(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INTERMEDIATE BOND
FUND - CLASS A, CLASS T (FORMERLY CLASS A), AND CLASS B
ANNUAL REPORT
NOVEMBER 30, 1996
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 34 Notes to the financial statements.
REPORT OF INDEPENDENT 40 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 41
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:
Although stocks have managed to post solid returns throughout 1996, signs
of strength in the economy have led to inflation fears, causing some
uncertainty in bond markets so far this year. In 1995, both stock and bond
markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR INTERMEDIATE BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance. 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 NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class A 4.86% 39.85% 109.35%
Advisor Intermediate Bond - Class A 1.45% 35.30% 102.55%
(incl. max. 3.25% sales charge)
Lehman Brothers Intermediate 5.82% 41.47% 116.17%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 42.04% 110.61%
Funds Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you had invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
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 issuers 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 177
mutual funds with similar objectives tracked by Lipper Analytical Services,
Inc. over the past 12 months. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class A 4.86% 6.94% 7.67%
Advisor Intermediate Bond - Class A 1.45% 6.23% 7.31%
(incl. max. 3.25% sales charge)
Lehman Brothers Intermediate 5.82% 7.18% 8.01%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 7.25% 7.72%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' actual (or cumulative)
return and show you what would have happened if Class A shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961219 104857 S00000000000001
FA Intermed Bond -CL A LB Intermediate Govt/Corp
00261 LB007
1986/11/30 9675.00 10000.00
1986/12/31 9719.21 10033.61
1987/01/31 9841.69 10135.51
1987/02/28 9900.93 10187.00
1987/03/31 9854.80 10165.86
1987/04/30 9600.53 9980.22
1987/05/31 9563.94 9957.18
1987/06/30 9691.75 10077.51
1987/07/31 9691.46 10100.55
1987/08/31 9644.36 10074.26
1987/09/30 9485.30 9943.63
1987/10/31 9721.74 10227.65
1987/11/30 9846.80 10292.70
1987/12/31 9944.79 10400.83
1988/01/31 10246.74 10666.97
1988/02/29 10400.15 10785.68
1988/03/31 10319.45 10744.21
1988/04/30 10297.64 10726.33
1988/05/31 10237.26 10678.90
1988/06/30 10426.70 10849.10
1988/07/31 10415.79 10826.06
1988/08/31 10445.27 10842.32
1988/09/30 10638.18 11030.41
1988/10/31 10780.75 11180.28
1988/11/30 10714.18 11084.88
1988/12/31 10724.04 11094.64
1989/01/31 10840.72 11211.18
1989/02/28 10815.04 11164.83
1989/03/31 10857.78 11213.07
1989/04/30 11040.42 11437.21
1989/05/31 11248.05 11664.32
1989/06/30 11522.11 11958.37
1989/07/31 11765.87 12203.91
1989/08/31 11606.97 12046.18
1989/09/30 11661.76 12103.10
1989/10/31 11905.08 12358.94
1989/11/30 12003.00 12477.10
1989/12/31 12022.79 12511.25
1990/01/31 11903.22 12431.03
1990/02/28 11942.37 12476.29
1990/03/31 11925.67 12492.55
1990/04/30 11848.57 12449.18
1990/05/31 12129.99 12289.28
1990/06/30 12292.16 12893.11
1990/07/31 12456.27 13071.98
1990/08/31 12352.29 13018.32
1990/09/30 12443.60 13118.87
1990/10/31 12560.87 13271.18
1990/11/30 12778.30 13006.67
1990/12/31 12974.09 13656.84
1991/01/31 13070.54 13795.33
1991/02/28 13175.36 13905.63
1991/03/31 13258.84 14000.22
1991/04/30 13406.72 14152.80
1991/05/31 13478.24 14239.80
1991/06/30 13482.29 14249.82
1991/07/31 13633.92 14408.64
1991/08/31 13920.15 14683.72
1991/09/30 14178.70 14936.31
1991/10/31 14346.48 15106.78
1991/11/30 14483.74 15280.23
1991/12/31 14940.66 15653.42
1992/01/31 14749.47 15511.68
1992/02/29 14787.73 15572.93
1992/03/31 14734.51 15511.68
1992/04/30 14817.30 15648.00
1992/05/31 15088.10 15890.56
1992/06/30 15300.85 16125.81
1992/07/31 15660.98 16446.42
1992/08/31 15805.78 16610.93
1992/09/30 15989.74 16836.41
1992/10/31 15753.76 16617.97
1992/11/30 15793.97 16554.83
1992/12/31 16005.60 16776.52
1993/01/31 16324.62 17102.82
1993/02/28 16650.34 17372.49
1993/03/31 16759.70 17441.60
1993/04/30 16862.61 17581.98
1993/05/31 16874.46 17542.96
1993/06/30 17209.01 17818.31
1993/07/31 17342.29 17861.94
1993/08/31 17723.78 18145.16
1993/09/30 17774.55 18220.50
1993/10/31 17870.25 18269.28
1993/11/30 17767.93 18167.38
1993/12/31 17845.16 18250.58
1994/01/31 18033.63 18453.30
1994/02/28 17685.08 18180.39
1994/03/31 17342.51 17880.37
1994/04/30 17273.56 17758.69
1994/05/31 17213.95 17770.61
1994/06/30 17209.18 17773.05
1994/07/31 17372.49 18028.89
1994/08/31 17370.43 18085.26
1994/09/30 17284.21 17918.86
1994/10/31 17285.26 17916.42
1994/11/30 17334.82 17835.11
1994/12/31 17405.01 17898.26
1995/01/31 17594.20 18199.90
1995/02/28 17811.72 18577.43
1995/03/31 17902.74 18683.67
1995/04/30 18079.24 18914.30
1995/05/31 18520.87 19486.15
1995/06/30 18630.45 19616.78
1995/07/31 18620.49 19619.49
1995/08/31 18769.93 19798.09
1995/09/30 18902.09 19941.46
1995/10/31 19091.81 20163.69
1995/11/30 19315.66 20428.75
1995/12/31 19527.33 20642.85
1996/01/31 19688.72 20820.91
1996/02/29 19445.49 20576.45
1996/03/31 19370.17 20470.49
1996/04/30 19272.28 20398.12
1996/05/31 19248.75 20382.68
1996/06/30 19425.02 20599.22
1996/07/31 19475.92 20660.47
1996/08/31 19508.56 20676.73
1996/09/30 19712.06 20964.82
1996/10/31 20023.92 21335.30
1996/11/29 20254.91 21616.62
IMATRL PRASUN SHR__CHT 19961130 19961219 104901 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Class A on November 30, 1986,
and the current maximum 3.25% sales charge was paid. As the chart shows, by
November 30, 1996, the value of the investment would have grown to $20,255
- - a 102.55% 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 $21,617 - a 116.17% 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>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 1993 1992
Dividend return 6.44% 6.56% 5.46% A 7.80% 8.19%
Capital appreciation return -1.58% 4.87% -7.90% 4.70% 0.86%
Total return 4.86% 11.43% -2.44% 12.50% 9.05%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30, 1996 PAST LIFE OF
MONTH CLASS
Dividends per share 5.14(cents) 15.40(cents)
Annualized dividend rate 5.92% 6.10%
30-day annualized yield n/a -
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 $10.56 over the past month, and
$10.47 over the life of the class, you can compare the class' income over
these two 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. Yield information will be reported once Class A
has a longer, more stable, operating history.
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. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance. The initial offering of Class 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 years and past 10 years total returns would have been lower. Effective
January 1, 1996, the maximum 4.75% sales charge on Class T shares was
reduced to 2.75%.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class T 5.10% 40.17% 109.83%
Advisor Intermediate Bond - Class T 2.21% 36.31% 104.06%
(incl. max. 2.75% sales charge)
Lehman Brothers Intermediate 5.82% 41.47% 116.17%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 42.04% 110.61%
Funds Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you had invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
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 177
mutual funds with similar objectives tracked by Lipper Analytical Services,
Inc. over the past 12 months. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class T 5.10% 6.99% 7.69%
Advisor Intermediate Bond - Class T 2.21% 6.39% 7.39%
(incl. max. 2.75% sales charge)
Lehman Brothers Intermediate 5.82% 7.18% 8.01%
Government/Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 7.25% 7.72%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' actual (or cumulative)
return and show you what would have happened if Class T shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961209 073831 S00000000000001
FA Intermed Bond -CL T LB Intermediate Govt/Corp
00287 LB007
1986/11/30 9725.00 10000.00
1986/12/31 9769.44 10033.61
1987/01/31 9892.55 10135.51
1987/02/28 9952.10 10187.00
1987/03/31 9905.73 10165.86
1987/04/30 9650.14 9980.22
1987/05/31 9613.36 9957.18
1987/06/30 9741.84 10077.51
1987/07/31 9741.55 10100.55
1987/08/31 9694.20 10074.26
1987/09/30 9534.32 9943.63
1987/10/31 9771.98 10227.65
1987/11/30 9897.69 10292.70
1987/12/31 9996.19 10400.83
1988/01/31 10299.70 10666.97
1988/02/29 10453.90 10785.68
1988/03/31 10372.78 10744.21
1988/04/30 10350.86 10726.33
1988/05/31 10290.17 10678.90
1988/06/30 10480.59 10849.10
1988/07/31 10469.62 10826.06
1988/08/31 10499.25 10842.32
1988/09/30 10693.16 11030.41
1988/10/31 10836.46 11180.28
1988/11/30 10769.55 11084.88
1988/12/31 10779.46 11094.64
1989/01/31 10896.74 11211.18
1989/02/28 10870.94 11164.83
1989/03/31 10913.89 11213.07
1989/04/30 11097.48 11437.21
1989/05/31 11306.18 11664.32
1989/06/30 11581.66 11958.37
1989/07/31 11826.67 12203.91
1989/08/31 11666.95 12046.18
1989/09/30 11722.03 12103.10
1989/10/31 11966.61 12358.94
1989/11/30 12065.04 12477.10
1989/12/31 12084.93 12511.25
1990/01/31 11964.73 12431.03
1990/02/28 12004.09 12476.29
1990/03/31 11987.30 12492.55
1990/04/30 11909.80 12449.18
1990/05/31 12192.67 12289.28
1990/06/30 12355.69 12893.11
1990/07/31 12520.65 13071.98
1990/08/31 12416.13 13018.32
1990/09/30 12507.91 13118.87
1990/10/31 12625.78 13271.18
1990/11/30 12844.33 13006.67
1990/12/31 13041.14 13656.84
1991/01/31 13138.09 13795.33
1991/02/28 13243.45 13905.63
1991/03/31 13327.36 14000.22
1991/04/30 13476.01 14152.80
1991/05/31 13547.89 14239.80
1991/06/30 13551.97 14249.82
1991/07/31 13704.38 14408.64
1991/08/31 13992.09 14683.72
1991/09/30 14251.98 14936.31
1991/10/31 14420.62 15106.78
1991/11/30 14558.59 15280.23
1991/12/31 15017.87 15653.42
1992/01/31 14825.70 15511.68
1992/02/29 14864.16 15572.93
1992/03/31 14810.65 15511.68
1992/04/30 14893.88 15648.00
1992/05/31 15166.07 15890.56
1992/06/30 15379.93 16125.81
1992/07/31 15741.92 16446.42
1992/08/31 15887.46 16610.93
1992/09/30 16072.37 16836.41
1992/10/31 15835.17 16617.97
1992/11/30 15875.59 16554.83
1992/12/31 16088.32 16776.52
1993/01/31 16408.98 17102.82
1993/02/28 16736.38 17372.49
1993/03/31 16846.31 17441.60
1993/04/30 16949.75 17581.98
1993/05/31 16961.66 17542.96
1993/06/30 17297.94 17818.31
1993/07/31 17431.92 17861.94
1993/08/31 17815.38 18145.16
1993/09/30 17866.41 18220.50
1993/10/31 17962.60 18269.28
1993/11/30 17859.75 18167.38
1993/12/31 17937.39 18250.58
1994/01/31 18126.82 18453.30
1994/02/28 17776.47 18180.39
1994/03/31 17432.14 17880.37
1994/04/30 17362.83 17758.69
1994/05/31 17302.91 17770.61
1994/06/30 17298.11 17773.05
1994/07/31 17462.27 18028.89
1994/08/31 17460.20 18085.26
1994/09/30 17373.53 17918.86
1994/10/31 17374.59 17916.42
1994/11/30 17424.40 17835.11
1994/12/31 17494.96 17898.26
1995/01/31 17685.13 18199.90
1995/02/28 17903.77 18577.43
1995/03/31 17995.26 18683.67
1995/04/30 18172.67 18914.30
1995/05/31 18616.58 19486.15
1995/06/30 18726.73 19616.78
1995/07/31 18716.72 19619.49
1995/08/31 18866.94 19798.09
1995/09/30 18999.78 19941.46
1995/10/31 19190.48 20163.69
1995/11/30 19415.48 20428.75
1995/12/31 19628.25 20642.85
1996/01/31 19790.47 20820.91
1996/02/29 19545.98 20576.45
1996/03/31 19470.27 20470.49
1996/04/30 19371.88 20398.12
1996/05/31 19348.23 20382.68
1996/06/30 19525.41 20599.22
1996/07/31 19576.57 20660.47
1996/08/31 19609.38 20676.73
1996/09/30 19843.36 20964.82
1996/10/31 20155.86 21335.30
1996/11/29 20406.43 21616.62
IMATRL PRASUN SHR__CHT 19961130 19961209 073834 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Class T on November 30, 1986,
and the current maximum 2.75% sales charge was paid. As the chart shows, by
November 30, 1996, the value of the investment would have grown to $20,406
- - a 104.06% 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 $21,617 - a 116.17% 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>
YEARS ENDED NOVEMBER 30,
1996 1995 1994 1993 1992
Dividend return 6.49% 6.56% 5.46% A 7.80% 8.19%
Capital appreciation return -1.39% 4.87% -7.90% 4.70% 0.86%
Total return 5.10% 11.43% -2.44% 12.50% 9.05%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30,
1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.09(cents) 32.83(cents) 67.42(cents)
Annualized dividend rate 5.86% 6.28% 6.40%
30-day annualized yield 5.17% - -
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 $10.57 over the past month, $10.43
over the past six months, and $10.54 over the past year, you can compare
the class' income over these three periods. The 30-day annualized YIELD is
a standard formula for all bond funds based on the yields of the bonds in
the fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you to compare funds from different companies on an equal basis. The
offering share price used in the calculation of the yield includes the
effect of Class 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. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance.
The initial offering of Class B shares took place on June 30, 1994. Class B
shares bear a .90% 12b-1/shareholder service fee (1.00% prior to January 1,
1996) 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. Effective January 1,
1996, Class B's contingent deferred sales charge is based on a declining
scale that ranges from 3% to 1% on Class B shares redeemed within three
years of purchase. This scale is revised from the previous scale of 4% to
1% on shares redeemed within five years of purchase. Class B's contingent
deferred sales charge included in the past one year, past five years and
past 10 years total return figures are 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
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class B 4.32% 37.42% 105.73%
Advisor Intermediate Bond - Class B 1.36% 37.42% 105.73%
(incl. contingent deferred sales charge)
Lehman Brothers Intermediate Government/ 5.82% 41.47% 116.17%
Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 42.04% 110.61%
Funds Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you had invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
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 177
mutual funds with similar objectives tracked by Lipper Analytical Services,
Inc. over the past 12 months. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond - Class B 4.32% 6.56% 7.48%
Advisor Intermediate Bond - Class B 1.36% 6.56% 7.48%
(incl. contingent deferred sales charge)
Lehman Brothers Intermediate Government/ 5.82% 7.18% 8.01%
Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 7.25% 7.72%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' actual (or cumulative)
return and show you what would have happened if Class B shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961219 105116 S00000000000001
FA Intermed Bond -CL B LB Intermediate Govt/Corp
00687 LB007
1986/11/30 10000.00 10000.00
1986/12/31 10045.69 10033.61
1987/01/31 10172.29 10135.51
1987/02/28 10233.52 10187.00
1987/03/31 10185.84 10165.86
1987/04/30 9923.03 9980.22
1987/05/31 9885.21 9957.18
1987/06/30 10017.31 10077.51
1987/07/31 10017.02 10100.55
1987/08/31 9968.33 10074.26
1987/09/30 9803.93 9943.63
1987/10/31 10048.31 10227.65
1987/11/30 10177.57 10292.70
1987/12/31 10278.86 10400.83
1988/01/31 10590.95 10666.97
1988/02/29 10749.51 10785.68
1988/03/31 10666.09 10744.21
1988/04/30 10643.56 10726.33
1988/05/31 10581.15 10678.90
1988/06/30 10776.95 10849.10
1988/07/31 10765.67 10826.06
1988/08/31 10796.14 10842.32
1988/09/30 10995.54 11030.41
1988/10/31 11142.89 11180.28
1988/11/30 11074.09 11084.88
1988/12/31 11084.27 11094.64
1989/01/31 11204.88 11211.18
1989/02/28 11178.34 11164.83
1989/03/31 11222.51 11213.07
1989/04/30 11411.29 11437.21
1989/05/31 11625.90 11664.32
1989/06/30 11909.16 11958.37
1989/07/31 12161.10 12203.91
1989/08/31 11996.86 12046.18
1989/09/30 12053.50 12103.10
1989/10/31 12305.00 12358.94
1989/11/30 12406.21 12477.10
1989/12/31 12426.66 12511.25
1990/01/31 12303.07 12431.03
1990/02/28 12343.53 12476.29
1990/03/31 12326.27 12492.55
1990/04/30 12246.58 12449.18
1990/05/31 12537.45 12289.28
1990/06/30 12705.08 12893.11
1990/07/31 12874.70 13071.98
1990/08/31 12767.22 13018.32
1990/09/30 12861.60 13118.87
1990/10/31 12982.81 13271.18
1990/11/30 13207.54 13006.67
1990/12/31 13409.91 13656.84
1991/01/31 13509.60 13795.33
1991/02/28 13617.95 13905.63
1991/03/31 13704.22 14000.22
1991/04/30 13857.07 14152.80
1991/05/31 13930.99 14239.80
1991/06/30 13935.19 14249.82
1991/07/31 14091.91 14408.64
1991/08/31 14387.76 14683.72
1991/09/30 14654.99 14936.31
1991/10/31 14828.40 15106.78
1991/11/30 14970.27 15280.23
1991/12/31 15442.54 15653.42
1992/01/31 15244.93 15511.68
1992/02/29 15284.48 15572.93
1992/03/31 15229.47 15511.68
1992/04/30 15315.04 15648.00
1992/05/31 15594.93 15890.56
1992/06/30 15814.84 16125.81
1992/07/31 16187.06 16446.42
1992/08/31 16336.72 16610.93
1992/09/30 16526.86 16836.41
1992/10/31 16282.95 16617.97
1992/11/30 16324.52 16554.83
1992/12/31 16543.26 16776.52
1993/01/31 16872.99 17102.82
1993/02/28 17209.65 17372.49
1993/03/31 17322.69 17441.60
1993/04/30 17429.05 17581.98
1993/05/31 17441.30 17542.96
1993/06/30 17787.09 17818.31
1993/07/31 17924.85 17861.94
1993/08/31 18319.16 18145.16
1993/09/30 18371.63 18220.50
1993/10/31 18470.54 18269.28
1993/11/30 18364.79 18167.38
1993/12/31 18444.61 18250.58
1994/01/31 18639.41 18453.30
1994/02/28 18279.15 18180.39
1994/03/31 17925.08 17880.37
1994/04/30 17853.81 17758.69
1994/05/31 17792.20 17770.61
1994/06/30 17784.70 17773.05
1994/07/31 17934.15 18028.89
1994/08/31 17918.87 18085.26
1994/09/30 17817.69 17918.86
1994/10/31 17788.72 17916.42
1994/11/30 17827.98 17835.11
1994/12/31 17869.94 17898.26
1995/01/31 18052.53 18199.90
1995/02/28 18265.69 18577.43
1995/03/31 18364.55 18683.67
1995/04/30 18516.48 18914.30
1995/05/31 18975.34 19486.15
1995/06/30 19093.54 19616.78
1995/07/31 19054.33 19619.49
1995/08/31 19196.81 19798.09
1995/09/30 19321.77 19941.46
1995/10/31 19505.07 20163.69
1995/11/30 19721.33 20428.75
1995/12/31 19926.91 20642.85
1996/01/31 20063.45 20820.91
1996/02/29 19824.20 20576.45
1996/03/31 19717.43 20470.49
1996/04/30 19624.81 20398.12
1996/05/31 19569.70 20382.68
1996/06/30 19757.55 20599.22
1996/07/31 19778.38 20660.47
1996/08/31 19799.66 20676.73
1996/09/30 20025.62 20964.82
1996/10/31 20349.90 21335.30
1996/11/29 20572.56 21616.62
IMATRL PRASUN SHR__CHT 19961130 19961219 105119 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Class B on November 30, 1986.
As the chart shows, by November 30, 1996, the value of the investment would
have grown to $20,573 - a 105.73% 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 $21,617 - a
116.17% 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
YEARS ENDED NOVEMBER 30,
1996 1995 1994 1993 1992
Dividend return 5.81% 5.74% 5.08% A 7.80% 8.19%
Capital appreciation
return -1.49% 4.88% -7.99 4.70% 0.86%
%
Total return 4.32% 10.62% -2.91 12.50% 9.05%
%
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30,
1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.51(cents) 29.30(cents) 60.38(cents)
Annualized dividend rate 5.20% 5.61% 5.74%
30-day annualized yield 4.65% - -
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 $10.56 over the past month, $10.42
over the past six months, and $10.52 over the past year you can compare the
class' income over these three periods. The 30-day annualized YIELD is a
standard formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. The
offering share price used in the calculation of the yield excludes the
effect of Class B's contingent deferred sales charge. If Fidelity had not
reimbursed certain class expenses during the period shown, the yield would
have been 4.60%.
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
MARKET RECAP
Shifting expectations over the
strength of the economy led to mixed
performance in domestic U.S. bond
markets over the 12 months
ended November 30, 1996. For the
period, the Lehman Brothers
Aggregate Bond Index - a proxy for
the performance of the U.S. taxable
bond market - posted a total return
of 6.07%. Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and caused
the yield on the 30-year bond to rise
to over 7% - a level not seen in
over a year. Bond investors spent
most of the summer anticipating an
increase in short-term interest
rates by the Federal Reserve Board.
However, the Fed stood pat through
the end of November, neither raising
nor lowering rates. After rising in
early 1996 and stabilizing during
much of the spring and summer,
interest rates responded to the Fed's
inaction by falling during much of
October and November.
Mortgage-backed securities
performed favorably relative to other
investment-grade securities, as the
higher, relatively stable interest rate
environment led to diminishing
refinancing activity. To illustrate, the
Salomon Brothers Mortgage Index
outperformed the Lehman
Brothers Aggregate Bond Index by
returning 7.15% during the period.
Investment-grade corporate bonds
also performed competitively, as
income-driven investors continued to
soak up higher yielding products
during the period. The Lehman
Brothers Corporate Bond Index
returned 6.46% during the
12-month period.
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the 12 months that ended November 30, 1996, the fund's Class A
shares provided a return of 4.86%. The fund's Class T and Class B shares
had 12-month returns of 5.10% and 4.32%, respectively. To gauge how the
fund stacked up against its peers, the intermediate investment grade debt
funds average returned 5.38% over the same 12 months, according to Lipper
Analytical Services. For a sense of how the fund performed relative to its
investing marketplace, the Lehman Brothers Intermediate
Government/Corporate Bond Index posted a 12-month return of 5.82%.
Q. CAN YOU ISOLATE THE SPECIFIC FACTORS THAT CONTRIBUTED TO THE FUND'S
PERFORMANCE?
A. There were a couple. The fund's mortgage-backed holdings - particularly
discount 15-year mortgages - turned out to be fruitful investments. These
securities carry relatively low prepayment risk - or the risk that the
homeowner will refinance or pay off the loan before its maturity date.
Mortgage bonds serve as a good alternative to Treasuries. When mortgages or
mortgage bonds are trading cheap, I'll sell a 5-year Treasury and buy some
discount 15-year mortgages. When mortgages richen, as they did in the
summer of 1996, I'll revert back to Treasuries. I was able to effectively
utilize this "back and forth" strategy throughout the period. The other
area that attracted my interest was "put" bonds. These are corporate issues
that give the investor the option to redeem the security at some point
prior to its actual maturity. These types of bonds made positive
contributions to overall performance as well.
Q. CAN YOU GIVE AN EXAMPLE OF A PUT BOND THE FUND OWNS AND THE STRATEGY
BEHIND IT?
A. Sure. Examples always help. The fund holds a position in a 10-year
Philip Morris bond that is "putable" in five years. If interest rates are
higher in five years, we'll exercise the put, get our money back and
reinvest that money at the higher rate level. Conversely, if rates are
lower after five years, we'll hang onto the bonds. Then, instead of having
a bond that is maturing, we'll have a security that has another five years
to maturity. In a fund like this that invests in mortgage securities, put
bonds tend to offset prepayment risk.
Q. WHAT WAS YOUR STRATEGY WITH RESPECT TO CORPORATE BONDS?
A. While my normal strategy would be to overweight corporate bonds relative
to the index, yields on corporates are at historically tight spreads to
Treasuries. The problem was that corporate bonds were overpriced relative
to Treasuries with similar maturities. Corporates were an interesting
story. The business cycle we've seen has been strong: Earnings and cash
flows have been healthy, and merger and acquisition activity has been
favorable. This has already been priced into corporate bonds. While this
business cycle may continue for awhile, but there's probably going to be a
point where corporates lose some of their steam.
Q. WERE THERE ANY INDIVIDUAL HOLDINGS THAT BENEFITED THE FUND? ANY
DISAPPOINTMENTS?
A. One particular issue that comes to mind is the Puerto Rico-based
Banponce Financial, a very large bank with its niche market being its home
region. When I bought these 10-year bonds, the market hadn't yet discovered
this issuer. Investors were busy analyzing banks within the continental
U.S. Yield spreads in this holding have tightened considerably, causing the
bond's price to rise while the market gradually began to realize Banponce's
strength. The fund also realized good performance from its positions in
yankee bonds - bonds issued in the United States and denominated in U.S.
dollars, but issued by foreign entities. Some of the yankee bonds issued by
the Canadian provinces of Quebec and Ontario worked out well. In terms of
disappointments, I could have been a little more aggressive with my
corporate holdings, considering the strength of that sector during the
period. However, capitalizing on that aggressiveness would have been more
luck than the result of a sensible decision.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. The mortgage market is a bit on edge. If interest rates drop
significantly, the stability we've seen there may recede. With corporates,
the fund is in a defensive posture so we'll be in a good position to take
advantage of opportunities when they arise.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks to provide a
high rate of income through
investment primarily in
investment-grade fixed-income
obligations
START DATE: February 2, 1984
SIZE: as of November 30, 1996,
more than $493 million
MANAGER: Kevin Grant, since
1995; manager, Fidelity
Advisor World Limited Term
Bond Fund, since 1995;
joined Fidelity in 1993
(checkmark)
KEVIN GRANT ON INDIVIDUAL
SECTOR STRATEGIES:
MORTGAGES: "Analyzing the
mortgage-backed market is a
very quantitative task. The
key thing we look at is a
security's valuation; we get
pricing and valuation statistics
on a nightly basis for each
security. Once we've whittled
down potential buys, we try to
determine the reasons behind
each individual valuation. Is
the security cheap for a
reason or has the market just
not caught on yet?"
CORPORATES: "Corporates
involve much more credit
analysis than mortgages. I
look for two things with
corporates: The yield on the
security has to be sufficient
compensation given the
assumed risks, and the
company has to be
bondholder friendly, or paying
off debt rather than engaging
in stock buybacks or
acquisition activity. We meet
with company managements
regularly to try to better
understand their business
strategies and effects on
bondholders."
TREASURIES: "In direct
contrast to mortgages and
corporates, there's not much
room for opportunities with
Treasuries. The Treasury
market is a very efficient one.
I typically avoid newly issued
Treasuries and focus instead
on seasoned issues that
might be slightly cheaper
relative to the new issues."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF NOVEMBER 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 71.8 68.3
Aa 6.2 4.4
A 17.5 12.3
Baa 1.9 2.4
TABLE EXCLUDES SHORT TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED
S&P RATINGS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1996
6 MONTHS AGO
Years 5.7 5.8
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 NOVEMBER 30, 1996
6 MONTHS AGO
Years 3.2 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1996 * AS OF MAY 31, 1996 **
Row: 1, Col: 1, Value: 3.6
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 5.2
Row: 1, Col: 4, Value: 20.5
Row: 1, Col: 5, Value: 44.2
Row: 1, Col: 6, Value: 24.5
Corporate bonds 16.9%
U.S. government
and government
agency
obligations 38.4%
Mortgage-backed
securities 28.6%
Foreign government
obligations 2.6%
Other 0.9%
Cash equivalents 12.6%
Corporate bonds 25.5%
U.S. government
and government
agency
obligations 46.2%
Mortgage-backed
securities 20.5%
Foreign government
obligations 4.2%
Other 1.0%
Cash equivalents 2.6%
Row: 1, Col: 1, Value: 12.6
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 3.6
Row: 1, Col: 4, Value: 28.6
Row: 1, Col: 5, Value: 36.4
Row: 1, Col: 6, Value: 16.9
* FOREIGN
INVESTMENTS 7.2%
** FOREIGN
INVESTMENTS 8.4%
INVESTMENTS NOVEMBER 30, 1996
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 25.5%
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 $ 3,012,768
ENERGY - 0.7%
ENERGY SERVICES - 0.7%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (b) 3,160,000 3,225,317
FINANCE - 18.7%
ASSET-BACKED SECURITIES - 5.5%
Capital Equipment Receivables Trust
6.11%, 7/15/99 7,670,000 7,787,409
Chase Manhattan Grantor Trust:
6.61%, 9/15/02 3,759,703 3,804,349
6.76%, 9/15/02 1,409,888 1,424,428
Ford Credit Grantor Trust 5.90%, 10/15/00 3,264,820 3,270,431
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 186,015 186,499
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 437,919 439,421
Sears Credit Account Master Trust II 6 1/2%, 10/15/03 3,400,000
3,443,554
Standard Credit Card Master Trust I:
participation certificate 5 1/2%, 9/7/98 5,000,000 5,010,156
7.65%, 2/15/00 1,200,000 1,219,875
26,586,122
BANKS - 6.7%
ABN Amro Bank NV 6 5/8%, 10/31/01 2,750,000 2,794,523
Banponce Financial Corp.:
6.69%, 9/21/00 2,250,000 2,279,408
6 3/4%, 8/9/01 3,850,000 3,904,632
Citicorp 8.80%, 2/1/00 780,000 783,549
First Security 6 7/8%, 11/15/06 5,000,000 5,031,750
Kansallis-Osake-Pankki 10%, 5/1/02 650,000 752,726
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,242,670
Provident Bank 6 1/8%, 12/15/00 5,000,000 4,971,050
Union Planters National Bank 6.81%, 8/20/01 1,500,000 1,518,750
U.S. Bancorp 7 1/2%, 6/1/26 2,000,000 2,144,980
Wachovia Corp. 6.605%, 10/1/25 5,000,000 5,042,250
32,466,288
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 4.4%
Associates Corp. of North America
6 1/2%, 9/9/98 $ 5,000,000 $ 5,061,050
CIT Group Holdings, Inc. 6 1/4%, 9/30/99 4,560,000 4,605,007
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,656,475
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 103,677
Ford Motor Credit Co.:
8%, 6/15/02 100,000 107,658
7 3/4%, 11/15/02 100,000 106,500
General Electric Capital Corp. 6.94%, 4/13/09 (a) 2,530,000 2,583,737
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,791,075
Secured Finance, Inc. gtd. secured 9.05%, 12/15/04 4,000,000 4,614,240
21,629,419
INSURANCE - 2.1%
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,065,940
SunAmerica, Inc. 6.20%, 10/31/99 9,300,000 9,327,063
10,393,003
TOTAL FINANCE 91,074,832
HEALTH - 0.7%
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 1,420,000 1,435,634
6.73%, 7/15/45 2,000,000 2,116,100
3,551,734
NONDURABLES - 2.4%
TOBACCO - 2.4%
Philip Morris Companies, Inc.:
9 3/4%, 5/1/97 100,000 101,486
6 3/8%, 1/15/98 250,000 251,035
6.95%, 6/1/06 11,000,000 11,284,680
11,637,201
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TECHNOLOGY - 2.1%
COMPUTER SERVICES & SOFTWARE - 1.0%
First Data Corp. 6 5/8%, 4/1/03 $ 5,000,000 $ 5,081,350
ELECTRONICS - 1.1%
Motorola, Inc. 6 1/2%, 9/1/25 5,000,000 5,090,700
TOTAL TECHNOLOGY 10,172,050
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.3%
British Columbia Hydro & Power Authority
yankee 12 1/2%, 1/15/14 940,000 1,095,655
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 157,350
1,253,005
TOTAL NONCONVERTIBLE BONDS
(Cost $121,716,444) 123,926,907
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 46.2%
U.S. TREASURY OBLIGATIONS - 39.3%
5 3/8%, 11/30/97 56,000,000 55,956,320
6 1/8%, 3/31/98 14,100,000 14,210,121
8 7/8%, 2/15/99 10,660,000 11,366,225
9 1/8%, 5/15/99 11,000,000 11,862,840
8%, 8/15/99 69,370,000 73,337,270
5 3/4%, 8/15/03 4,260,000 4,216,079
12 3/4%, 11/15/10 13,998,000 20,290,521
TOTAL U.S. TREASURY OBLIGATIONS 191,239,376
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.9%
Farm Credit System Financial Assistance Corp.
9 3/8%, 7/21/03 1,017,000 1,194,182
Federal Home Loan Bank:
5.77%, 2/3/04 740,000 719,421
7.31%, 6/16/04 3,830,000 4,078,337
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank: - continued
7.38%, 8/5/04 $ 1,930,000 $ 2,062,379
7.70%, 9/20/04 1,250,000 1,360,350
Federal Home Loan Mortgage Corporation
8.115%, 1/31/05 5,460,000 6,076,816
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 342,071 355,861
Series 1994-C, 6.61%, 9/15/99 91,909 92,837
Series 1994-F, 8.187%, 12/15/04 541,184 575,641
Guaranteed Trade Trust Certificates
Series 1994-A (assets of Trust guaranteed by U.S.
Government through Export-Import Bank)
7.39%, 6/26/06 1,373,333 1,437,763
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency)
Class 2-E 9.40%, 5/15/02 1,110,000 1,202,308
Private Export Funding Corp. secured 6.24%,
5/15/02 550,000 553,856
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
8%, 11/15/01 1,740,000 1,886,752
6 1/8%, 3/15/03 680,000 678,456
5 5/8%, 9/15/03 1,920,000 1,867,430
6 5/8%, 2/15/04 140,000 142,778
7 5/8%, 8/15/04 840,000 902,604
5.89%, 8/15/05 2,070,000 2,009,918
U.S. Housing & Urban Development:
participation certificate 8.24%, 8/1/04 1,030,000 1,153,281
6.92%, 8/1/04 5,360,000 5,572,899
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 33,923,869
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $224,497,550) 225,163,245
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 11.1%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.6%
5 1/2%, 12/1/02 to 6/1/03 $ 2,392,689 $ 2,318,660
7%, 11/1/00 to 7/1/01 3,476,624 3,523,315
9 1/2%, 1/1/17 54,596 59,163
10%, 4/1/05 to 8/1/10 473,814 512,262
10 1/4%, 12/1/09 49,283 53,531
10 1/2%, 5/1/21 903,406 1,001,525
11%, 12/1/11 50,445 55,622
11 1/2%, 10/1/15 140,747 158,616
11 3/4%, 10/1/10 135,881 152,103
7,834,797
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.2%
5 1/2%, 5/1/03 to 5/1/26 4,317,036 4,161,682
6%, 5/1/01 to 3/1/11 2,191,710 2,156,639
9 1/2%, 2/1/25 4,528,452 4,908,389
10%, 1/1/20 139,405 152,256
10 1/2%, 7/1/11 to 8/1/20 825,196 909,830
11%, 8/1/15 2,759,035 3,088,078
12 1/2%, 2/1/11 to 4/1/15 120,613 141,661
15,518,535
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.3%
7%, 11/15/22 to 11/15/25 6,161,745 6,154,590
8%, 2/15/02 to 6/15/25 5,180,805 5,370,118
8 1/2%, 4/15/17 to 5/15/26 905,590 956,115
9%, 5/15/16 to 10/15/18 4,253,596 4,585,000
10%, 8/15/18 to 1/15/26 5,393,738 5,946,448
11%, 12/15/09 to 10/15/20 1,625,269 1,842,246
11 1/2%, 3/15/10 to 2/15/19 4,986,132 5,730,771
30,585,288
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $53,051,579) 53,938,620
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 6.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Federal Home Loan Mortgage Corporation:
planned amortization class:
Series 1645 Class ZA, 5 1/2%, 4/15/05 $ 10,500,001 $ 10,286,719
Series 1727 Class D, 6 1/2%, 8/15/14 4,750,000 4,785,625
sequential pay Series 1838 Class A,
6 1/2%, 12/15/02 9,609,440 9,651,481
Federal National Mortgage Association planned amortization
class Series X-188A Class H, 6%, 6/25/07 9,162,500 8,995,743
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $33,634,998) 33,719,568
COMMERCIAL MORTGAGE SECURITIES - 2.5%
CBM Funding Corp. sequential pay Series 1996-1B Class A1,
7.55%, 7/1/99 199,310 202,643
CS First Boston Mortgage Securities Corp.:
Series 1995-AEWI Class A1, 6.665%, 11/25/27 590,368 593,136
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 4,979,688
Equitable Life Assurance Society of the United States
Series 1996-1 Class C1, 7.52%, 5/15/06 (b) 1,000,000 1,042,500
Resolution Trust Corp.:
Series 1994-N2 Class 3, 7 1/2%, 12/15/04 (a) (b) 132,818 132,818
Series 1995-C1 Class A-4A, 6 1/4%, 2/25/27 1,175,370 1,173,901
Structured Asset Securities Corp.:
Series 1995-C4 Class A1A, 6.90%, 6/25/26 1,089,928 1,092,823
Series 1996 Class A-1C, 5.944%, 2/25/28 1,489,000 1,481,555
Wells Fargo Capital Markets Apartment Financing Trust
6.56%, 12/29/05 (b) 1,625,000 1,632,617
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $12,249,671) 12,331,681
FOREIGN GOVERNMENT OBLIGATIONS - 4.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Manitoba Province yankee 6 3/8%, 10/15/99 $ 2,590,000 $ 2,620,277
Ontario Province yankee 7 3/4%, 6/4/02 6,000,000 6,435,120
Quebec Province yankee (a):
6.86%, 4/15/26 5,000,000 5,073,200
7.22%, 7/22/36 6,000,000 6,408,660
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $19,454,035) 20,537,257
SUPRANATIONAL OBLIGATIONS - 1.0%
African Development Bank
8.70%, 5/1/01 (Cost $4,376,880) 4,500,000 4,938,615
CASH EQUIVALENTS - 2.6%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71%, dated
11/29/96 due 12/2/96 $ 12,481,936 12,476,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $481,457,157) $ 487,031,893
LEGEND
1. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $6,033,252 or 1.2% of net
assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 93.8% AAA, AA, A 91.8%
Baa 1.9% BBB 4.4%
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 November 30,1996, the aggregate cost of investment securities for income
tax purposes was $481,639,485. Net unrealized appreciation aggregated
$5,392,408, of which $6,782,618 related to appreciated investment
securities and $1,390,210 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>
NOVEMBER 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 487,031,893
agreements of $12,476,000) (cost $481,457,157) -
See accompanying schedule
Cash 998
Receivable for investments sold 8,382
Interest receivable 7,632,735
Prepaid expenses 15,091
TOTAL ASSETS 494,689,099
LIABILITIES
Payable for fund shares redeemed $ 970
Distributions payable 679,325
Accrued management fee 166,755
Distribution fees payable 68,539
Other payables and accrued expenses 146,040
TOTAL LIABILITIES 1,061,629
NET ASSETS $ 493,627,470
Net Assets consist of:
Paid in capital $ 504,326,185
Distributions in excess of net investment income (2,016,748)
Accumulated undistributed net realized gain (loss) on (14,257,450)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 5,575,483
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 493,627,470
CALCULATION OF MAXIMUM OFFERING PRICE $10.59
CLASS A:
NET ASSET VALUE and redemption price per share
($686,950 (divided by) 64,843 shares)
Maximum offering price per share (100/96.75 of $10.59) $10.95
CLASS B: $10.59
NET ASSET VALUE and offering price per share
($18,972,129 (divided by) 1,790,685 shares) A
CLASS T: $10.61
NET ASSET VALUE and redemption price per share
($262,102,632 (divided by) 24,703,638 shares)
Maximum offering price per share (100/97.25 of $10.61) $10.91
INSTITUTIONAL CLASS: $10.62
NET ASSET VALUE, offering price and redemption price per
share ($211,865,759 (divided by) 19,954,617 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME $ 35,858,335
Interest
EXPENSES
Management fee $ 2,174,162
Transfer agent fees 355
Class A
Class B 43,621
Class T 491,106
Institutional Class 307,012
Distribution fees 153
Class A
Class B 165,116
Class T 637,019
Accounting fees and expenses 198,036
Non-interested trustees' compensation 2,014
Custodian fees and expenses 63,465
Registration fees 11,254
Class A
Class B 24,345
Class T 35,118
Institutional Class 23,492
Audit 39,306
Legal 7,681
Miscellaneous 12,479
Total expenses before reductions 4,235,734
Expense reductions (53,271) 4,182,463
NET INVESTMENT INCOME 31,675,872
REALIZED AND UNREALIZED GAIN (LOSS) (9,733,480)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 2,408,292
investment securities
NET GAIN (LOSS) (7,325,188)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 24,350,684
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 31,675,872 $ 23,985,922
Net investment income
Net realized gain (loss) (9,733,480) 2,071,414
Change in net unrealized appreciation (depreciation) 2,408,292 15,815,741
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 24,350,684 41,873,077
FROM OPERATIONS
Distributions to shareholders (6,183) -
From net investment income
Class A
Class B (1,037,161) (469,092)
Class T (16,284,509) (11,358,854)
Institutional Class (14,341,457) (11,805,144)
TOTAL DISTRIBUTIONS (31,669,310) (23,633,090)
Share transactions - net increase (decrease) 47,816,674 117,745,547
TOTAL INCREASE (DECREASE) IN NET ASSETS 40,498,048 135,985,534
NET ASSETS
Beginning of period 453,129,422 317,143,888
End of period (including distributions in excess $ 493,627,470 $ 453,129,422
of net investment income of $2,016,748 and
$2,113,277, respectively)
FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
NOVEMBER 30,
1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.350
Income from Investment Operations
Net investment income D .159
Net realized and unrealized gain (loss) .235 G
Total from investment operations .394
Less Distributions
From net investment income (.154)
Net asset value, end of period $ 10.590
TOTAL RETURN B, C 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 687
Ratio of expenses to average net assets .90% A,
F
Ratio of net investment income to average net assets 6.45% A
Portfolio turnover rate 200%
</TABLE>
A ANNUALIZED
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO NOVEMBER 30, 1996.
A 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).
A 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 FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED NOVEMBER 30,
1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .597 D .579 .204
Net realized and unrealized gain (loss) (.153) .483 (.178)
Total from investment operations .444 1.062 .026
Less Distributions
From net investment income (.604) (.562) (.187)
From return of capital - - (.019)
Total Distributions (.604) (.562) (.206)
Net asset value, end of period $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 4.32% 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 18,972 $ 15,830 $ 3,156
Ratio of expenses to average net assets 1.66% F 1.70% 1.65% A,
F F
Ratio of net investment income to average net assets 5.69% 5.44% 5.42% A
Portfolio turnover rate 200% 189% 68%
</TABLE>
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
A 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 - CLASS T
YEARS ENDED NOVEMBER 30,
1996 1995 1994 F 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960
of period
Income from Investment
Operations
Net investment income .671 D .649 .609 .785 .170
Net realized and (.147) .491 (.876) .511 (.320)
unrealized gain (loss)
Total from investment .524 1.140 (.267) 1.296 (.150)
operations
Less Distributions
From net investment income (.674) (.640) (.555) (.796) (.170)
From return of capital - - (.058) - -
Total distributions (.674) (.640) (.613) (.796) (.170)
Net asset value, end of period $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640
TOTAL RETURN B, C 5.10% 11.43% (2.44)% 12.50% (1.37)%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 262,103 $ 228,439 $ 141,866 $ 59,184 $ 2,583
(000 omitted)
Ratio of expenses to average .97% .94% 1.02% 1.23% .82%
net assets G G A
Ratio of expenses to average .96% .94% 1.02% 1.23% .82%
net assets after expense H A
reductions
Ratio of net investment income 6.38% 6.20% 6.04% 6.81% 7.67%
A
to average net assets
Portfolio turnover rate 200% 189% 68% 59% 7%
</TABLE>
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO NOVEMBER 30, 1992.
A 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.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED NOVEMBER 30,
1996 1995 1994 C 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550
of period
Income from Investment
Operations
Net investment income .705 B .671 .602 .832 .840
Net realized and (.151) .499 (.833) .531 .102
unrealized gain (loss)
Total from investment .554 1.170 (.231) 1.363 .942
operations
Less Distributions
From net investment income (.704) (.670) (.597) (.843) (.852)
From return of capital - - (.062) - -
Total distributions (.704) (.670) (.659) (.843) (.852)
Net asset value, end of period $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640
TOTAL RETURN A 5.40% 11.73% (2.10)% 13.17% 9.21%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 211,866 $ 208,861 $ 172,122 $ 183,790 $ 160,156
(000 omitted)
Ratio of expenses to average .66% .67% .61% .64% .57%
net assets D
Ratio of net investment income 6.69% 6.47% 6.45% 7.41% 7.96%
to average net assets
Portfolio turnover rate 200% 189% 68% 59% 7%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A 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.
A 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 November 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (formerly Fidelity Advisor Limited
Term 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 B, Class T, 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.
The fund commenced sale of a new Class A of shares on September 3, 1996. On
this date, the original Class A was renamed Class T. 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. 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. 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES. FMR bears all organizational expenses except for
registering and qualifying each class and shares of each class for
distribution under federal and state securities law. These expenses are
borne by each class 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 are declared
separately for each class, while capital gain distributions are declared at
the fund level and allocated to each class on a pro rata basis based on the
number of shares held by each class on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount, capital loss
carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed
net realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences that will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $986,365,004 and $935,122,496, respectively, of which U.S.
government and government agency obligations aggregated $851,017,229 and
$864,447,908, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annual rate of .45% of
average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares (Class A Plan),
Class B shares (Class B Plan), Class T shares (Class T Plan), and
Institutional Class shares (collectively referred to as "the Plans"). Under
the Class A, Class B, and Class T Plans, the fund pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. This fee is based on annual rates of .15%, .90% (of which .65%
represents a distribution fee and .25% represents a shareholder service
fee), and .25% of the average net assets of the Class A, Class B, and Class
T shares, respectively. Prior to January 1, 1996, the fee for Class B was
based on an annual rate of 1.00% (of which .75% represented a distribution
fee and .25% represented a shareholder service fee) of the average net
assets of the Class B shares. For the period, the fund paid FDC $153,
$165,116, and $637,019 under the Class A, Class B and Class T Plans, of
which $153, $45,490, and $637,019, respectively, were paid to securities
dealers, banks and other financial institutions for the distribution of
Class A, Class B, and Class T shares, and providing shareholder support
services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class A, Class B,
Class T, and Institutional Class shares. The Plans also authorize payments
to third parties that assist in the sale of the fund's shares or render
shareholder support services.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
SALES LOAD. FDC receives a front-end sales charge of up to 3.25% and 2.75%
(4.75% prior to January 1, 1996) 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 (five years prior to January 1, 1996). The Class B charge is based
on declining rates which range from 3% to 1% (4% to 1% prior to January 1,
1996) 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.
For the period, FDC received sales charges of $10,944 and $604,408 on sales
of Class A and Class T shares of the fund, of which $9,145 and $503,754
were paid to securities dealers, banks, and other financial institutions.
FDC also received contingent deferred sales charges of $56,925 on Class B
share redemptions from the fund. When Class B shares are sold, FDC pays
commissions from its own resources to dealers through which the sales are
made.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the transfer,
dividend disbursing, and shareholder servicing agent for the fund's Class A
, Class B, and Institutional Class shares, while State Street Bank and
Trust Company (State Street) (collectively, with FIIOC, referred to as the
Transfer Agents) acts in that capacity for the fund's Class T shares. The
Transfer Agents receive account fees and asset-based fees that vary
according to account size and type of account of the shareholders of the
respective classes of the fund. With respect to the Class T shares, State
Street has delegated certain transfer, dividend disbursing, and shareholder
services to FIIOC for which FIIOC receives its allocable share of all such
fees. FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements. For the period, the transfer agent fees
were equivalent to annual rates of .35%, .24%, .19%, and .14% of the
average net assets of Class A, Class B, Class T, and Institutional Class,
respectively.
Effective January 1, 1997, FIIOC will replace State Street as the transfer
agent for the fund's Class T shares.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for each class.
(I) CLASS A. For the period, this expense limitation was .90% of average
net assets and the reimbursement reduced expenses by $13,138.
(II) CLASS B. Effective January 1, 1996, the expense limitation changed
from an annual rate of 1.75% to 1.65% of average net assets and the
reimbursement reduced expenses by $23,635.
(III) CLASS T. For the period, this expense limitation was 1.00% of average
net assets.
(IV) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets.
In addition, the fund has entered into an arrangement with its custodian
whereby interest earned on uninvested cash balances was used to offset a
portion of expenses. During the period, the fund's custodian fees were
reduced by $16,498 under the custodian arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEARS ENDED YEARS ENDED YEARS ENDED YEARS ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 A 1995 1996 A 1995
CLASS A 72,448 - $ 756,142 $ -
Shares sold
Reinvestment of distributions 475 - 4,998 -
Shares redeemed (8,080) - (84,516) -
Net increase (decrease) 64,843 - $ 676,624 $ -
CLASS B 1,114,235 1,500,134 $ 11,808,349 $ 15,796,386
Shares sold
Reinvestment of distributions 76,373 34,530 803,087 365,409
Shares redeemed (872,302) (370,104) (9,227,658) (3,899,854)
Net increase (decrease) 318,306 1,164,560 $ 3,383,778 $ 12,261,941
CLASS T 14,999,140 13,972,712 $ 158,724,547 $ 146,736,790
Shares sold
Reinvestment of distributions 1,411,416 976,867 14,860,075 10,311,030
Shares redeemed (12,931,481) (7,555,004) (136,183,619) (79,370,108)
Net increase (decrease) 3,479,075 7,394,575 $ 37,401,003 $ 77,677,712
INSTITUTIONAL CLASS 9,022,232 10,574,426 $ 95,376,649 $ 111,078,304
Shares sold
Reinvestment of distributions 561,358 373,768 5,915,605 3,947,462
Shares redeemed (9,022,616) (8,321,232) (94,936,985) (87,219,872)
Net increase (decrease) 560,974 2,626,962 $ 6,355,269 $ 27,805,894
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders
of Fidelity Advisor Intermediate Bond Fund (formerly Fidelity Advisor
Limited Term Bond Fund):
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Advisor Intermediate Bond Fund
(formerly Fidelity Advisor Limited Term Bond Fund), including the schedule
of portfolio investments, as of November 30, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights of Class A, Class B, Class T and Institutional Class
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Advisor Intermediate Bond Fund as
of November 30, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights of Class A, Class B, Class
T and Institutional Class for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 15, 1997
DISTRIBUTIONS
A total of 44.99% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.)
Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Kevin E. Grant, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Fidelity Investments Institutional Operations Company
Boston, MA - Class A and Class B
State Street Bank and Trust Company
Boston, MA - Class T
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 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
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
NOVEMBER 30, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and
liabilities, operations, and changes
in net assets, as well as financial
highlights.
NOTES 26 Notes to the financial statements.
REPORT OF INDEPENDENT 32 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 33
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:
Although stocks have managed to post solid returns throughout 1996, signs
of strength in the economy have led to inflation fears, causing some
uncertainty in bond markets so far this year. In 1995, both stock and bond
markets posted strong results, while the year before, stocks posted
below-average returns and bonds had one of the worst years in history.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving
for a college education, enables you to weather these ups and downs in a
long-term fund, which has higher potential returns. An intermediate-length
fund could be appropriate if your investment horizon is two to four years,
and a short-term bond fund could be the right choice if you need your money
in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR INTERMEDIATE BOND FUND - 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. A class' total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at income to
measure performance. If Fidelity had not reimbursed certain class expenses,
the past five years and past 10 years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond Fund - 5.40% 42.50% 113.33%
Institutional Class
Lehman Brothers Intermediate Government/ 5.82% 41.47% 116.17%
Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 42.04% 110.61%
Funds Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five years, or
10 years. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Institutional Class' returns to those of the Lehman
Brothers Intermediate Government/Corporate Bond Index - 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 177 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. over the past 12 months. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Intermediate Bond Fund - 5.40% 7.34% 7.87%
Institutional Class
Lehman Brothers Intermediate Government/ 5.82% 7.18% 8.01%
Corporate Bond Index
Intermediate Investment Grade Debt 5.38% 7.25% 7.72%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class shares' actual (or
cumulative) return and show you what would have happened if Institutional
Class shares had performed at a constant rate each year.
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19961130 19961209 073625 S00000000000001
FA Intermed Bond -CL I LB Intermediate Govt/Corp
00087 LB007
1986/11/30 10000.00 10000.00
1986/12/31 10045.69 10033.61
1987/01/31 10172.29 10135.51
1987/02/28 10233.52 10187.00
1987/03/31 10185.84 10165.86
1987/04/30 9923.03 9980.22
1987/05/31 9885.21 9957.18
1987/06/30 10017.31 10077.51
1987/07/31 10017.02 10100.55
1987/08/31 9968.33 10074.26
1987/09/30 9803.93 9943.63
1987/10/31 10048.31 10227.65
1987/11/30 10177.57 10292.70
1987/12/31 10278.86 10400.83
1988/01/31 10590.95 10666.97
1988/02/29 10749.51 10785.68
1988/03/31 10666.09 10744.21
1988/04/30 10643.56 10726.33
1988/05/31 10581.15 10678.90
1988/06/30 10776.95 10849.10
1988/07/31 10765.67 10826.06
1988/08/31 10796.14 10842.32
1988/09/30 10995.54 11030.41
1988/10/31 11142.89 11180.28
1988/11/30 11074.09 11084.88
1988/12/31 11084.27 11094.64
1989/01/31 11204.88 11211.18
1989/02/28 11178.34 11164.83
1989/03/31 11222.51 11213.07
1989/04/30 11411.29 11437.21
1989/05/31 11625.90 11664.32
1989/06/30 11909.16 11958.37
1989/07/31 12161.10 12203.91
1989/08/31 11996.86 12046.18
1989/09/30 12053.50 12103.10
1989/10/31 12305.00 12358.94
1989/11/30 12406.21 12477.10
1989/12/31 12426.66 12511.25
1990/01/31 12303.07 12431.03
1990/02/28 12343.53 12476.29
1990/03/31 12326.27 12492.55
1990/04/30 12246.58 12449.18
1990/05/31 12537.45 12289.28
1990/06/30 12705.08 12893.11
1990/07/31 12874.70 13071.98
1990/08/31 12767.22 13018.32
1990/09/30 12861.60 13118.87
1990/10/31 12982.81 13271.18
1990/11/30 13207.54 13006.67
1990/12/31 13409.91 13656.84
1991/01/31 13509.60 13795.33
1991/02/28 13617.95 13905.63
1991/03/31 13704.22 14000.22
1991/04/30 13857.07 14152.80
1991/05/31 13930.99 14239.80
1991/06/30 13935.19 14249.82
1991/07/31 14091.91 14408.64
1991/08/31 14387.76 14683.72
1991/09/30 14654.99 14936.31
1991/10/31 14828.40 15106.78
1991/11/30 14970.27 15280.23
1991/12/31 15442.54 15653.42
1992/01/31 15244.93 15511.68
1992/02/29 15284.48 15572.93
1992/03/31 15229.47 15511.68
1992/04/30 15315.04 15648.00
1992/05/31 15594.93 15890.56
1992/06/30 15814.84 16125.81
1992/07/31 16187.06 16446.42
1992/08/31 16336.72 16610.93
1992/09/30 16544.84 16836.41
1992/10/31 16304.54 16617.97
1992/11/30 16349.71 16554.83
1992/12/31 16572.26 16776.52
1993/01/31 16921.60 17102.82
1993/02/28 17247.01 17372.49
1993/03/31 17364.00 17441.60
1993/04/30 17476.43 17581.98
1993/05/31 17497.15 17542.96
1993/06/30 17850.45 17818.31
1993/07/31 18014.83 17861.94
1993/08/31 18420.27 18145.16
1993/09/30 18479.99 18220.50
1993/10/31 18585.90 18269.28
1993/11/30 18503.20 18167.38
1993/12/31 18574.61 18250.58
1994/01/31 18777.63 18453.30
1994/02/28 18402.47 18180.39
1994/03/31 18052.13 17880.37
1994/04/30 18007.38 17758.69
1994/05/31 17960.23 17770.61
1994/06/30 17962.44 17773.05
1994/07/31 18136.94 18028.89
1994/08/31 18139.02 18085.26
1994/09/30 18055.01 17918.86
1994/10/31 18058.97 17916.42
1994/11/30 18114.77 17835.11
1994/12/31 18192.30 17898.26
1995/01/31 18393.35 18199.90
1995/02/28 18606.35 18577.43
1995/03/31 18723.34 18683.67
1995/04/30 18893.77 18914.30
1995/05/31 19377.51 19486.15
1995/06/30 19496.13 19616.78
1995/07/31 19491.11 19619.49
1995/08/31 19652.94 19798.09
1995/09/30 19777.99 19941.46
1995/10/31 20000.54 20163.69
1995/11/30 20240.08 20428.75
1995/12/31 20467.17 20642.85
1996/01/31 20622.15 20820.91
1996/02/29 20391.78 20576.45
1996/03/31 20298.16 20470.49
1996/04/30 20219.19 20398.12
1996/05/31 20179.05 20382.68
1996/06/30 20387.72 20599.22
1996/07/31 20446.06 20660.47
1996/08/31 20465.84 20676.73
1996/09/30 20734.91 20964.82
1996/10/31 21066.37 21335.30
1996/11/29 21333.33 21616.62
IMATRL PRASUN SHR__CHT 19961130 19961209 073628 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Advisor Intermediate Bond Fund - Institutional Class on
November 30, 1986. As the chart shows, by November 30, 1996, the value of
the investment would have grown to $21,333 - a 113.33% 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
$21,617 - a 116.17% 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
YEARS ENDED NOVEMBER 30,
1996 1995 1994 1993 1992
Dividend return 6.79% 6.86% 5.87% A 8.28% 8.36%
Capital appreciation return -1.39% 4.87% -7.97% 4.89% 0.85%
Total return 5.40% 11.73% -2.10% 13.17% 9.21%
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or capital gains are
reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30,
1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.36(cents) 34.36(cents) 70.44(cents)
Annualized dividend rate 6.16% 6.56% 6.68%
30-day annualized yield 5.62% - -
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 $10.58 over the past month, $10.44
over the past six months and $10.55 over the past year, you can compare the
class' income over these three periods. The 30-day annualized YIELD is a
standard formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 6.2(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Shifting expectations over the
strength of the economy led to mixed
performance in domestic U.S. bond
markets over the 12 months
ended November 30, 1996. For the
period, the Lehman Brothers
Aggregate Bond Index - a proxy for
the performance of the U.S. taxable
bond market - posted a total return
of 6.07%. Stronger-than-expected
economic signals - including
surprisingly robust employment
reports in February and March -
rattled the bond market and caused
the yield on the 30-year bond to rise
to over 7% - a level not seen in
over a year. Bond investors spent
most of the summer anticipating an
increase in short-term interest
rates by the Federal Reserve Board.
However, the Fed stood pat through
the end of November, neither raising
nor lowering rates. After rising in
early 1996 and stabilizing during
much of the spring and summer,
interest rates responded to the Fed's
inaction by falling during much of
October and November.
Mortgage-backed securities
performed favorably relative to other
investment-grade securities, as the
higher, relatively stable interest rate
environment led to diminishing
refinancing activity. To illustrate, the
Salomon Brothers Mortgage Index
outperformed the Lehman
Brothers Aggregate Bond Index by
returning 7.15% during the period.
Investment-grade corporate bonds
also performed competitively, as
income-driven investors continued to
soak up higher yielding products
during the period. The Lehman
Brothers Corporate Bond Index
returned 6.46% during the
12-month period.
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the 12 months that ended November 30, 1996, the fund's Institutional
Class shares had a return of 5.40%. To gauge how the fund stacked up
against its peers, the intermediate investment grade debt funds average
returned 5.38% over the same 12 months, according to Lipper Analytical
Services. For a sense of how the fund performed relative to its investing
marketplace, the Lehman Brothers Intermediate Government/Corporate Bond
Index posted a 12-month return of 5.82%.
Q. CAN YOU ISOLATE THE SPECIFIC FACTORS THAT CONTRIBUTED TO THE FUND'S
PERFORMANCE?
A. There were a couple. The fund's mortgage-backed holdings - particularly
discount 15-year mortgages - turned out to be fruitful investments. These
securities carry relatively low prepayment risk - or the risk that the
homeowner will refinance or pay off the loan before its maturity date.
Mortgage bonds serve as a good alternative to Treasuries. When mortgages or
mortgage bonds are trading cheap, I'll sell a 5-year Treasury and buy some
discount 15-year mortgages. When mortgages richen, as they did in the
summer of 1996, I'll revert back to Treasuries. I was able to effectively
utilize this "back and forth" strategy throughout the period. The other
area that attracted my interest was "put" bonds. These are corporate issues
that give the investor the option to redeem the security at some point
prior to its actual maturity. These types of bonds made positive
contributions to overall performance as well.
Q. CAN YOU GIVE AN EXAMPLE OF A PUT BOND THE FUND OWNS AND THE STRATEGY
BEHIND IT?
A. Sure. Examples always help. The fund holds a position in a 10-year
Philip Morris bond that is "putable" in five years. If interest rates are
higher in five years, we'll exercise the put, get our money back and
reinvest that money at the higher rate level. Conversely, if rates are
lower after five years, we'll hang onto the bonds. Then, instead of having
a bond that is maturing, we'll have a security that has another five years
to maturity. In a fund like this that invests in mortgage securities, put
bonds tend to offset prepayment risk.
Q. WHAT WAS YOUR STRATEGY WITH RESPECT TO CORPORATE BONDS?
A. While my normal strategy would be to overweight corporate bonds relative
to the index, yields on corporates are at historically tight spreads to
Treasuries. The problem was that corporate bonds were overpriced relative
to Treasuries with similar maturities. Corporates were an interesting
story. The business cycle we've seen has been strong: Earnings and cash
flows have been healthy, and merger and acquisition activity has been
favorable. This has already been priced into corporate bonds. While this
business cycle may continue for awhile, but there's probably going to be a
point where corporates lose some of their steam.
Q. WERE THERE ANY INDIVIDUAL HOLDINGS THAT BENEFITED THE FUND? ANY
DISAPPOINTMENTS?
A. One particular issue that comes to mind is the Puerto Rico-based
Banponce Financial, a very large bank with its niche market being its home
region. When I bought these 10-year bonds, the market hadn't yet discovered
this issuer. Investors were busy analyzing banks within the continental
U.S. Yield spreads in this holding have tightened considerably, causing the
bond's price to rise while the market gradually began to realize Banponce's
strength. The fund also realized good performance from its positions in
yankee bonds - bonds issued in the United States and denominated in U.S.
dollars, but issued by foreign entities. Some of the yankee bonds issued by
the Canadian provinces of Quebec and Ontario worked out well. In terms of
disappointments, I could have been a little more aggressive with my
corporate holdings, considering the strength of that sector during the
period. However, capitalizing on that aggressiveness would have been more
luck than the result of a sensible decision.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. The mortgage market is a bit on edge. If interest rates drop
significantly, the stability we've seen there may recede. With corporates,
the fund is in a defensive posture so we'll be in a good position to take
advantage of opportunities when they arise.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks to provide a
high rate of income through
investment primarily in
investment-grade fixed-income
obligations
START DATE: February 2, 1984
SIZE: as of November 30, 1996,
more than $493 million
MANAGER: Kevin Grant, since
1995; manager, Fidelity
Advisor World Limited Term
Bond Fund, since 1995;
joined Fidelity in 1993
(checkmark)
KEVIN GRANT ON INDIVIDUAL
SECTOR STRATEGIES:
MORTGAGES: "Analyzing the
mortgage-backed market is a
very quantitative task. The
key thing we look at is a
security's valuation; we get
pricing and valuation statistics
on a nightly basis for each
security. Once we've whittled
down potential buys, we try to
determine the reasons behind
each individual valuation. Is
the security cheap for a
reason or has the market just
not caught on yet?"
CORPORATES: "Corporates
involve much more credit
analysis than mortgages. I
look for two things with
corporates: The yield on the
security has to be sufficient
compensation given the
assumed risks, and the
company has to be
bondholder friendly, or paying
off debt rather than engaging
in stock buybacks or
acquisition activity. We meet
with company managements
regularly to try to better
understand their business
strategies and effects on
bondholders."
TREASURIES: "In direct
contrast to mortgages and
corporates, there's not much
room for opportunities with
Treasuries. The Treasury
market is a very efficient one.
I typically avoid newly issued
Treasuries and focus instead
on seasoned issues that
might be slightly cheaper
relative to the new issues."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF NOVEMBER 30, 1996
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 71.8 68.3
Aa 6.2 4.4
A 17.5 12.3
Baa 1.9 2.4
TABLE EXCLUDES SHORT TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED
S&P RATINGS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1996
6 MONTHS AGO
Years 5.7 5.8
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 NOVEMBER 30, 1996
6 MONTHS AGO
Years 3.2 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1996 * AS OF MAY 31, 1996 **
Row: 1, Col: 1, Value: 3.6
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 5.2
Row: 1, Col: 4, Value: 20.5
Row: 1, Col: 5, Value: 44.2
Row: 1, Col: 6, Value: 24.5
Corporate bonds 16.9%
U.S. government
and government
agency
obligations 38.4%
Mortgage-backed
securities 28.6%
Foreign government
obligations 2.6%
Other 0.9%
Cash equivalents 12.6%
Corporate bonds 25.5%
U.S. government
and government
agency
obligations 46.2%
Mortgage-backed
securities 20.5%
Foreign government
obligations 4.2%
Other 1.0%
Cash equivalents 2.6%
Row: 1, Col: 1, Value: 12.6
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 3.6
Row: 1, Col: 4, Value: 28.6
Row: 1, Col: 5, Value: 36.4
Row: 1, Col: 6, Value: 16.9
* FOREIGN
INVESTMENTS 7.2%
** FOREIGN
INVESTMENTS 8.4%
INVESTMENTS NOVEMBER 30, 1996
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 25.5%
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 $ 3,012,768
ENERGY - 0.7%
ENERGY SERVICES - 0.7%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (b) 3,160,000 3,225,317
FINANCE - 18.7%
ASSET-BACKED SECURITIES - 5.5%
Capital Equipment Receivables Trust
6.11%, 7/15/99 7,670,000 7,787,409
Chase Manhattan Grantor Trust:
6.61%, 9/15/02 3,759,703 3,804,349
6.76%, 9/15/02 1,409,888 1,424,428
Ford Credit Grantor Trust 5.90%, 10/15/00 3,264,820 3,270,431
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 186,015 186,499
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 437,919 439,421
Sears Credit Account Master Trust II 6 1/2%, 10/15/03 3,400,000
3,443,554
Standard Credit Card Master Trust I:
participation certificate 5 1/2%, 9/7/98 5,000,000 5,010,156
7.65%, 2/15/00 1,200,000 1,219,875
26,586,122
BANKS - 6.7%
ABN Amro Bank NV 6 5/8%, 10/31/01 2,750,000 2,794,523
Banponce Financial Corp.:
6.69%, 9/21/00 2,250,000 2,279,408
6 3/4%, 8/9/01 3,850,000 3,904,632
Citicorp 8.80%, 2/1/00 780,000 783,549
First Security 6 7/8%, 11/15/06 5,000,000 5,031,750
Kansallis-Osake-Pankki 10%, 5/1/02 650,000 752,726
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,242,670
Provident Bank 6 1/8%, 12/15/00 5,000,000 4,971,050
Union Planters National Bank 6.81%, 8/20/01 1,500,000 1,518,750
U.S. Bancorp 7 1/2%, 6/1/26 2,000,000 2,144,980
Wachovia Corp. 6.605%, 10/1/25 5,000,000 5,042,250
32,466,288
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 4.4%
Associates Corp. of North America
6 1/2%, 9/9/98 $ 5,000,000 $ 5,061,050
CIT Group Holdings, Inc. 6 1/4%, 9/30/99 4,560,000 4,605,007
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,656,475
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 103,677
Ford Motor Credit Co.:
8%, 6/15/02 100,000 107,658
7 3/4%, 11/15/02 100,000 106,500
General Electric Capital Corp. 6.94%, 4/13/09 (a) 2,530,000 2,583,737
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,791,075
Secured Finance, Inc. gtd. secured 9.05%, 12/15/04 4,000,000 4,614,240
21,629,419
INSURANCE - 2.1%
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,065,940
SunAmerica, Inc. 6.20%, 10/31/99 9,300,000 9,327,063
10,393,003
TOTAL FINANCE 91,074,832
HEALTH - 0.7%
MEDICAL FACILITIES MANAGEMENT - 0.7%
Columbia/HCA Healthcare Corp.:
6 1/2%, 3/15/99 1,420,000 1,435,634
6.73%, 7/15/45 2,000,000 2,116,100
3,551,734
NONDURABLES - 2.4%
TOBACCO - 2.4%
Philip Morris Companies, Inc.:
9 3/4%, 5/1/97 100,000 101,486
6 3/8%, 1/15/98 250,000 251,035
6.95%, 6/1/06 11,000,000 11,284,680
11,637,201
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
TECHNOLOGY - 2.1%
COMPUTER SERVICES & SOFTWARE - 1.0%
First Data Corp. 6 5/8%, 4/1/03 $ 5,000,000 $ 5,081,350
ELECTRONICS - 1.1%
Motorola, Inc. 6 1/2%, 9/1/25 5,000,000 5,090,700
TOTAL TECHNOLOGY 10,172,050
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.3%
British Columbia Hydro & Power Authority
yankee 12 1/2%, 1/15/14 940,000 1,095,655
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 157,350
1,253,005
TOTAL NONCONVERTIBLE BONDS
(Cost $121,716,444) 123,926,907
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 46.2%
U.S. TREASURY OBLIGATIONS - 39.3%
5 3/8%, 11/30/97 56,000,000 55,956,320
6 1/8%, 3/31/98 14,100,000 14,210,121
8 7/8%, 2/15/99 10,660,000 11,366,225
9 1/8%, 5/15/99 11,000,000 11,862,840
8%, 8/15/99 69,370,000 73,337,270
5 3/4%, 8/15/03 4,260,000 4,216,079
12 3/4%, 11/15/10 13,998,000 20,290,521
TOTAL U.S. TREASURY OBLIGATIONS 191,239,376
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.9%
Farm Credit System Financial Assistance Corp.
9 3/8%, 7/21/03 1,017,000 1,194,182
Federal Home Loan Bank:
5.77%, 2/3/04 740,000 719,421
7.31%, 6/16/04 3,830,000 4,078,337
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank: - continued
7.38%, 8/5/04 $ 1,930,000 $ 2,062,379
7.70%, 9/20/04 1,250,000 1,360,350
Federal Home Loan Mortgage Corporation
8.115%, 1/31/05 5,460,000 6,076,816
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government
through Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 342,071 355,861
Series 1994-C, 6.61%, 9/15/99 91,909 92,837
Series 1994-F, 8.187%, 12/15/04 541,184 575,641
Guaranteed Trade Trust Certificates
Series 1994-A (assets of Trust guaranteed by U.S.
Government through Export-Import Bank)
7.39%, 6/26/06 1,373,333 1,437,763
Government Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Defense Security Assistance Agency)
Class 2-E 9.40%, 5/15/02 1,110,000 1,202,308
Private Export Funding Corp. secured 6.24%,
5/15/02 550,000 553,856
State of Israel (guaranteed by U.S. Government
through Agency for International Development):
8%, 11/15/01 1,740,000 1,886,752
6 1/8%, 3/15/03 680,000 678,456
5 5/8%, 9/15/03 1,920,000 1,867,430
6 5/8%, 2/15/04 140,000 142,778
7 5/8%, 8/15/04 840,000 902,604
5.89%, 8/15/05 2,070,000 2,009,918
U.S. Housing & Urban Development:
participation certificate 8.24%, 8/1/04 1,030,000 1,153,281
6.92%, 8/1/04 5,360,000 5,572,899
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 33,923,869
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $224,497,550) 225,163,245
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 11.1%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.6%
5 1/2%, 12/1/02 to 6/1/03 $ 2,392,689 $ 2,318,660
7%, 11/1/00 to 7/1/01 3,476,624 3,523,315
9 1/2%, 1/1/17 54,596 59,163
10%, 4/1/05 to 8/1/10 473,814 512,262
10 1/4%, 12/1/09 49,283 53,531
10 1/2%, 5/1/21 903,406 1,001,525
11%, 12/1/11 50,445 55,622
11 1/2%, 10/1/15 140,747 158,616
11 3/4%, 10/1/10 135,881 152,103
7,834,797
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.2%
5 1/2%, 5/1/03 to 5/1/26 4,317,036 4,161,682
6%, 5/1/01 to 3/1/11 2,191,710 2,156,639
9 1/2%, 2/1/25 4,528,452 4,908,389
10%, 1/1/20 139,405 152,256
10 1/2%, 7/1/11 to 8/1/20 825,196 909,830
11%, 8/1/15 2,759,035 3,088,078
12 1/2%, 2/1/11 to 4/1/15 120,613 141,661
15,518,535
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.3%
7%, 11/15/22 to 11/15/25 6,161,745 6,154,590
8%, 2/15/02 to 6/15/25 5,180,805 5,370,118
8 1/2%, 4/15/17 to 5/15/26 905,590 956,115
9%, 5/15/16 to 10/15/18 4,253,596 4,585,000
10%, 8/15/18 to 1/15/26 5,393,738 5,946,448
11%, 12/15/09 to 10/15/20 1,625,269 1,842,246
11 1/2%, 3/15/10 to 2/15/19 4,986,132 5,730,771
30,585,288
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $53,051,579) 53,938,620
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 6.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Federal Home Loan Mortgage Corporation:
planned amortization class:
Series 1645 Class ZA, 5 1/2%, 4/15/05 $ 10,500,001 $ 10,286,719
Series 1727 Class D, 6 1/2%, 8/15/14 4,750,000 4,785,625
sequential pay Series 1838 Class A,
6 1/2%, 12/15/02 9,609,440 9,651,481
Federal National Mortgage Association planned amortization
class Series X-188A Class H, 6%, 6/25/07 9,162,500 8,995,743
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $33,634,998) 33,719,568
COMMERCIAL MORTGAGE SECURITIES - 2.5%
CBM Funding Corp. sequential pay Series 1996-1B Class A1,
7.55%, 7/1/99 199,310 202,643
CS First Boston Mortgage Securities Corp.:
Series 1995-AEWI Class A1, 6.665%, 11/25/27 590,368 593,136
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 4,979,688
Equitable Life Assurance Society of the United States
Series 1996-1 Class C1, 7.52%, 5/15/06 (b) 1,000,000 1,042,500
Resolution Trust Corp.:
Series 1994-N2 Class 3, 7 1/2%, 12/15/04 (a) (b) 132,818 132,818
Series 1995-C1 Class A-4A, 6 1/4%, 2/25/27 1,175,370 1,173,901
Structured Asset Securities Corp.:
Series 1995-C4 Class A1A, 6.90%, 6/25/26 1,089,928 1,092,823
Series 1996 Class A-1C, 5.944%, 2/25/28 1,489,000 1,481,555
Wells Fargo Capital Markets Apartment Financing Trust
6.56%, 12/29/05 (b) 1,625,000 1,632,617
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $12,249,671) 12,331,681
FOREIGN GOVERNMENT OBLIGATIONS - 4.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Manitoba Province yankee 6 3/8%, 10/15/99 $ 2,590,000 $ 2,620,277
Ontario Province yankee 7 3/4%, 6/4/02 6,000,000 6,435,120
Quebec Province yankee (a):
6.86%, 4/15/26 5,000,000 5,073,200
7.22%, 7/22/36 6,000,000 6,408,660
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $19,454,035) 20,537,257
SUPRANATIONAL OBLIGATIONS - 1.0%
African Development Bank
8.70%, 5/1/01 (Cost $4,376,880) 4,500,000 4,938,615
CASH EQUIVALENTS - 2.6%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71%, dated
11/29/96 due 12/2/96 $ 12,481,936 12,476,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $481,457,157) $ 487,031,893
LEGEND
3. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
4. 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 $6,033,252 or 1.2% of net
assets.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 93.8% AAA, AA, A 91.8%
Baa 1.9% BBB 4.4%
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 November 30,1996, the aggregate cost of investment securities for income
tax purposes was $481,639,485. Net unrealized appreciation aggregated
$5,392,408, of which $6,782,618 related to appreciated investment
securities and $1,390,210 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>
NOVEMBER 30, 1996
ASSETS
Investment in securities, at value (including repurchase $ 487,031,893
agreements of $12,476,000) (cost $481,457,157) -
See accompanying schedule
Cash 998
Receivable for investments sold 8,382
Interest receivable 7,632,735
Prepaid expenses 15,091
TOTAL ASSETS 494,689,099
LIABILITIES
Payable for fund shares redeemed $ 970
Distributions payable 679,325
Accrued management fee 166,755
Distribution fees payable 68,539
Other payables and accrued expenses 146,040
TOTAL LIABILITIES 1,061,629
NET ASSETS $ 493,627,470
Net Assets consist of:
Paid in capital $ 504,326,185
Distributions in excess of net investment income (2,016,748)
Accumulated undistributed net realized gain (loss) on (14,257,450)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 5,575,483
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 493,627,470
CALCULATION OF MAXIMUM OFFERING PRICE $10.59
CLASS A:
NET ASSET VALUE and redemption price per share
($686,950 (divided by) 64,843 shares)
Maximum offering price per share (100/96.75 of $10.59) $10.95
CLASS B: $10.59
NET ASSET VALUE and offering price per share
($18,972,129 (divided by) 1,790,685 shares) A
CLASS T: $10.61
NET ASSET VALUE and redemption price per share
($262,102,632 (divided by) 24,703,638 shares)
Maximum offering price per share (100/97.25 of $10.61) $10.91
INSTITUTIONAL CLASS: $10.62
NET ASSET VALUE, offering price and redemption price per
share ($211,865,759 (divided by) 19,954,617 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME $ 35,858,335
Interest
EXPENSES
Management fee $ 2,174,162
Transfer agent fees 355
Class A
Class B 43,621
Class T 491,106
Institutional Class 307,012
Distribution fees 153
Class A
Class B 165,116
Class T 637,019
Accounting fees and expenses 198,036
Non-interested trustees' compensation 2,014
Custodian fees and expenses 63,465
Registration fees 11,254
Class A
Class B 24,345
Class T 35,118
Institutional Class 23,492
Audit 39,306
Legal 7,681
Miscellaneous 12,479
Total expenses before reductions 4,235,734
Expense reductions (53,271) 4,182,463
NET INVESTMENT INCOME 31,675,872
REALIZED AND UNREALIZED GAIN (LOSS) (9,733,480)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 2,408,292
investment securities
NET GAIN (LOSS) (7,325,188)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 24,350,684
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 31,675,872 $ 23,985,922
Net investment income
Net realized gain (loss) (9,733,480) 2,071,414
Change in net unrealized appreciation (depreciation) 2,408,292 15,815,741
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 24,350,684 41,873,077
FROM OPERATIONS
Distributions to shareholders (6,183) -
From net investment income
Class A
Class B (1,037,161) (469,092)
Class T (16,284,509) (11,358,854)
Institutional Class (14,341,457) (11,805,144)
TOTAL DISTRIBUTIONS (31,669,310) (23,633,090)
Share transactions - net increase (decrease) 47,816,674 117,745,547
TOTAL INCREASE (DECREASE) IN NET ASSETS 40,498,048 135,985,534
NET ASSETS
Beginning of period 453,129,422 317,143,888
End of period (including distributions in excess $ 493,627,470 $ 453,129,422
of net investment income of $2,016,748 and
$2,113,277, respectively)
FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED
NOVEMBER 30,
1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.350
Income from Investment Operations
Net investment income D .159
Net realized and unrealized gain (loss) .235 G
Total from investment operations .394
Less Distributions
From net investment income (.154)
Net asset value, end of period $ 10.590
TOTAL RETURN B, C 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 687
Ratio of expenses to average net assets .90% A,
F
Ratio of net investment income to average net assets 6.45% A
Portfolio turnover rate 200%
</TABLE>
A ANNUALIZED
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A SHARES)
TO NOVEMBER 30, 1996.
A 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).
A 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 FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF
THE INVESTMENTS OF THE FUND.
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED NOVEMBER 30,
1996 1995 1994 E
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.750 $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .597 D .579 .204
Net realized and unrealized gain (loss) (.153) .483 (.178)
Total from investment operations .444 1.062 .026
Less Distributions
From net investment income (.604) (.562) (.187)
From return of capital - - (.019)
Total Distributions (.604) (.562) (.206)
Net asset value, end of period $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 4.32% 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 18,972 $ 15,830 $ 3,156
Ratio of expenses to average net assets 1.66% F 1.70% 1.65% A,
F F
Ratio of net investment income to average net assets 5.69% 5.44% 5.42% A
Portfolio turnover rate 200% 189% 68%
</TABLE>
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
A 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 - CLASS T
YEARS ENDED NOVEMBER 30,
1996 1995 1994 F 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.760 $ 10.260 $ 11.140 $ 10.640 $ 10.960
of period
Income from Investment
Operations
Net investment income .671 D .649 .609 .785 .170
Net realized and (.147) .491 (.876) .511 (.320)
unrealized gain (loss)
Total from investment .524 1.140 (.267) 1.296 (.150)
operations
Less Distributions
From net investment income (.674) (.640) (.555) (.796) (.170)
From return of capital - - (.058) - -
Total distributions (.674) (.640) (.613) (.796) (.170)
Net asset value, end of period $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640
TOTAL RETURN B, C 5.10% 11.43% (2.44)% 12.50% (1.37)%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 262,103 $ 228,439 $ 141,866 $ 59,184 $ 2,583
(000 omitted)
Ratio of expenses to average .97% .94% 1.02% 1.23% .82%
net assets G G A
Ratio of expenses to average .96% .94% 1.02% 1.23% .82%
net assets after expense H A
reductions
Ratio of net investment income 6.38% 6.20% 6.04% 6.81% 7.67%
A
to average net assets
Portfolio turnover rate 200% 189% 68% 59% 7%
</TABLE>
A ANNUALIZED
A 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).
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO NOVEMBER 30, 1992.
A 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.
A FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
A FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED NOVEMBER 30,
1996 1995 1994 C 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.770 $ 10.270 $ 11.160 $ 10.640 $ 10.550
of period
Income from Investment
Operations
Net investment income .705 B .671 .602 .832 .840
Net realized and (.151) .499 (.833) .531 .102
unrealized gain (loss)
Total from investment .554 1.170 (.231) 1.363 .942
operations
Less Distributions
From net investment income (.704) (.670) (.597) (.843) (.852)
From return of capital - - (.062) - -
Total distributions (.704) (.670) (.659) (.843) (.852)
Net asset value, end of period $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640
TOTAL RETURN A 5.40% 11.73% (2.10)% 13.17% 9.21%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 211,866 $ 208,861 $ 172,122 $ 183,790 $ 160,156
(000 omitted)
Ratio of expenses to average .66% .67% .61% .64% .57%
net assets D
Ratio of net investment income 6.69% 6.47% 6.45% 7.41% 7.96%
to average net assets
Portfolio turnover rate 200% 189% 68% 59% 7%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
A NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
A 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.
A 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 November 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (formerly Fidelity Advisor Limited
Term 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 B, Class T, 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.
The fund commenced sale of a new Class A of shares on September 3, 1996. On
this date, the original Class A was renamed Class T. 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. 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. 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PREPAID EXPENSES. FMR bears all organizational expenses except for
registering and qualifying each class and shares of each class for
distribution under federal and state securities law. These expenses are
borne by each class 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 are declared
separately for each class, while capital gain distributions are declared at
the fund level and allocated to each class on a pro rata basis based on the
number of shares held by each class on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount, capital loss
carryforwards and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed
net realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences that will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $986,365,004 and $935,122,496, respectively, of which U.S.
government and government agency obligations aggregated $851,017,229 and
$864,447,908, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annual rate of .45% of
average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate distribution plans with respect to
the fund's Class A shares (Class A Plan),
Class B shares (Class B Plan), Class T shares (Class T Plan), and
Institutional Class shares (collectively referred to as "the Plans"). Under
the Class A, Class B, and Class T Plans, the fund pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution and
service fee. This fee is based on annual rates of .15%, .90% (of which .65%
represents a distribution fee and .25% represents a shareholder service
fee), and .25% of the average net assets of the Class A, Class B, and Class
T shares, respectively. Prior to January 1, 1996, the fee for Class B was
based on an annual rate of 1.00% (of which .75% represented a distribution
fee and .25% represented a shareholder service fee) of the average net
assets of the Class B shares. For the period, the fund paid FDC $153,
$165,116, and $637,019 under the Class A, Class B and Class T Plans, of
which $153, $45,490, and $637,019, respectively, were paid to securities
dealers, banks and other financial institutions for the distribution of
Class A, Class B, and Class T shares, and providing shareholder support
services.
Under the Plans, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's Class A, Class B,
Class T, and Institutional Class shares. The Plans also authorize payments
to third parties that assist in the sale of the fund's shares or render
shareholder support services.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
SALES LOAD. FDC receives a front-end sales charge of up to 3.25% and 2.75%
(4.75% prior to January 1, 1996) 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 (five years prior to January 1, 1996). The Class B charge is based
on declining rates which range from 3% to 1% (4% to 1% prior to January 1,
1996) 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.
For the period, FDC received sales charges of $10,944 and $604,408 on sales
of Class A and Class T shares of the fund, of which $9,145 and $503,754
were paid to securities dealers, banks, and other financial institutions.
FDC also received contingent deferred sales charges of $56,925 on Class B
share redemptions from the fund. When Class B shares are sold, FDC pays
commissions from its own resources to dealers through which the sales are
made.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the transfer,
dividend disbursing, and shareholder servicing agent for the fund's Class A
, Class B, and Institutional Class shares, while State Street Bank and
Trust Company (State Street) (collectively, with FIIOC, referred to as the
Transfer Agents) acts in that capacity for the fund's Class T shares. The
Transfer Agents receive account fees and asset-based fees that vary
according to account size and type of account of the shareholders of the
respective classes of the fund. With respect to the Class T shares, State
Street has delegated certain transfer, dividend disbursing, and shareholder
services to FIIOC for which FIIOC receives its allocable share of all such
fees. FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements. For the period, the transfer agent fees
were equivalent to annual rates of .35%, .24%, .19%, and .14% of the
average net assets of Class A, Class B, Class T, and Institutional Class,
respectively.
Effective January 1, 1997, FIIOC will replace State Street as the transfer
agent for the fund's Class T shares.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) above the
following annual rates of average net assets for each class.
(I) CLASS A. For the period, this expense limitation was .90% of average
net assets and the reimbursement reduced expenses by $13,138.
(II) CLASS B. Effective January 1, 1996, the expense limitation changed
from an annual rate of 1.75% to 1.65% of average net assets and the
reimbursement reduced expenses by $23,635.
(III) CLASS T. For the period, this expense limitation was 1.00% of average
net assets.
(IV) INSTITUTIONAL CLASS. For the period, this expense limitation was .75%
of average net assets.
In addition, the fund has entered into an arrangement with its custodian
whereby interest earned on uninvested cash balances was used to offset a
portion of expenses. During the period, the fund's custodian fees were
reduced by $16,498 under the custodian arrangement.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEARS ENDED YEARS ENDED YEARS ENDED YEARS ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 A 1995 1996 A 1995
CLASS A 72,448 - $ 756,142 $ -
Shares sold
Reinvestment of distributions 475 - 4,998 -
Shares redeemed (8,080) - (84,516) -
Net increase (decrease) 64,843 - $ 676,624 $ -
CLASS B 1,114,235 1,500,134 $ 11,808,349 $ 15,796,386
Shares sold
Reinvestment of distributions 76,373 34,530 803,087 365,409
Shares redeemed (872,302) (370,104) (9,227,658) (3,899,854)
Net increase (decrease) 318,306 1,164,560 $ 3,383,778 $ 12,261,941
CLASS T 14,999,140 13,972,712 $ 158,724,547 $ 146,736,790
Shares sold
Reinvestment of distributions 1,411,416 976,867 14,860,075 10,311,030
Shares redeemed (12,931,481) (7,555,004) (136,183,619) (79,370,108)
Net increase (decrease) 3,479,075 7,394,575 $ 37,401,003 $ 77,677,712
INSTITUTIONAL CLASS 9,022,232 10,574,426 $ 95,376,649 $ 111,078,304
Shares sold
Reinvestment of distributions 561,358 373,768 5,915,605 3,947,462
Shares redeemed (9,022,616) (8,321,232) (94,936,985) (87,219,872)
Net increase (decrease) 560,974 2,626,962 $ 6,355,269 $ 27,805,894
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders
of Fidelity Advisor Intermediate Bond Fund (formerly Fidelity Advisor
Limited Term Bond Fund):
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Advisor Intermediate Bond Fund
(formerly Fidelity Advisor Limited Term Bond Fund), including the schedule
of portfolio investments, as of November 30, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights of Class A, Class B, Class T and Institutional Class
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Advisor Intermediate Bond Fund as
of November 30, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights of Class A, Class B, Class
T and Institutional Class for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 15, 1997
DISTRIBUTIONS
A total of 44.99% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.)
Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Fred L. Henning, Jr., Vice President
Kevin E. Grant, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
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 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
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY
REAL ESTATE HIGH INCOME
FUND
ANNUAL REPORT
AUGUST 31, 1993
CONTENTS
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PERFORMANCE 3 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 5 THE MANAGER'S REVIEW OF FUND PERFORMANCE,
STRATEGY AND OUTLOOK.
INVESTMENTS 6 A COMPLETE LIST OF THE FUND'S INVESTMENTS WITH
THEIR MARKET VALUES.
FINANCIAL STATEMENTS 8 STATEMENTS OF ASSETS AND LIABILITIES, OPERATIONS,
AND CHANGES IN NET ASSETS, AS WELL AS FINANCIAL
HIGHLIGHTS.
NOTES 10 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT ACCOUNTANTS 12 THE AUDITORS' OPINION.
DISTRIBUTIONS 13
</TABLE>
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 THE FUND, INCLUDING CHARGES AND EXPENSES, CALL JEFF
GANDEL AT 617-563-6414 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU
INVEST OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
REAL ESTATE HIGH INCOME
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's 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. Each
performance figure includes changes in share price, plus reinvestment of
any dividends (income) and capital gains (the profits the fund earns when
it sells securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 LIFE OF
YEAR FUND
Real Estate High Income 18.71% 42.84%
Merrill Lynch High Yield Master Index 11.99% 31.91%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, or since the fund started on
January 5, 1995. For example, if you invested $1,000 in a fund that had a
5% return over the past year, the value of your investment would be $1,050.
You can compare the fund's return to the performance of the Merrill Lynch
High Yield Master Index - a market capitalization weighted index of all
domestic and yankee high-yield bonds. Issues included in the index have
maturities of at least one year and have a credit rating lower than
BBB-/Baa3, but are not in default. This benchmark includes reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 LIFE OF
YEAR FUND
Real Estate High Income 18.71% 20.56%
Merrill Lynch High Yield Master Index 11.99% 15.63%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$100,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19961130 19961211 121807 S00000000000001
Real Estate High Inc ML High Yield Master
00671 ML002
1995/01/05 100000.00 100000.00
1995/01/31 100918.56 101216.68
1995/02/28 104093.12 104374.76
1995/03/31 105430.21 105827.31
1995/04/30 107058.44 108305.10
1995/05/31 111364.63 111688.80
1995/06/30 112854.47 112541.88
1995/07/31 113387.98 113828.48
1995/08/31 115807.97 114519.33
1995/09/30 117769.89 115829.55
1995/10/31 118684.60 116650.61
1995/11/30 120329.56 117789.28
1995/12/31 121432.24 119680.03
1996/01/31 122861.39 121570.15
1996/02/29 122234.55 121753.20
1996/03/31 122094.38 121422.53
1996/04/30 123181.86 121477.54
1996/05/31 123858.23 122353.61
1996/06/30 126275.58 123088.59
1996/07/31 127320.62 123924.26
1996/08/31 127913.11 125204.02
1996/09/30 132066.15 127890.35
1996/10/31 138261.78 129291.93
1996/11/29 142842.15 131905.85
IMATRL PRASUN SHR__CHT 19961130 19961211 121808 R00000000000026
Let's say hypothetically that $100,000 was invested in Fidelity Real Estate
High Income Fund on January 5, 1995, when the fund started. As the chart
shows, by November 30, 1996, the value of the investment would have grown
to $142,842 - a 42.84% increase on the initial investment. For comparison,
look at how the Merrill Lynch High Yield Master Index did over the same
period. With dividends reinvested, the same $100,000 investment would have
grown to $131,906 - a 31.91% 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
NOVEMBER 30, JANUARY 5, 1995
1996 (COMMENCEMENT
OF OPERATIONS) TO
NOVEMBER 30,
1995
Dividend return 9.74% 9.93%
Capital appreciation return 8.97% 10.40%
Total return 18.71% 20.33%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. 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 gains are
reinvested.
DIVIDENDS
PERIODS ENDED NOVEMBER 30,
1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 8.26(cents) 48.57(cents) 92.96(cents)
Annualized dividend rate 8.60% 8.74% 8.47%
30-day annualized yield 10.80% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $11.69 over
the past month, $11.09 over the past six months and $10.97 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all 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 Mark Snyderman, Portfolio Manager of Fidelity Real Estate
High Income Fund
Q. HOW DID THE FUND PERFORM, MARK?
A. The fund turned in a great performance. For the 12-month period ending
November 30, 1996, the fund had a return of 18.71%. The Merrill Lynch High
Yield Master Index, which is comprised of comparable credit risk-rated
securities, compiled a return of 11.99% over the same time period.
Q. TO WHAT DO YOU ATTRIBUTE THE FUND'S STRONG SHOWING?
A. There were two positive developments during the period that bolstered
the fund's performance. First, some of the fund's biggest positions saw
their credit quality improve and the market began to recognize their value.
Second, the fixed-income market's participation in real estate-related
issues broadened. As a result, the fund benefited from both credit spread
tightening within the sector and from its own underlying investments.
Q. WHAT SPECIFIC FACTORS PLAYED A ROLE IN THE CREDIT IMPROVEMENT YOU
MENTIONED?
A. The value of underlying real estate properties continued to increase
gradually and, in some securities, more of the underlying loans were paid
off. It also helped that there were more funds readily available to
borrowers choosing to pay off the loans. When the loans are paid off, it
means you're no longer in danger of realizing a loss on that loan. The
market took this into account, as reflected by the narrowing credit spreads
we saw during the period.
Q. DURING THE PERIOD, FIXED-INCOME INVESTORS PAID PARTICULARLY CLOSE
ATTENTION TO THE FEDERAL RESERVE BOARD AND THE POTENTIAL FOR INTEREST RATE
MOVEMENTS. HOW DID THIS AFFECT YOUR MANAGEMENT STYLE?
A. Since I cannot predict the direction of rates, I don't spend much time
trying. Just like any other bond fund, when interest rates go up, we'll
lose some value. But my real focus is on credit analysis. That's the key.
Over any given cycle, the fund's performance will be based on our credit
decisions. The interest rate environment over the past 12 months was fairly
normal, but the real surprise was how much the fund's credit improved.
Going into the period, I would have expected the amount of credit
improvement realized by the portfolio to be spread out over two years.
Q. WHAT CHARACTERISTICS CAN MAKE A SECURITY A WELCOME ADDITION TO THE
PORTFOLIO?
A. When I'm poring over opportunities, I'm mostly looking for advantageous
credit situations - where the market doesn't appreciate an issue's current
or potential credit status. By engaging in a step-by-step credit research
process, we try to find securities that have superior credit potential
unrecognized by the market. If our research pays off, we should eventually
realize some price appreciation.
Q. HOW DID THE FUND'S HOLDINGS IN RTC BONDS PERFORM?
A. The fund's holdings in bonds issued by the former Resolution Trust Corp.
(RTC) - a U.S. government agency created to merge or close insolvent
savings and loans institutions - were strong contributors. When I first
started buying RTCs, the market was a bit leery toward them. In the past
year or so, however, the market has reached a consensus that these are good
credits after all.
Q. WHICH INDIVIDUAL HOLDINGS HAD AN IMPACT ON PERFORMANCE?
A. One of our biggest wins came from a series of BB-rated New England
commercial mortgage securitization bonds. I began buying these bonds right
around the time the fund started - January 1995 - and I've since sold them
for some nice gains. Another favorable showing came from the fund's RTC
issues.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. I doubt we'll see such strong performance relative to the index again.
The credit wins most likely will be more dispersed going forward as well.
That being said, I think there's still some value in the real estate debt
securities market and I'm optimistic that our work will produce good,
relative gains.
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: to provide high current income by
investing primarily in commercial
mortgage-backed securities, with an emphasis
on lower-quality securities
START DATE: January 5, 1995
SIZE: as of November 30, 1996, more than $57
million
MANAGER: Mark Snyderman, since inception;
joined Fidelity in 1994
(checkmark)
INVESTMENTS NOVEMBER 30, 1996
Showing Percentage of Total Value of Investment in Securities
REAL ESTATE LOANS - 1.6%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
WCI Communities LP 17%,
7/24/98 (d) (Cost $987,446) - $ 1,000,000 $ 1,000,000
U.S. TREASURY OBLIGATIONS - 0.3%
U.S. Treasury Bill, yield at date of purchase
5.1253%, 3/6/97 (h)
(Cost $162,090) - 165,000 162,844
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.4%
PRIVATE SPONSOR - 0.4%
DLJ Mortgage Acceptance Corp.
Series 1996-T-D Class D,
6.8822%, 9/29/23 (e)(f)
(Cost 244,349) - 1,169,166 238,531
COMMERCIAL MORTGAGE SECURITIES - 77.0%
ACP Mortgage LP floater Series F,
7.3987%, 2/28/28 (e)(f) B 1,837,487 1,574,487
American Southwest Financial
Securities Series 1994-C2
Class B2, 12.8046%, 12/25/01
(e)(f) - 2,000,000 1,955,000
CBA Mortgage Corp. Series 1993-C1
Class E, 7.7732%, 12/25/03
(e)(f) Ba2 3,000,000 2,658,750
CS First Boston Mortgage Securities
Corp. Series 1994-CFB1 Class E,
7.7485%, 1/25/28 (e)(f) Ba2 3,290,278 2,792,623
Merrill Lynch Mortgage Investments,
Inc. Series 1994 Class M1-E,
8.0830%, 6/25/22 (e)(f) Ba2 3,500,000 3,166,953
Meritor Mortgage Security Corp.
Series 1987-1 Class B, 9.40%,
2/1/00 (b)(e) - 12,919,000 2,160,057
Morgan Stanley Capital One,
Inc. Series 1996-MBL1
Class E, 8.661%,
5/25/21 (e) - 1,272,463 1,168,678
Nomura Asset Securities Corp.
Series 1993-1 Class B3, 6.68%,
12/15/03 (e) B 3,300,000 2,628,141
Oregon Commercial Mortgage, Inc.
Series 1995 Class E, 9.8161%,
6/25/26 (e)(f) BB 3,000,000 2,780,156
Penn Mutual Life Insurance Co. (The)
Series 1996-PML (e):
Class L, 7.90%, 11/15/26 - 2,500,000 1,096,500
Class M, 7.90%, 11/15/26 - 5,862,000 1,211,089
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
Phoenix Real Estate Securities, Inc.
Series 1993, Class D-1, 8 1/4%,
11/25/23 (e) Ba2 $ 3,500,000 $ 3,269,219
Resolution Trust Corp.:
floater Series 1991-M2 Class A1,
7.1656%, 9/25/20 (f) Ba3 3,582,575 2,507,802
sequential pay Series 1994-C1
Class F, 8%, 6/25/26 B 4,207,579 3,869,658
Series 1994-C2 Class G,
8%, 4/25/25 B 4,115,476 3,809,388
Series 1995-C1 Class F,
6.90%, 2/25/27 B1 - -
Series 1995-C2 Class F,
7%, 5/25/27 B1 3,182,819 2,726,283
SML, Inc. Series 1994-C1 Class C,
9.20%, 9/18/99 (d) - 1,600,000 1,064,000
Structured Asset Securities Corp.:
Series 1992-M1 Class C, 7.05%
11/25/02 B2 3,200,000 2,744,000
Series 1993-C1 Class E, 6.60%,
10/25/24 (e) B 3,250,215 1,266,568
Series 1995-C1 Class E,
7 3/8%, 9/25/24 (e) BB 1,750,000 1,445,391
Series 1996-CFL Class G,
7 3/4%, 2/25/28 (e) - 2,250,000 1,705,781
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $43,442,512) 47,600,524
COMPLEX MORTGAGE SECURITIES - 0.0%
INTEREST ONLY STRIPS - 0.0%
Mortgage Capital Funding, Inc.
Series 1993-C1 Class 2, 3.6056%,
5/25/15 (f)(g)
(Cost 24,576) Aaa 1,619,350 6,073
COMMON STOCKS - 1.7%
SHARES
CONSTRUCTION & REAL ESTATE - 1.7%
REAL ESTATE - 1.1%
Trizec Hahn Corp. (a) 31,400 642,170
REAL ESTATE INVESTMENT TRUSTS - 0.6%
Angeles Mortgage Investment Trust 33,100 388,925
TOTAL COMMON STOCKS
(Cost $715,450) 1,031,095
CASH EQUIVALENTS - 19.0%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71%, dated
11/29/96 due 12/2/96 $ 11,780,603 $ 11,775,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $57,351,423) $ 61,814,067
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
75 U.S. Treasury Note
Futures Contracts March 97 $ 8,364,844 $ (19,430)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 13.5%
LEGEND
1. Non-income producing
2. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Restricted securities - Investment in securities not registered under
the
Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SML, Inc. Series 1994-C1
Class C, 9.20%, 9/18/99 12/6/95 $1,064,500
WCI Communities LP
17%, 7/24/98 7/24/95 $ 987,446
5. 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 $31,117,924 or 53.9% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. Security represents right to receive monthly interest payments on an
underlying pool of mortgages. Principal shown is the par amount of the
mortgage pool.
8. Security pledged to cover margin requirements for futures contracts. At
the period end, the value of securities pledged amounted to $162,844.
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 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 23.3% BB 11.1%
B 8.8% B 25.3%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 18.8%. FMR has
determined that unrated debt securities that are lower quality account for
18.8% of the total value of investment in securities.
INCOME TAX INFORMATION
At November 30, 1996, the aggregate cost of investment securities for
income tax purposes was $57,351,423. Net unrealized appreciation aggregated
$4,462,644, of which $4,650,107 related to appreciated investment
securities and $187,463 related to depreciated investment securities.
The fund hereby designates approximately $1,770,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
REAL ESTATE HIGH INCOME
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
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ERROR: The Following Table: "Assets" is Too Wide!
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NOVEMBER 30, 1996
ASSETS
Investment in securities, at value (including repurchase agreements of $11,775,000)
(cost $57,351,423) - See $ 61,814,067
accompanying schedule
Receivable for investments sold 2,532,888
Interest receivable 443,106
TOTAL ASSETS 64,790,061
LIABILITIES
Payable to custodian bank $ 6,502,127
Payable for investments purchased 64,736
Distributions payable 437,034
Accrued management fee 38,926
Payable for daily variation on 44,531
futures contracts
Other payables and accrued expenses 6,126
TOTAL LIABILITIES 7,093,480
NET ASSETS $ 57,696,581
Net Assets consist of:
Paid in capital $ 48,849,075
Undistributed net investment income 1,737,396
Accumulated undistributed net realized gain (loss) on investments 2,666,896
Net unrealized appreciation (depreciation) on investments 4,443,214
NET ASSETS, for 4,870,485 shares outstanding $ 57,696,581
NET ASSET VALUE, offering price $11.85
and redemption price per share ($57,696,581 (divided by) 4,870,485 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME $ 74,156
Dividends
Interest 7,270,324
TOTAL INCOME 7,344,480
EXPENSES
Management fee $ 569,089
Transfer agent fees 12,312
Accounting fees and expenses 59,588
Non-interested trustees' compensation 319
Custodian fees and expenses 4,775
Audit 41,613
Legal 1,397
Interest 2,803
Miscellaneous 505
Total expenses before reductions 692,401
Expense reductions (6,549 685,852
)
NET INVESTMENT INCOME 6,658,628
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 4,726,723
Futures contracts (453,320 4,273,403
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 1,313,466
Futures contracts (19,430 1,294,036
)
NET GAIN (LOSS) 5,567,439
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,226,067
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED JANUARY 5, 1995
NOVEMBER 30, (COMMENCEMENT
1996 OF OPERATIONS) TO
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 6,658,628 $ 4,225,415
Net investment income
Net realized gain (loss) 4,273,403 1,654,410
Change in net unrealized appreciation (depreciation) 1,294,036 3,149,178
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 12,226,067 9,029,003
Distributions to shareholders (6,461,049) (4,225,415)
From net investment income
In excess of net investment income - (454,831)
From net realized gain (1,264,154) -
TOTAL DISTRIBUTIONS (7,725,203) (4,680,246)
Share transactions 17,100,001 64,899,998
Net proceeds from sales of shares
Reinvestment of distributions 2,766,715 4,680,246
Cost of shares redeemed (39,100,000) (1,500,000)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (19,233,284) 68,080,244
TOTAL INCREASE (DECREASE) IN NET ASSETS (14,732,420) 72,429,001
NET ASSETS
Beginning of period 72,429,001 -
End of period (including under (over) distribution of net investment income of $1,737,396 and $ 57,696,581 $ 72,429,001
$(31,563), respectively)
OTHER INFORMATION
Shares
Sold 1,569,711 6,269,408
Issued in reinvestment of distributions 254,411 434,154
Redeemed (3,513,383) (143,816)
Net increase (decrease) (1,689,261) 6,559,746
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA YEAR ENDED JANUARY 5, 1995
NOVEMBER 30, (COMMENCEMENT
1996 OF OPERATIONS) TO
NOVEMBER 30, 1995
<ERROR: WIDE TABLE>
ERROR: The Following Table: "Assets" is Too Wide!
Table Width is 182 characters.
<TABLE>
<CAPTION>
<S> <C> <C>
Net asset value, beginning of period $ 11.040 $ 10.000
Income from Investment Operations .950 E .922
Net investment income
Net realized and unrealized gain (loss) .970 1.045
Total from investment operations 1.920 1.967
Less Distributions
From net investment income (.930) (.837)
In excess of net investment income - (.090)
From net realized gain (.180) -
Total distributions (1.110) (.927)
Net asset value, end of period $ 11.850 $ 11.040
TOTAL RETURN B, C 18.71% 20.33%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 57,697 $ 72,429
Ratio of expenses to average net assets .91% 1.09% A
Ratio of expenses to average net assets after expense reductions .90% D 1.09% A
Ratio of net investment income to average net assets 8.72% 9.14% A
Portfolio turnover rate 53% 49% A
1. ANNUALIZED
2. TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
3. THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
4. 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 6 OF NOTES TO
FINANCIAL STATEMENTS).
5. NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Real Estate High Income 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. 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. Securities
(including restricted securities) for which market quotations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. 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 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 and dividend income is recorded on the
ex-dividend date.
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 and futures and options transactions.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). 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.
2. 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 that mature in
60 days or less from the date of purchase 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.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates. Buying
futures tends to increase the fund's exposure to the underlying instrument,
while selling futures tends to decrease the fund's exposure to the
underlying instrument or hedge other fund investments. Futures contracts
involve, to varying degrees, risk of loss in excess of the futures
variation margin reflected in the Statement of Assets and Liabilities. The
underlying face amount at value of any open futures contracts at period
end, is shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the underlying
instrument at period end. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms. Futures contracts are valued at the settlement price established
each day by the board of trade or exchange on which they are traded.
2. OPERATING POLICIES - CONTINUED
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,
restricted securities (excluding 144A issues) amounted to $2,064,000 or
3.6% of net assets.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to invest in
loans and loan participations, trade claims or other receivables. These
investments may include standby financing commitments that obligate the
fund to supply additional cash to the borrower on demand. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary. At the end of the period, these investments
amounted to $1,000,000 or 1.7% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $38,365,465 and $63,613,656, respectively, of which U.S.
government and government agency obligations aggregated $32,084,399 and
$56,017,667, respectively.
The market value of futures contracts opened and closed during the period
amounted to $39,847,270 and $31,955,176, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1100% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .60%. For
the period, the management fee was equivalent to an annual rate of .75% of
average net assets.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives account fees and
asset-based fees that vary according to account size and type of account.
FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements. For the period, the transfer agent fees
were equivalent to an annual rate of .02% of average net assets.
ACCOUNTING FEES. Fidelity Service Co., 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. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the period for
which loans were outstanding amounted to $4,312,000 and $4,248,750,
respectively. The weighted average interest rate was 5.9%.
6. EXPENSE REDUCTIONS.
The fund has entered into arrangements with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $5,118 and $1,431,
respectively, under these arrangements.
7. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
100% of the total outstanding shares of the fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholder of
Fidelity Real Estate High Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Real Estate High Income Fund,
including the schedule of portfolio investments, as of November 30, 1996,
and the related statement of operations for the year then ended and the
statement of changes in net assets and the financial highlights for the
year then ended and for the period from January 5, 1995(commencement of
operations) to November 30, 1995. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV:Fidelity Real Estate High Income Fund as of
November 30, 1996, the results of its operations for the year then ended,
and the statement of changes in net assets and the financial highlights
for the year then ended and for the period from January 5,
1995(commencement of operations) to November 30, 1995 in conformity with
generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 7, 1997
DISTRIBUTIONS
The Board of Trustees of Fidelity Real Estate High Income Fund voted to pay
on December 23, 1996, to shareholders of record at the opening of business
on December 20, 1996, a distribution of $.33 per share derived from capital
gains realized from sales of portfolio securities.
A total of 1% of the dividends distributed during the fiscal year qualifies
for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
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. A fund's total return
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
investments that have grown in value). You can also look at income to
measure performance. If Fidelity had not reimbursed certain fund expenses,
the past one year total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Institutional Short-Intermediate Government Fund 5.86% 34.85% 102.76%
Salomon Brothers Treasury/Agency 1-5 Year Index 5.74% 36.21% 106.76%
Short-Intermediate U.S. Government Funds Average 4.90% 33.57% 98.85%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you 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 89 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. over the past 12 months. These benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Institutional Short-Intermediate Government Fund 5.86% 6.16% 7.32%
Salomon Brothers Treasury/Agency 1-5 Year Index 5.74% 6.38% 7.53%
Short-Intermediate U.S. Government Funds Average 4.90% 5.95% 7.10%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$100,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960930 19961009 151627 S00000000000001
Inst. Short-Interm. Gov. SB Treasury/Agency 1-5 Yr
00464 SB025
1986/11/30 100000.00 100000.00
1986/12/31 100232.45 100214.42
1987/01/31 100984.52 100992.22
1987/02/28 101297.04 101471.52
1987/03/31 101534.48 101324.36
1987/04/30 100733.60 100412.02
1987/05/31 101025.36 100391.00
1987/06/30 102031.83 101505.15
1987/07/31 102646.76 101933.99
1987/08/31 102870.96 101992.85
1987/09/30 102770.50 101273.91
1987/10/31 104186.29 103729.24
1987/11/30 104953.26 104364.10
1987/12/31 105853.42 105175.53
1988/01/31 107712.94 107248.27
1988/02/29 108817.08 108219.47
1988/03/31 108720.94 108198.44
1988/04/30 108785.98 108194.24
1988/05/31 108647.18 107984.02
1988/06/30 109881.56 109278.96
1988/07/31 110106.53 109215.89
1988/08/31 110213.93 109375.66
1988/09/30 111588.10 110842.97
1988/10/31 112484.85 112125.29
1988/11/30 112515.68 111557.70
1988/12/31 112780.97 111688.04
1989/01/31 113748.45 112663.44
1989/02/28 113857.27 112503.68
1989/03/31 114282.70 112953.54
1989/04/30 115949.64 114786.63
1989/05/31 117612.63 116792.10
1989/06/30 119764.15 119369.35
1989/07/31 121326.05 121433.68
1989/08/31 120733.67 120243.85
1989/09/30 121440.29 120920.75
1989/10/31 123395.24 123069.16
1989/11/30 124456.69 124216.94
1989/12/31 125011.52 124662.60
1990/01/31 124905.35 124443.98
1990/02/28 125514.30 124961.11
1990/03/31 126068.16 125284.84
1990/04/30 126226.71 125360.52
1990/05/31 128132.86 127529.96
1990/06/30 129431.74 129035.11
1990/07/31 130900.35 130796.72
1990/08/31 131407.27 130880.81
1990/09/30 132295.69 132083.25
1990/10/31 133615.13 133701.91
1990/11/30 135084.39 135202.86
1990/12/31 136609.16 136981.29
1991/01/31 137853.22 138267.82
1991/02/28 138891.95 138990.96
1991/03/31 139756.92 139920.12
1991/04/30 141155.69 141395.84
1991/05/31 142195.47 142198.86
1991/06/30 142497.86 142581.46
1991/07/31 143853.21 144074.00
1991/08/31 146120.12 146340.13
1991/09/30 147346.73 148375.03
1991/10/31 148929.68 150031.53
1991/11/30 150365.93 151788.94
1991/12/31 154016.64 154677.32
1992/01/31 152549.86 153886.90
1992/02/29 153239.30 154345.18
1992/03/31 153175.74 153958.38
1992/04/30 154315.48 155530.80
1992/05/31 156283.47 157342.86
1992/06/30 158139.65 159381.96
1992/07/31 159806.46 161812.07
1992/08/31 161526.84 163510.62
1992/09/30 163504.68 165453.02
1992/10/31 161646.75 163830.15
1992/11/30 161973.71 163233.13
1992/12/31 163773.02 165078.83
1993/01/31 165722.10 167731.76
1993/02/28 167247.90 169590.08
1993/03/31 168029.81 170178.68
1993/04/30 168658.86 171540.89
1993/05/31 169019.66 170939.67
1993/06/30 170363.41 172789.57
1993/07/31 170873.05 173117.51
1993/08/31 171939.57 175181.84
1993/09/30 172350.90 175787.26
1993/10/31 172624.54 176094.18
1993/11/30 172552.26 175741.01
1993/12/31 173380.52 176451.55
1994/01/31 174965.54 177868.40
1994/02/28 173462.42 176165.65
1994/03/31 170555.17 174383.01
1994/04/30 169677.98 173399.20
1994/05/31 169851.71 173622.03
1994/06/30 170052.87 173907.93
1994/07/31 171933.26 175745.22
1994/08/31 172405.45 176291.78
1994/09/30 171630.57 175345.81
1994/10/31 171952.96 175568.64
1994/11/30 171334.85 174643.68
1994/12/31 171893.89 175089.34
1995/01/31 174332.02 177817.95
1995/02/28 177247.64 180744.17
1995/03/31 178140.11 181732.18
1995/04/30 180124.79 183577.89
1995/05/31 183807.15 187778.01
1995/06/30 184976.34 188883.75
1995/07/31 185419.00 189350.43
1995/08/31 186876.05 190624.34
1995/09/30 187922.13 191620.77
1995/10/31 189839.29 193479.08
1995/11/30 191537.33 195526.59
1995/12/31 193281.61 197170.49
1996/01/31 195048.64 198911.08
1996/02/29 193709.65 197708.64
1996/03/31 193238.13 197077.99
1996/04/30 192899.00 196800.50
1996/05/31 192972.20 197056.97
1996/06/30 194851.67 198738.70
1996/07/31 195524.51 199419.80
1996/08/31 195959.58 199945.34
1996/09/30 198064.73 202102.17
1996/10/31 200844.22 204906.45
1996/11/30 202764.30 206756.36
IMATRL PRASUN SHR__CHT 19960930 19961009 151629 R00000000000123
$100,000 OVER 10 YEARS: Let's say hypothetically that $100,000 was
invested in Fidelity Institutional Short-Intermediate Government Fund on
November 30, 1986. As the chart shows, by November 30, 1996, the value of
the investment would have grown to $202,764 - a 102.76% 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 $206,756 - a 106.76%
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
YEARS ENDED NOVEMBER 30,
1996 1995 1994 1993 1992
Dividend return 6.90% 7.56% 6.07% 6.12% 6.90%
Capital appreciation return -1.04% 4.23% -6.78% 0.41% 0.82%
Total return 5.86% 11.79% -0.71% 6.53% 7.72%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. 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 gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30,
1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.04(cents) 30.65(cents) 63.94(cents)
Annualized dividend rate 6.48% 6.51% 6.77%
30-day annualized yield 5.91% - -
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 $9.47 over the past month, $9.39
over the past six months, and $9.45 over the past 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
MARKET RECAP
Shifting expectations over the strength of the economy
led to mixed performance in domestic U.S. bond
markets over the 12 months ended November 30,
1996. For the period, the Lehman Brothers
Aggregate Bond Index - a proxy for the performance
of the U.S. taxable bond market - posted a total return
of 6.07%. Stronger-than-expected economic signals -
including surprisingly robust employment reports in
February and March - rattled the bond market and
caused the yield on the 30-year bond to rise to over 7%
- - a level not seen in over a year. Bond investors spent
most of the summer anticipating an increase in
short-term interest rates by the Federal Reserve Board.
However, the Fed stood pat through the end of
November, neither raising nor lowering rates. After
rising in early 1996 and stabilizing during much of
the spring and summer, interest rates responded to the
Fed's inaction by falling during much of October and
November. Mortgage-backed securities performed
favorably relative to other investment-grade securities,
as the higher, relatively stable interest rate environment
led to diminishing refinancing activity. To illustrate, the
Salomon Brothers Mortgage Index outperformed the
Lehman Brothers Aggregate Bond Index by returning
7.15% during the period. Investment grade corporate
bonds also performed competitively, as income-driven
investors continued to soak up higher yielding products
during the period. The Lehman Brothers Corporate
Bond Index returned 6.46% during the 12-month
period.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Institutional Short-Intermediate Government Fund
Q. CURT, HOW DID THE FUND PERFORM?
A. The fund did pretty well. For the 12 months that ended on November 30,
1996, the fund returned 5.86%. To measure the fund's performance against
that of its competition, the short-intermediate U.S. government funds
average had a return of 4.90% over the same period, according to Lipper
Analytical Services. The Salomon Brothers Treasury/Agency 1-5 Year Index, a
barometer of the marketplace in which the fund invests, gained 5.74% in
that 12-month span.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. I'd point to three things: a strategy I employed during the period, the
fund's positions in agency-backed and mortgage-backed securities, and
individual security selection. Rather than trying to anticipate interest
rate movements, I managed the fund to have approximately the same
sensitivity to rate fluctuations as the market for 1-5 year government
securities, as reflected by the fund's index. It is my belief that this
strategy benefits the fund through the bond market's ups and downs. The
fund's mortgage positions performed fairly well throughout the period, and
we also saw several positive developments involving agencies.
Q. YOU'VE INCREASED THE FUND'S AGENCY HOLDINGS OVER THE PAST YEAR. WHAT
MADE THIS SECTOR APPEALING?
A. First and foremost, agencies offered the highest probability for
outperformance relative to Treasuries. Yield spreads between agencies and
Treasuries narrowed quite significantly during the period, contributing to
higher yields and an uptick in price appreciation for some of the fund's
agency issues. Among other things, part of this strong agency performance
can be attributed to two specific circumstances. The Financing Corporation
(FICO) - a federal agency established to help resurrect the savings and
loan industry - went through a major restructuring. The market thought
favorably of this rejiggering, and FICO's bonds increased in quality. The
second development involved the Student Loan Marketing Association (Sallie
Mae). Sallie Mae went through a privatization process and its outstanding
bonds were "grandfathered." The government bent over backwards to ensure
that Sallie Mae's bonds would maintain their agency status. These events
were met warmly by the capital markets and resulted in a favorable climate
for agencies.
Q. DO AGENCIES PRESENT MORE RISK THAN TREASURIES?
A. Sure. Occasionally, I'll come across agencies that have a call feature -
that is, the issuer has the right to redeem the security before its stated
maturity date. This takes away some of the investor's control with respect
to that particular holding. Treasuries with 1-5 year maturities do not
typically have this call risk. The other two, less significant areas of
risk are the potential for liquidity problems and credit risk. These rarely
come into play, but call risk is something I try to avoid. With
mortgage-backed issues, prepayment risk can also come into play.
Q. DID MORTGAGE-BACKED SECURITIES PLAY A KEY ROLE IN THE FUND'S
PERFORMANCE?
A. Absolutely. The mortgage market can be a difficult one to navigate and
monitor. Mortgage-backed issues performed relatively well during the period
as yield spreads remained stable. By capturing some of the yield spread
between mortgages and Treasuries, the fund's mortgage-related positions
made positive contributions to performance.
Q. ALONG THE SAME LINES, THE FUND'S POSITIONS IN COLLATERALIZED MORTGAGE
OBLIGATIONS (CMOS) INCREASED. WHAT EXACTLY ARE CMOS AND WHY WERE THEY
APPEALING?
A. CMOs are very complex, so I'll try to keep it as simple as possible.
CMOs are mortgage-backed bonds that separate mortgage pools into different
maturity classes, or "tranches." This is done by applying income - payments
and prepayments of principal and interest - from mortgages in the pool in
the order that the CMOs pay out. The CMOs the fund invests in are typically
backed by government-guaranteed or other top-grade mortgages and often have
AAA ratings. CMOs were offering favorable yield spreads - relative to
Treasuries - during the period and I sought to take advantage.
Q. DO YOU FOLLOW ANY PARTICULAR STRATEGIES WHEN PORING OVER THE
MORTGAGE-BACKED MARKET?
A. Nothing too intricate. I do like to buy "seasoned" or moderately
seasoned mortgage issues as opposed to the newer pools. After 2 1/2 years,
pools are considered to be moderately seasoned. After five to seven years,
pools are considered fully seasoned. The more seasoned a mortgage issue is,
the less likely it is that prepayment will occur.
Q. WERE THERE ANY OTHER TRENDS THAT SPROUTED UP OVER THE COURSE OF THE
PERIOD?
A. An interesting yield spread situation developed between some of the more
established, well-known agencies and those of lesser repute. Yields between
some of the lesser-known agencies, such as the Private Export Funding Corp.
and the Agency for International Development, were trading at wide spreads
relative to old standbys, such as the Federal Farm Credit Bank and Sallie
Mae. As the period came to an end, those spreads had narrowed quite a bit,
to the point where they're almost on top of each other. This tightening
helped the performance of some of the fund's holdings.
Q. WERE THERE ANY INDIVIDUAL BONDS THAT CONTRIBUTED POSITIVELY TO THE
FUND'S RETURN? ANY DISAPPOINTMENTS?
A. With a fund like this where I'm investing mainly in Treasuries and
agencies, it's hard to hit a home run with one security. I'd again point to
my overweighting in mortgage-backed issues relative to the index. Mortgage
bonds issued by both the Federal National Mortgage Association and the
Government National Mortgage Association were positive contributors. The
fund's positions in collateralized mortgage obligations also worked out
well. In terms of negatives, the securities in the portfolio pretty much
performed as I had expected. There weren't too many surprises.
Q. WHAT'S YOUR OUTLOOK?
A. I think the environment will continue to be somewhat non-volatile. In
fact, the market has gone from a fear of rate tightening to expectations of
an easing. In terms of the portfolio, I'll continue to emphasize strong
sector bets and security selection. I think we're on a good path.
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 a high level of current income
in a manner consistent with preserving
principal
START DATE: November 10, 1986
SIZE: as of November 30, 1996, more than
$337 million
MANAGER: Curt Hollingsworth, since 1987;
manager, Spartan Limited Maturity
Government Fund, since 1988; Fidelity
Short-Intermediate Government Fund, since
1991; Spartan Short-Intermediate Government
Fund, since 1992; joined Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON THE MORTGAGE-BACKED AND
AGENCY MARKETS:
"While mortgages and agencies are the main
areas I look to when aiming to improve the
fund's returns, the strategies for each
market are quite different. In seeking to
outperform the fund's benchmark and keep
tracking error - the deviation in return
between the fund and the index - low, I
typically favor non-callable issues. Yield
spreads obviously play a big part in my
decision process, too. With agencies, we've
come up with three selection tiers: 1) bonds
that are explicitly backed by the full faith and
credit of the U.S. government; 2) agency notes,
in which the notes themselves are not directly
backed by the government, but are backed by
other securities that do have that government
support; and 3) the older agencies, such as
Sallie Maes, which only have the implicit
backing of the government. The majority of the
fund's agencies fall into the first two categories.
The mortgage market is a little trickier to
navigate. Unlike the agency market, yield
spreads in the mortgage market do not always
translate into a total return advantage.
Mortgages also can present more risk issues,
particularly in terms of credit quality and
liquidity. There's much more of an art to finding
good mortgage opportunities."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF NOVEMBER 30, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Under 5% 2.3 1.7
5 - 5.99% 6.1 8.1
6 - 6.99% 39.1 33.7
7 - 7.99% 14.0 8.3
8 - 8.99% 19.8 23.0
9 - 9.99% 9.6 15.2
10% and over 8.0 6.4
Zero Coupon Bonds 0.2 0.1
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1996
6 MONTHS AGO
Years 3.4 3.5
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 NOVEMBER 30, 1996
6 MONTHS AGO
Years 2.3 2.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1996 AS OF MAY 31, 1996
U.S. government
agency mortgage-
backed securities 23.9%
U.S. government
and government
agency obligations 71.4%
Collateralized
mortgage obligations
(CMOs) 3.8%
Short-term
investments 0.9%
U.S. government
agency mortgage-
backed securities 28.6%
U.S. government
and government
agency obligations 67.0%
Collateralized
mortgage obligations
(CMOs) 0.9%
Short-term
investments 3.5%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 3.8
Row: 1, Col: 3, Value: 71.0
Row: 1, Col: 4, Value: 23.2
Row: 1, Col: 1, Value: 3.6
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 66.0
Row: 1, Col: 4, Value: 28.4
INVESTMENTS NOVEMBER 30, 1996
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 71.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 37.7%
8 1/2%, 5/15/97 $ 830,000 $ 841,927
8 3/4%, 10/15/97 8,700,000 8,940,642
6 1/8%, 3/31/98 83,490,000 84,142,057
9 1/4%, 8/15/98 8,660,000 9,171,460
8 7/8%, 11/15/98 5,400,000 5,722,326
6 7/8%, 8/31/99 5,680,000 5,849,491
7 3/4%, 12/31/99 10,780,000 11,388,100
6 1/4%, 2/15/03 170,000 173,028
TOTAL U.S. TREASURY OBLIGATIONS 126,229,031
U.S. GOVERNMENT AGENCY OBLIGATIONS - 33.7%
Federal Agricultural Mortgage Corporation:
6.92%, 8/10/00 1,040,000 1,074,445
7.61%, 10/16/00 3,000,000 3,174,330
Federal Home Loan Bank:
8.85%, 6/21/00 940,000 1,028,125
6.17%, 10/17/01 1,000,000 1,006,410
6.20%, 7/17/02 960,000 966,749
Federal Home Loan Mortgage Corporation:
6.40%, 8/1/00 1,000,000 1,016,410
6.55%, 10/2/02 720,000 736,085
Federal National Mortgage Association:
0%, 11/30/99 610,000 510,436
8.90%, 6/12/00 12,970,000 14,198,129
6.33%, 8/11/00 1,240,000 1,254,603
5 1/2%, 2/02/01 1,060,000 1,041,948
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 1,819,000 1,966,030
Class 2-E, 9.40%, 5/15/02 3,240,000 3,509,438
Class T-2, 9 5/8%, 5/15/02 1,414,370 1,529,414
Guaranteed Export Trust Certificates
(assets of Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1993-C, 5.20%, 10/15/04 729,600 706,800
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Series 1993-D, 5.23%, 5/15/05 $ 520,851 $ 502,621
Series 1994-A, 7.12%, 4/15/06 2,137,946 2,224,132
Series 1994-F, 8.187%, 12/15/04 12,534,768 13,332,857
Series 1996-A, 6.55%, 6/15/04 1,091,764 1,112,104
Guaranteed Trade Trust Certificates
(assets of Trust guaranteed by U.S.
Government through Export-Import
Bank):
Series 1992-A, 7.02%, 9/1/04 1,068,000 1,104,053
Series 1993-A, 4.86%, 4/1/98 2,049,000 2,038,755
Series 1994-A, 7.39%, 6/26/06 985,000 1,031,212
Israel Export Trust Certificates
Series 1994-1 (assets of Trust
guaranteed by U.S. Government
through Export-Import Bank)
6.88%, 1/26/03 642,353 656,498
Private Export Funding Corp. secured:
9.10%, 10/30/98 1,100,000 1,165,802
8.40%, 7/31/01 3,550,000 3,888,741
7.30%, 1/31/02 6,645,000 6,996,919
6.24%, 5/15/02 390,000 392,734
5.65%, 3/15/03 1,050,214 1,041,025
5.80%, 2/1/04 1,310,000 1,294,503
6.86%, 4/30/04 1,028,625 1,055,297
State of Israel (guaranteed by U.S.
Government through Agency for
International Development):
7 3/4%, 4/1/98 2,808,372 2,856,142
4 7/8%, 9/15/98 5,750,000 5,671,398
6%, 2/15/99 1,420,000 1,426,191
7 1/8%, 8/15/99 1,522,000 1,571,506
7 3/4%, 11/15/99 10,504,000 11,033,192
8%, 11/15/01 4,583,000 4,969,530
6 1/4%, 8/15/02 858,000 864,966
5 5/8%, 9/15/03 7,271,000 7,071,920
5.89%, 8/15/05 1,390,000 1,349,655
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
U.S. Housing & Urban Development:
6.59%, 8/1/00 $ 620,000 $ 632,567
6.67%, 8/1/01 3,600,000 3,690,756
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 112,694,428
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $235,678,509) 238,923,459
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 23.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.7%
5 1/2%, 5/1/98 91,608 89,861
6%, 2/1/98 to 5/1/98 319,978 318,276
6 1/4%, 1/1/03 1,641,349 1,623,852
6 1/2%, 4/1/98 to 5/1/08 1,560,215 1,559,538
7%, 5/1/01 to 6/1/01 748,369 758,420
7 1/2%, 11/1/12 2,555,904 2,632,249
8%, 9/1/07 to 12/1/09 3,481,992 3,627,356
8 1/2%, 5/1/06 to 5/1/17 3,256,163 3,407,692
9%, 11/1/07 to 3/1/22 2,645,744 2,818,078
9 1/2%, 1/1/17 to 2/1/23 5,011,662 5,424,540
10%, 1/1/09 to 6/1/20 1,344,189 1,467,148
10 1/4%, 12/1/09 48,414 52,588
10 1/2%, 1/1/16 to 5/1/21 3,904,570 4,339,031
11%, 12/1/11 to 1/1/19 110,057 122,184
11 1/2%, 10/1/15 101,082 113,915
12%, 9/1/11 to 11/1/19 181,177 207,817
12 1/4%, 11/1/14 119,553 137,299
12 1/2%, 8/1/10 to 6/1/19 3,377,537 3,938,379
32,638,223
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.3%
5 1/2%, 1/1/09 2,215,606 2,132,520
6%, 10/1/08 to 12/1/08 11,563,437 11,366,396
6 1/2%, 7/1/00 to 2/1/10 2,418,617 2,412,271
7%, 6/1/00 to 1/1/10 2,037,717 2,067,257
PRINCIPAL VALUE
AMOUNT (NOTE 1)
8%, 6/1/02 to 8/1/09 $ 752,205 $ 785,758
8 1/4%, 12/1/01 1,874,977 2,013,258
8 1/2%, 3/1/08 to 9/1/23 2,622,932 2,758,520
9%, 11/1/97 to 8/1/21 4,313,646 4,599,790
9 1/2%, 5/1/09 to 11/1/21 478,254 518,902
10%, 1/1/17 to 1/1/20 1,342,195 1,484,300
10 1/2%, 5/1/10 to 8/1/20 608,970 670,740
11%, 11/1/10 to 6/1/15 2,301,497 2,583,699
11 1/2%, 12/1/00 to 11/1/15 527,683 596,441
12%, 4/1/15 149,156 170,176
12 1/2%, 3/1/16 215,316 252,927
12 3/4%, 10/1/13 29,408 34,471
34,447,426
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.9%
8 1/2%, 5/1/16 to 4/1/17 566,924 601,999
9%, 1/1/05 to 2/1/17 1,456,745 1,568,727
10%, 11/1/09 to 9/1/19 964,063 1,063,026
11%, 12/1/09 to 12/1/15 4,758,106 5,346,944
11 1/2%, 12/1/10 to 1/1/16 2,105,674 2,423,840
12%, 1/1/14 to 2/1/16 1,229,435 1,448,250
12 1/2%, 11/1/14 119,980 142,891
13%, 8/1/14 to 11/1/14 233,524 277,886
13 1/2%, 7/1/11 70,225 85,117
12,958,680
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $78,260,926) 80,044,329
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.8%
U.S. GOVERNMENT AGENCY - 3.8%
Federal Home Loan Mortgage Corporation:
sequential pay Series 1353
Class A, 5 1/2%, 11/15/04 177,487 176,211
planned amortization class:
Series 1511 Class D,
6%, 10/15/04 4,530,000 4,493,194
Series 1722-PC,
6 1/2%, 3/15/12 3,000,000 3,013,125
COLLATERALIZED MORTGAGE OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - CONTINUED
Federal National Mortgage Association
planned amortization class:
Series 1993-229 Class PD,
5.60%, 7/25/06 $ 3,000,000 $ 2,954,055
Series 1993-191 Class PE,
5.80%, 9/25/06 2,000,000 1,990,000
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $12,596,794) 12,626,585
CASH EQUIVALENTS - 0.9%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71%, dated
11/29/96 due 12/2/96
(Cost $2,953,000) $ 2,954,405 2,953,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $329,489,229) $ 334,547,373
INCOME TAX INFORMATION
At November 30, 1996, the aggregate cost of investment securities for
income tax purposes was $329,489,774. Net unrealized appreciation
aggregated $5,057,599, of which $5,571,929 related to appreciated
investment securities and $514,330 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>
NOVEMBER 30, 1996
ASSETS 6. 7.
8.Investment in securities, at value (including repurchase agreements of $2,953,000) (cost 9. $ 334,547,373
$329,489,229) - See accompanying schedule
10.Cash 11. 135,281
12.Receivable for investments sold 13. 293,954
14.Interest receivable 15. 4,460,544
16. TOTAL ASSETS 17. 339,437,152
LIABILITIES 18. 19.
20.Payable for investments purchased $ 2,047,961 21.
22.Distributions payable 132,750 23.
24.Accrued management fee 125,526 25.
26. TOTAL LIABILITIES 27. 2,306,237
28.NET ASSETS 29. $ 337,130,915
30.Net Assets consist of: 31. 32.
33.Paid in capital 34. $ 353,804,441
35.Undistributed net investment income 36. 558,957
37.Accumulated undistributed net realized gain (loss) on investments 38. (22,290,627)
39.Net unrealized appreciation (depreciation) on investments 40. 5,058,144
41.NET ASSETS 42. $ 337,130,915
NET ASSET VALUE, offering price and redemption price per share ($337,130,915 (divided by)
35,486,217 shares) 43. $9.50
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME 45. $ 25,146,179
44.Interest
EXPENSES 46. 47.
48.Management fee $ 1,535,780 49.
50.Non-interested trustees' compensation 1,428 51.
52. Total expenses before reductions 1,537,208 53.
54. Expense reductions (141,223) 1,395,985
55.NET INVESTMENT INCOME 56. 23,750,194
REALIZED AND UNREALIZED GAIN (LOSS) 58. (4,684,002)
57.Net realized gain (loss) on investment securities
59.Change in net unrealized appreciation (depreciation) on investment securities 60. 113,944
61.NET GAIN (LOSS) 62. (4,570,058)
63.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 64. $ 19,180,136
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
65.Operations $ 23,750,194 $ 24,502,089
Net investment income
66. Net realized gain (loss) (4,684,002) (3,161,030)
67. Change in net unrealized appreciation (depreciation) 113,944 16,819,220
68. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 19,180,136 38,160,279
69.Distributions to shareholders (23,101,706) (24,108,710)
From net investment income
Class I
70. Class II - (7,054)
71. TOTAL DISTRIBUTIONS (23,101,706) (24,115,764)
72.Share transactions 93,172,695 116,396,020
Net proceeds from sales of shares
73. Reinvestment of distributions 21,070,454 21,916,510
74. Cost of shares redeemed (121,761,067) (143,673,695)
75.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (7,517,918) (5,361,165)
76. TOTAL INCREASE (DECREASE) IN NET ASSETS (11,439,488) 8,683,350
NET ASSETS 77. 78.
79. Beginning of period 348,570,403 339,887,053
80. End of period (including undistributed net investment income of $558,957 and $484,470, $ 337,130,915 $ 348,570,403
respectively)
OTHER INFORMATION 81. 82.
83.Shares 9,825,446 12,338,047
Sold
84. Issued in reinvestment of distributions 2,228,440 2,322,847
85. Redeemed (12,867,775) (15,250,216)
86. Net increase (decrease) $ (813,889) $ (589,322)
</TABLE>
FINANCIAL HIGHLIGHTS
87. YEARS ENDED NOVEMBER 30,
88. 1996 1995 1994 B 1993 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
89.SELECTED PER-SHARE DATA
90.Net asset value, beginning of period $ 9.600 $ 9.210 $ 9.890 $ 9.850 $ 9.770
91.Income from Investment Operations
92. Net investment income .641 .669 .597 .654 .721
93. Net realized and unrealized gain (loss) (.102) .383 (.665) (.022) .014
94. Total from investment operations .539 1.052 (.068) .632 .735
95.Less Distributions
96. From net investment income (.639) (.662) (.602) (.592) (.655)
97. From net realized gain - - (.010) - -
98. Total distributions (.639) (.662) (.612) (.592) (.655)
99.Net asset value, end of period $ 9.500 $ 9.600 $ 9.210 $ 9.890 $ 9.850
100.TOTAL RETURN A 5.86% 11.79% (.71)% 6.53% 7.72%
101.RATIOS AND SUPPLEMENTAL DATA
102.Net assets, end of period (000 omitted) $ 337,131 $ 348,570 $ 339,788 $ 344,935 $ 188,918
103.Ratio of expenses to average net assets .42% C .45% .45% .45% .45%
104.Ratio of expenses to average net assets after expense .41% D .45% .45% .45% .45%
reductions
105.Ratio of net investment income to average net assets 6.95% 7.14% 7.06% 7.14% 7.29%
106.Portfolio turnover rate 141% 214% 303% 351% 355%
</TABLE>
9. THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
10. 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.
11. 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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
12. 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 November 30, 1996
8. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Institutional Short-Intermediate Government Fund (the fund)
(formerly Fidelity Institutional Short-Intermediate Government
Portfolio-Class I) 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.
Until November 30, 1995, the fund offered Class I and Class II shares. On
November 30, 1995, the sole shareholder of Class II redeemed all of its
outstanding shares and Class II was liquidated. Each class had equal rights
as to assets and voting privileges. Each class had exclusive voting rights
with respect to its distribution plan. Investment income, realized and
unrealized capital gains and losses, and the common expenses of the fund
were 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 differed in its respective distribution fees and expenses.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
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. 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.
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.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). 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.
9. 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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase 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.
10. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $476,075,809 and $494,286,146, respectively.
11. 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.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made to third parties under
the Plan during the period.
12. EXPENSE REDUCTIONS.
FMR agreed to reimburse a portion of the fund's operating expenses. For the
period, this reimbursement reduced expenses by $98,146.
In addition, FMR has entered into arrangements on behalf of the fund with
the fund's custodian and transfer agent whereby interest earned on
uninvested cash balances was used to offset a portion of the fund's
expenses. During the period, the fund's expenses were reduced by $43,077
under these arrangements.
13. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of approximately
20.4% of the total outstanding shares of the fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Institutional Short-Intermediate Government Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Institutional Short-Intermediate
Government Fund, including the schedule of portfolio investments, as of
November 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of
the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Institutional Short-Intermediate
Government Fund as of November 30, 1996, the results of its operations for
the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 15, 1997
DISTRIBUTIONS
A total of 47.47% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
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
Kenneth A. Rathgeber, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
