-than-expected
rate and inflation fears grew. Throughout most of January and February,
bonds remained in a narrow trading range in the absence of any conclusive
data about the direction of the economy, inflation and interest rates. In
March, the Fed boosted its target rate for Federal funds - or overnight
loans between banks - a quarter percentage point to 5.50% to stave off
future inflation. The bond market experienced a brief sell-off, although
investors had - to some extent - factored that hike into bond prices. There
was no change in Fed policy in April and May, and the bond market rebounded
somewhat.
Q. WHAT WAS YOUR STRATEGY OVER THE PAST SIX MONTHS?
A. I chose to underweight the fund in lower-yielding Treasuries and
overweight higher-yielding agencies and mortgage-backed securities relative
to the index. At the end of the period, Treasury securities accounted for
36.2% of the fund's investments, U.S. government agency securities were
35.9% and mortgage-backed securities were 25.2%.
Q. WHICH AGENCY SECURITIES WERE ATTRACTIVE?
A. I focused on agency bonds that are non-callable - meaning the issuer
does not have the option of redeeming the bond prior to maturity. Thus, the
fund won't be faced with having to invest cash if a bond is called in what
may be an unfavorable interest rate environment. I also emphasized
higher-quality agency securities, those directly or indirectly backed by
the full faith and credit of the U.S. government. These high-quality
securities offered higher yields than comparable Treasuries and, as such,
helped the fund's performance. Two of the fund's largest agency holdings at
the end of the period were the Federal National Mortgage Association and
the Agency for International Development notes issued by the State of
Israel and backed by the full faith and credit of the U.S. government.
Q. WHAT CHOICES DID YOU MAKE IN THE MORTGAGE SECTOR?
A. I focused on mortgage securities with coupons - the interest rate the
borrower promises to pay - that were either much higher or lower than
current interest rates. Here's why: Mortgage-backed securities are subject
to prepayment risk - the risk that they will be paid off before maturity as
mortgage holders refinance their debt. Both rising and falling interest
rates typically set off changes in prepayment patterns that can
dramatically affect the prices of mortgage-backed securities. The bonds
most vulnerable to a dramatic pickup or slowdown in prepayment activity are
those that have coupons close to current market rates. As a result, I've
tended to avoid them.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
A. The fund's performance may have been even better if it had more bonds
that offered a yield advantage over Treasury securities. However, the fact
that yield spreads - which measure the difference in yields between bonds
of various credit quality - became tighter, or smaller, made it a
frustrating period for finding higher-yield opportunities.
Q. WHAT'S YOUR OUTLOOK?
A. Looking ahead, investors will likely continue to scrutinize every new
piece of economic data, looking for clues as to whether the Federal Reserve
will raise interest rates at its next meeting in July and thereafter. In
the meantime, contradictory economic data may mean more volatility for the
fixed-income markets. But regardless of the direction of interest rates,
I'll focus on choosing bonds whose prices are lower than I believe they
should be and sell those that have exceeded their value relative to other
bonds in the marketplace. In addition, I will look for opportunities that
may arise due to price inefficiencies with the idea of exploiting the
anomalies for the benefit of the fund.
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:
START DATE:
SIZE:
MANAGER:
(checkmark)
(solid bullet)
(solid bullet)
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MAY 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Zero Coupon Bonds 7.2 0.2
Less than 5% 2.8 2.3
5 - 5.99% 13.0 6.1
6 - 6.99% 11.5 39.1
7 - 7.99% 20.4 14.0
8 - 8.99% 14.7 19.8
9 - 9.99% 14.5 9.6
10 - 10.99% 2.3 2.7
11 - 11.99% 3.6 3.3
12 - 12.99% 1.6 1.9
13% and over 5.7 0.1
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1997
6 MONTHS AGO
Years 3.2 3.4
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, 1997
6 MONTHS AGO
Years 2.2 2.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1997 AS OF NOVEMBER 30, 1996
Row: 1, Col: 1, Value: 2.7
Row: 1, Col: 2, Value: 35.9
Row: 1, Col: 3, Value: 36.2
Row: 1, Col: 4, Value: 25.2
Mortgage-backed
securities 27.7%
U.S. Treasury
obligations 37.7%
U.S. government
agency obligations 33.7%
Short-term
investments 0.9%
Mortgage-backed
securities 25.2%
U.S. Treasury
obligations 36.2%
U.S. government
agency obligations 35.9%
Short-term
investments 2.7%
Row: 1, Col: 1, Value: 1.5
Row: 1, Col: 2, Value: 33.7
Row: 1, Col: 3, Value: 37.7
Row: 1, Col: 4, Value: 27.1
INVESTMENTS MAY 31, 1997 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 72.1%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 36.2%
7 7/8%, 4/15/98 $ 39,890,000 $ 40,569,327
5 7/8%, 4/30/98 24,000,000 24,011,280
8 7/8%, 11/15/98 10,410,000 10,810,160
8%, 8/15/99 22,080,000 22,859,645
7 3/4%, 12/31/99 4,000,000 4,134,360
7 7/8%, 8/15/01 2,890,000 3,035,858
13 3/8%, 8/15/02 15,400,000 19,237,988
TOTAL U.S. TREASURY OBLIGATIONS 124,658,618
U.S. GOVERNMENT AGENCY OBLIGATIONS - 35.9%
Federal Agricultural Mortgage Corporation:
6.92%, 8/10/00 1,040,000 1,051,534 7.61%, 10/16/00 3,000,000
3,095,670
Federal National Mortgage Association
4.95%, 9/30/98 8,500,000 8,365,870
Government Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Defense Security Assistance
Agency):
Class 1-C, 9 1/4%, 11/15/01 20,760,611 22,020,987
Class 2-E, 9.40%, 5/15/02 2,961,838 3,141,473
Class T-3, 9 5/8%, 5/15/02 9,731,661 10,339,500
Guaranteed Export Trust Certificates
(assets of Trust guaranteed by U.S.
Government through Export-Import
Bank):
Series 1993-C, 5.20%, 10/15/04 684,000 650,655
Series 1993-D, 5.23%, 5/15/05 490,213 464,323
Series 1994-A, 7.12%, 4/15/06 2,057,549 2,081,339
Guaranteed Trade Trust Certificates
(assets of Trust guaranteed by U.S.
Government through Export-Import
Bank) Series 1993-A,
4.86%, 4/1/98 1,366,000 1,360,509
Israel Export Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank)
Series 1994-1, 6.88%, 1/26/03 592,942 595,776
Overseas Private Investment Corp. U.S.
Government guaranteed participation
certificates Series 1994-195,
6.08%, 8/15/04 (callable) 3,330,000 3,239,191
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Private Export Funding Corp. secured:
9.10%, 10/30/98 $ 1,100,000 $ 1,142,284
5.65%, 3/15/03 969,428 946,182
5.80%, 2/1/04 3,410,000 3,293,003
6.86%, 4/30/04 960,050 962,556
State of Israel (guaranteed by U.S.
Government through Agency for
International Development):
6%, 2/15/99 1,420,000 1,413,198
6 1/8%, 8/15/99 4,050,000 4,029,183
7 1/8%, 8/15/99 1,522,000 1,542,714
7 3/4%, 11/15/99 10,504,000 10,801,998
0%, 11/15/00 22,380,000 17,881,396 0%, 11/15/01 9,415,000
7,048,163
8%, 11/15/01 4,583,000 4,812,837
6 1/4%, 8/15/02 858,000 839,166
5 5/8%, 9/15/03 7,271,000 6,871,968
5.89%, 8/15/05 1,390,000 1,296,948
U.S. Department of Housing and
Urban Development government
guaranteed participation
certificates Series 1996-A:
6.59%, 8/1/00 620,000 619,709
6.67%, 8/1/01 3,600,000 3,597,696
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 123,505,828
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $249,455,319) 248,164,446
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 21.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 8.5%
5 1/2%, 5/1/98 91,434 90,194
6%, 2/1/98 to 5/1/98 274,579 274,066
6 1/4%, 1/1/03 1,470,290 1,446,942
6 1/2%, 4/1/98 to 5/1/08 1,434,736 1,413,456
7%, 5/1/01 to 6/1/01 715,038 717,876
7 1/2%, 11/1/12 2,208,072 2,215,645
8%, 9/1/07 to 12/1/09 3,140,158 3,231,529
8 1/2%, 5/1/06 to 5/1/17 2,942,531 3,052,792
9%, 12/1/07 to 3/1/22 2,397,886 2,537,824
9 1/2%, 1/1/17 to 2/1/23 4,479,223 4,827,614
10%, 1/1/09 to 6/1/20 1,204,468 1,312,083
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - CONTINUED
10 1/4%, 12/1/09 $ 45,877 $ 49,596
10 1/2%, 1/1/16 to 5/1/21 3,470,682 3,809,077
11%, 12/1/11 to 1/1/19 95,033 104,501
11 1/2%, 10/1/15 97,668 108,479
12%, 9/1/11 to 11/1/19 169,624 192,562
12 1/4%, 11/1/14 111,282 126,374
12 1/2%, 8/1/10 to 6/1/19 3,077,520 3,541,591
29,052,201
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.8%
5 1/2%, 1/1/09 2,093,639 1,978,489
6%, 10/1/08 10,975,714 10,589,585
6 1/2%, 7/1/00 to 2/1/10 2,139,736 2,118,807
7%, 6/1/00 to 1/1/10 1,844,673 1,846,286
8%, 6/1/02 to 8/1/09 719,092 738,464
8 1/4%, 12/1/01 1,865,034 1,960,691
8 1/2%, 3/1/08 to 9/1/23 2,413,577 2,520,646
9%, 11/1/97 to 8/1/21 3,846,343 4,077,264
9 1/2%, 5/1/09 to 11/1/21 424,266 456,179
10%, 1/1/17 to 1/1/20 1,238,205 1,348,443
10 1/2%, 5/1/10 to 8/1/20 554,673 607,136
11%, 11/1/10 to 6/1/15 2,016,268 2,226,400
11 1/2%, 12/1/00 to 7/1/19 2,596,881 2,892,816
12%, 4/1/15 127,966 144,282
12 1/2%, 3/1/16 194,046 224,024
12 3/4%, 10/1/13 29,154 33,782
33,763,294
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.3%
8 1/2%, 5/15/16 to 4/15/17 468,455 492,890
9%, 1/15/05 to 2/15/17 1,277,370 1,363,973
10%, 11/15/09 to 9/15/19 804,727 876,195
11%, 12/15/09 to 12/15/15 4,344,527 4,815,947
11 1/2%, 12/15/10 to 1/15/16 1,853,816 2,096,471
12%, 1/15/14 to 2/15/16 1,098,763 1,262,876
12 1/2%, 11/15/14 119,114 138,920
13%, 8/15/14 to 11/15/14 231,831 270,005
13 1/2%, 7/15/11 61,411 72,722
11,389,999
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $73,522,169) 74,205,494
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.6%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - 3.6%
Federal Home Loan Mortgage Corporation:
sequential pay Series 1353 Class A,
5 1/2%, 11/15/04 $ 144,133 $ 142,558 planned amortization class:
Series 1511 Class D, 6%, 10/15/04 4,530,000 4,501,688
Series 1722-PC, 6 1/2%, 3/15/12 2,771,583 2,774,182
Federal National Mortgage Association:
planned amortization class:
Series 1993-229 Class PD,
5.60%, 7/25/06 3,000,000 2,925,000
Series 1993-191 Class PE,
5.80%, 9/25/06 2,000,000 1,965,000
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $12,336,387) 12,308,428
CASH EQUIVALENTS - 2.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.54%, dated
5/30/97 due 6/2/97 $ 9,389,333 9,385,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $344,698,875) $ 344,063,368
INCOME TAX INFORMATION
At May 31, 1997, the aggregate cost of investment securities for income tax
purposes was $344,699,420. Net unrealized depreciation aggregated $636,052,
of which $1,567,166 related to appreciated investment securities and
$2,203,218 related to depreciated investment securities.
At November 30, 1996, the fund had a capital loss carryforward of
approximately $22,273,000 of which $14,816,000, $3,288,000 and $4,169,000
will expire on November 30, 2002, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1997 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $9,385,000) $ 344,063,368
(cost $344,698,875) - See accompanying schedule
Cash 445
Receivable for investments sold 232,346
Interest receivable 3,334,317
TOTAL ASSETS 347,630,476
LIABILITIES
Payable for fund shares redeemed $ 266,681
Distributions payable 149,362
Accrued management fee 130,129
Other payables and accrued expenses 3,435
TOTAL LIABILITIES 549,607
NET ASSETS $ 347,080,869
Net Assets consist of:
Paid in capital $ 369,648,801
Undistributed net investment income 476,377
Accumulated undistributed net realized gain (loss) on investments (22,408,802)
Net unrealized appreciation (depreciation) on investments (635,507)
NET ASSETS $ 347,080,869
</TABLE>
NET ASSET VALUE, offering price and redemption price per share $9.34
($347,080,869 (divided by) 37,179,196 shares)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
INVESTMENT INCOME $ 12,381,963
Interest
EXPENSES
Management fee $ 758,686
Non-interested trustees' compensation 3,970
Total expenses before reductions 762,656
Expense reductions (23,500) 739,156
NET INVESTMENT INCOME 11,642,807
REALIZED AND UNREALIZED GAIN (LOSS) (118,175)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on investment securities (5,693,651)
NET GAIN (LOSS) (5,811,826)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,830,981
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1997 1996
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 11,642,807 $ 23,750,194
Net investment income
Net realized gain (loss) (118,175) (4,684,002)
Change in net unrealized appreciation (depreciation) (5,693,651) 113,944
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,830,981 19,180,136
Distributions to shareholders from net investment income (11,696,734) (23,101,706)
Share transactions 80,364,827 93,172,695
Net proceeds from sales of shares
Reinvestment of distributions 10,809,778 21,070,454
Cost of shares redeemed (75,358,898) (121,761,067)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 15,815,707 (7,517,918)
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,949,954 (11,439,488)
NET ASSETS
Beginning of period 337,130,915 348,570,403
End of period (including undistributed net investment income of $476,377 and $558,957,
respectively) $ 347,080,869 $ 337,130,915
OTHER INFORMATION
Shares 8,577,739 9,825,446
Sold
Issued in reinvestment of distributions 1,154,853 2,228,440
Redeemed (8,039,613) (12,867,775)
Net increase (decrease) 1,692,979 (813,889)
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1997
(UNAUDITED) 1996 1995 1994 E 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.500 $ 9.600 $ 9.210 $ 9.890 $ 9.850 $ 9.770
Income from Investment Operations
Net investment income .322 D .641 .669 .597 .654 .721
Net realized and unrealized gain (loss) (.159) (.102) .383 (.665) (.022) .014
Total from investment operations .163 .539 1.052 (.068) .632 .735
Less Distributions
From net investment income (.323) (.639) (.662) (.602) (.592) (.655)
From net realized gain - - - (.010) - -
Total distributions (.323) (.639) (.662) (.612) (.592) (.655)
Net asset value, end of period $ 9.340 $ 9.500 $ 9.600 $ 9.210 $ 9.890 $ 9.850
TOTAL RETURN B, C 1.76% 5.86% 11.79% (.71) 6.53% 7.72%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 347,081 $ 337,131 $ 348,570 $ 339,788 $ 344,935 $ 188,918
Ratio of expenses to average net assets .45% A .42% .45% .45% .45% .45%
F
Ratio of expenses to average net assets after expense .44% A, .41% .45% .45% .45% .45%
reductions G G
Ratio of net investment income to average net assets 6.89% A 6.95% 7.14% 7.06% 7.14% 7.29%
Portfolio turnover rate 169% A 141% 214% 303% 351% 355%
</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 FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S 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 FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1997 (Unaudited)
17. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Institutional Short-Intermediate Government Fund (the 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
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. 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. Short-term securities with
remaining maturities of sixty days or less for which quotations are not
readily available are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
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 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, market discount and losses deferred due
to wash sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which 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.
18. OPERATING POLICIES.
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 for 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.
19. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $284,941,823 and $276,580,924, respectively.
20. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.45% of the fund's average net assets.
21. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the fund's
custodian and transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of the fund's
expenses. During the period, the fund's expenses were reduced by $23,500
under these arrangements.
22. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
19.2% of the total outstanding shares of the fund.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Curtis Hollingsworth, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Richard A. Silver, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
