(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
FIDELITY ADVISOR
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 1998
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 FIVE MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 20 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 29 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 38 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 39
PROXY VOTING RESULTS 40
NOTE TO SHAREHOLDERS: The fiscal year end for Fidelity Advisor
Intermediate Bond Fund recently changed from November 30 to October
31. This change was made in order to align the fund's fiscal year end
with other similar Fidelity Advisor FundsSM.
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:
What a difference one month can make. The stock and bond markets did
an about-face in October, as renewed optimism in many emerging markets
and more encouraging corporate earnings forecasts in the U.S. replaced
the concerns that had shaped the financial markets in recent months.
Equity markets worldwide bounced back strongly, while the major U.S.
bond indexes were off slightly as the flight to safety eased.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR INTERMEDIATE BOND FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
class expenses, the past five year and past 10 year total returns and
dividends would have been lower.
<TABLE>
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CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - INST CL 7.66% 30.54% 117.74%
LB INT GOVT/CORP BOND 9.12% 36.97% 123.83%
SHORT-INTERMEDIATE INVESTMENT GRADE DEBT 6.97% 30.54% 105.48%
FUNDS AVERAGE
</TABLE>
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 had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Institutional Class' returns to
those of the Lehman Brothers Intermediate Government/Corporate Bond
Index - a market value weighted performance benchmark for government
and corporate fixed-rate debt issues with maturities between one and
10 years. To measure how Institutional Class' performance stacked up
against its peers, you can compare it to the short-intermediate
investment grade debt funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past one year average represents a peer group of 94
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - INST CL 7.66% 5.48% 8.09%
LB INT GOVT/CORP BOND 9.12% 6.49% 8.39%
SHORT-INTERMEDIATE INVESTMENT GRADE DEBT 6.97% 5.47% 7.46%
FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative
return and show you what would have happened if Institutional Class
had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Intermed Bond -CL I LB Intermediate Govt/Corp
00087 LB007
1988/10/31 10000.00 10000.00
1988/11/30 9938.25 9914.67
1988/12/31 9947.39 9923.40
1989/01/31 10055.62 10027.63
1989/02/28 10031.81 9986.18
1989/03/31 10071.45 10029.33
1989/04/30 10240.87 10229.80
1989/05/31 10433.46 10432.94
1989/06/30 10687.67 10695.95
1989/07/31 10913.78 10915.57
1989/08/31 10766.38 10774.49
1989/09/30 10817.21 10825.39
1989/10/31 11042.91 11054.23
1989/11/30 11133.74 11159.92
1989/12/31 11152.09 11190.46
1990/01/31 11041.18 11118.71
1990/02/28 11077.49 11159.19
1990/03/31 11062.00 11173.73
1990/04/30 10990.48 11134.95
1990/05/31 11251.52 10991.93
1990/06/30 11401.95 11532.01
1990/07/31 11554.18 11692.00
1990/08/31 11457.73 11644.00
1990/09/30 11542.43 11733.93
1990/10/31 11651.20 11870.17
1990/11/30 11852.88 11633.58
1990/12/31 12034.50 12215.11
1991/01/31 12123.96 12338.98
1991/02/28 12221.19 12437.64
1991/03/31 12298.62 12522.24
1991/04/30 12435.80 12658.72
1991/05/31 12502.13 12736.53
1991/06/30 12505.89 12745.50
1991/07/31 12646.54 12887.55
1991/08/31 12912.05 13133.59
1991/09/30 13151.87 13359.51
1991/10/31 13307.49 13511.99
1991/11/30 13434.82 13667.13
1991/12/31 13858.64 14000.92
1992/01/31 13681.31 13874.14
1992/02/29 13716.80 13928.93
1992/03/31 13667.42 13874.14
1992/04/30 13744.22 13996.07
1992/05/31 13995.41 14213.03
1992/06/30 14192.76 14423.44
1992/07/31 14526.80 14710.20
1992/08/31 14661.11 14857.34
1992/09/30 14847.88 15059.03
1992/10/31 14632.23 14863.65
1992/11/30 14672.77 14807.17
1992/12/31 14872.49 15005.45
1993/01/31 15186.00 15297.31
1993/02/28 15478.03 15538.51
1993/03/31 15583.03 15600.32
1993/04/30 15683.93 15725.89
1993/05/31 15702.52 15690.98
1993/06/30 16019.58 15937.27
1993/07/31 16167.10 15976.29
1993/08/31 16530.96 16229.61
1993/09/30 16584.55 16297.00
1993/10/31 16679.60 16340.63
1993/11/30 16605.39 16249.48
1993/12/31 16669.47 16323.90
1994/01/31 16851.66 16505.22
1994/02/28 16514.98 16261.12
1994/03/31 16200.58 15992.78
1994/04/30 16160.42 15883.94
1994/05/31 16118.11 15894.60
1994/06/30 16120.09 15896.78
1994/07/31 16276.69 16125.62
1994/08/31 16278.56 16176.04
1994/09/30 16203.16 16027.20
1994/10/31 16206.72 16025.02
1994/11/30 16256.80 15952.29
1994/12/31 16326.37 16008.78
1995/01/31 16506.80 16278.57
1995/02/28 16697.95 16616.25
1995/03/31 16802.94 16711.27
1995/04/30 16955.89 16917.56
1995/05/31 17390.01 17429.04
1995/06/30 17496.47 17545.88
1995/07/31 17491.96 17548.30
1995/08/31 17637.20 17708.05
1995/09/30 17749.42 17836.28
1995/10/31 17949.14 18035.05
1995/11/30 18164.12 18272.13
1995/12/31 18367.91 18463.63
1996/01/31 18507.00 18622.89
1996/02/29 18300.25 18404.24
1996/03/31 18216.24 18309.46
1996/04/30 18145.37 18244.73
1996/05/31 18109.34 18230.92
1996/06/30 18296.62 18424.60
1996/07/31 18348.96 18479.38
1996/08/31 18366.71 18493.93
1996/09/30 18608.19 18751.61
1996/10/31 18905.66 19082.98
1996/11/30 19145.23 19334.59
1996/12/31 19047.91 19210.72
1997/01/31 19113.66 19285.39
1997/02/28 19134.31 19322.23
1997/03/31 19019.60 19188.91
1997/04/30 19232.41 19414.35
1997/05/31 19356.62 19575.55
1997/06/30 19532.68 19754.20
1997/07/31 19894.80 20156.11
1997/08/31 19823.22 20054.78
1997/09/30 20050.48 20287.98
1997/10/31 20225.62 20512.69
1997/11/30 20267.25 20558.02
1997/12/31 20425.86 20722.37
1998/01/31 20678.72 20993.87
1998/02/28 20673.23 20977.87
1998/03/31 20755.12 21045.26
1998/04/30 20833.83 21150.70
1998/05/31 20994.06 21305.84
1998/06/30 21113.89 21441.83
1998/07/31 21176.54 21517.47
1998/08/31 21417.49 21855.62
1998/09/30 21815.55 22404.67
1998/10/30 21774.30 22382.61
IMATRL PRASUN SHR__CHT 19981031 19981111 155142 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Institutional
Class on October 31, 1988. As the chart shows, by October 31, 1998,
the value of the investment would have grown to $21,774 - a 117.74%
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 and capital gains, if any, reinvested,
the same $10,000 investment would have grown to $22,383 - a 123.83%
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 OCTOBER 31,
1998 1997 1996 1995 1994
DIVIDEND RETURNS 5.96% 6.41% 6.83% 6.77% 5.86%
CAPITAL RETURNS 1.70% 0.57% -1.50% 3.98% -8.70%
TOTAL RETURNS 7.66% 6.98% 5.33% 10.75% -2.84%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.95(CENTS) 30.32(CENTS) 60.85(CENTS)
ANNUALIZED DIVIDEND RATE 5.39% 5.63% 5.71%
30-DAY ANNUALIZED YIELD 5.10% - -
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 share price of $10.81 over the past one
month, $10.69 over the past six months and $10.66 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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
Uncertainty in the global equity
markets, combined with two
interest-rate cuts by the Federal
Reserve Board, provided the
backdrop for strong gains in the
bond market during the 12-month
period ended October 31, 1998. The
Lehman Brothers Aggregate Bond
Index - a broad measure of the U.S.
taxable investment-grade bond
market - returned 9.34% over the
past year. Global market volatility,
low interest rates and a sharp
decline in stock prices sent U.S.
Treasury yields - which move in
the opposite direction of bond
prices - to their lowest levels in
30 years. While the extreme flight
to quality helped Treasuries
outperform all other sectors of the
bond market, corporate bond
investors benefited from a stable
domestic economy, low interest rates
and low inflation. The Lehman
Brothers Corporate Bond Index
returned 7.99% for the past 12
months. Despite high refinancing
activity, mortgage bonds also
performed well. The Lehman Brothers
Mortgage Backed Securities Index
posted a 12-month return of 7.30%.
Late in the period, the bond market
stumbled as the Group of Seven
leading industrial nations eased
global market fears with
announcements that the International
Monetary Fund would establish a
precautionary line of credit to help
certain countries resolve their
financial crises. In spite of weakness
toward the end of the period, the
yield on the benchmark 30-year
Treasury closed at 5.15%.
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the 12-month period that ended October 31, 1998, the fund's
Institutional Class shares returned 7.66%. In comparison, the fund
outpaced the short-intermediate investment grade debt funds average
tracked by Lipper Analytical Services, which returned 6.97%. The fund
lagged the Lehman Brothers Intermediate Government/Corporate Bond
Index, which returned 9.12% during the same period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S UNDERPERFORMANCE OF THE
LEHMAN BROTHERS INDEX?
A. Historically, the fund has been overweighted in corporate bonds as
well as mortgage and asset-backed securities compared to Treasury
bonds. The Lehman Brothers Intermediate Government/Corporate Bond
Index tends to have over 40% of its assets in short- and
intermediate-maturity Treasuries. For many years, we've been able to
replace the short-term Treasuries that the fund would ordinarily hold
with short-term, high-grade corporate bonds. Over the long haul, the
yield advantage of the short-term corporate bonds helps generate
higher total return than government bonds. However, in an environment
like we experienced in August and September, the markets seemed to
care only about government-guaranteed bonds, and Treasuries benefited
from a massive flight to quality. While this situation was good for
Treasury bonds, it caused the fund to underperform the Lehman Brothers
Intermediate Government/Corporate Bond Index because the rally was for
the most part limited to Treasuries.
Q. CAN YOU GIVE US YOUR THOUGHTS REGARDING THE RECENT INTEREST-RATE
CUTS?
A. During most of the period, we witnessed an extreme demand for
safety that we haven't seen since the 1987 market crash. Toward the
end of the period, however, two interest-rate cuts by the Federal
Reserve Board, most notably the surprise rate cut on October 15, were
instrumental in changing market sentiment. The market seemed to
believe that the Fed would not let the economy slide into recession
and that it was willing to act aggressively to prevent an economic
downturn. At the end of the period, the federal funds rate - the
overnight interbank loan rate - stood at 5.00%, yet the yield on the
two-year Treasury dropped to approximately 4.25%. This yield spread is
telling us that the bond market believes the Federal Reserve will cut
rates further. This may or may not come to pass, but it's clear that
the market is very concerned about the potential for recession over
the next few quarters.
Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD?
A. During most of the year, I felt the mortgage-securities market was
expensive relative to Treasuries and I kept the fund's position close
to the index. As it turns out, we experienced a massive re-pricing of
these securities and the mortgage market was much cheaper as the
period drew to a close. In fact, over the past eight to 10 years,
mortgage rates have ranged anywhere from 80 to 130 basis points higher
than the 10-year Treasury bond. At the end of September, the yield
spread between Ginnie Mae Mortgage bonds and the 10-year Treasury was
over 200 points.
Q. DID YOU TAKE ANY ACTION AT THAT POINT?
A. I did. As a result, I increased the fund's position in mortgage
securities to take advantage of the interest-rate advantage over
Treasuries. Additionally, the fund held approximately 37% of its
investments in corporate bonds at the end of the period. This sector
was contributing to performance until we had the massive flight to
quality - and to Treasuries - at the end of the summer. The fund's
overweighted position in corporate bonds relative to the index hurt
performance in the long run.
Q. WHAT'S YOUR OUTLOOK?
A. I think we need to take a cautious view. However, with the federal
funds rate at 5.00% at the end of the period, combined with the
Federal Reserve Board's recent bias to ease rates, there are now more
reasons to be optimistic. At the same time, I have positioned the fund
relatively defensively because I believe it may take some time before
corporate America returns to a solid growth path. The underlying
economy seems to be in good shape, however, and we are beginning to
see a light at the end of the tunnel. Corporate bonds will continue to
be a focus for the fund and I will continue to look closely at
mortgage securities, maybe adding to the fund's position.
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.
KEVIN GRANT ON THE FUND'S
BENCHMARK, THE LEHMAN
BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND
INDEX AND ITS ROLE IN THE
MANAGEMENT OF THE FUND:
"The Lehman Brothers Intermediate
Government/Corporate Bond Index
- - a market value weighted
benchmark of investment-grade
fixed-rate debt issues with
maturities of at least one year -
plays a very important role in the
management of the fund. It's the
fund's benchmark index and
includes most of the universe of
investment-grade bonds with
maturities of one year or more. I
use the index as a guideline for the
structure of the overall bond
market, managing the fund to be
generally as sensitive to changes in
interest rates as the index. In
addition, I refer to the index when
deciding how to allocate assets
among different maturities and
market sectors - such as
corporate, mortgage or government
securities - based on my view of
the relative value of each maturity
or sector."
FUND FACTS
GOAL: high current income, by
investing mainly in
investment-grade debt
securities
START DATE: February 2, 1984
SIZE: as of October 31, 1998,
more than $509 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in 1993
(checkmark)
INVESTMENT CHANGES
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QUALITY DIVERSIFICATION AS OF OCTOBER 31, 1998
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 5 MONTHS AGO
AAA 54.8 57.5
AA 4.3 7.5
A 17.2 20.6
BAA 9.4 10.9
BA 1.5 1.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS BA OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1998
5 MONTHS AGO
YEARS 5.5 6.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1998
5 MONTHS AGO
YEARS 3.2 3.4
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 OCTOBER 31, 1998 * AS OF MAY 31, 1998 **
CORPORATE BONDS 37.0%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 12.4%
MORTGAGE
SECURITIES 32.5%
FOREIGN GOVERNMENT
OBLIGATIONS 2.9%
OTHER 2.4%
SHORT-TERM
INVESTMENTS 12.8%
* FOREIGN
INVESTMENTS 11.1%
CORPORATE BONDS 45.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 25.9%
MORTGAGE
SECURITIES 19.4%
FOREIGN GOVERNMENT
OBLIGATIONS 3.7%
OTHER 2.7%
SHORT-TERM
INVESTMENTS 2.5%
** FOREIGN
INVESTMENTS 12.0%
ROW: 1, COL: 1, VALUE: 12.8
ROW: 1, COL: 2, VALUE: 2.4
ROW: 1, COL: 3, VALUE: 2.9
ROW: 1, COL: 4, VALUE: 32.5
ROW: 1, COL: 5, VALUE: 12.4
ROW: 1, COL: 6, VALUE: 37.0
ROW: 1, COL: 1, VALUE: 2.5
ROW: 1, COL: 2, VALUE: 2.7
ROW: 1, COL: 3, VALUE: 3.7
ROW: 1, COL: 4, VALUE: 19.4
ROW: 1, COL: 5, VALUE: 25.9
ROW: 1, COL: 6, VALUE: 45.8
INVESTMENTS OCTOBER 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
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NONCONVERTIBLE BONDS - 25.9%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
BASIC INDUSTRIES - 2.0%
CHEMICALS & PLASTICS - 1.2%
Methanex Corp. yankee 8.875% 11/15/01 A2 $ 2,790,000 $ 2,877,299
Praxair, Inc. 6.15% 4/15/03 A3 3,640,000 3,671,086
6,548,385
PACKAGING & CONTAINERS - 0.8%
Owens-Illinois, Inc.:
7.15% 5/15/05 Ba1 1,500,000 1,492,254
7.35% 5/15/08 Ba1 1,450,000 1,428,563
7.8% 5/15/18 Ba1 1,750,000 1,656,377
4,577,194
TOTAL BASIC INDUSTRIES 11,125,579
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
CenterPoint Properties Trust 6.75% 4/1/05 Baa2 640,000 612,384
FINANCE - 14.1%
BANKS - 9.0%
ABN-Amro Bank NV, Chicago 6.625% Aa3 2,750,000 2,856,178
10/31/01
BankAmerica Corp. 10% 2/1/03 Aa3 210,000 242,243
BankBoston Companies 6.625% 2/1/04 A3 3,200,000 3,321,536
BanPonce Financial Corp.:
6.69% 9/21/00 A3 2,250,000 2,298,983
6.75% 8/9/01 A3 3,850,000 3,936,240
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 2,700,000 2,728,134
5.95% 7/15/01 A1 3,050,000 3,099,715
Capital One Bank 7.35% 6/20/00 Baa3 5,000,000 5,077,650
Capital One Financial Corp. 7.125% 8/1/08 Ba1 1,390,000 1,344,950
Chase Manhattan Corp. 5.5% 2/15/01 Aa3 600,000 598,512
Kansallis-Osake-Pankki, New York 10% 5/1/02 A3 650,000 740,883
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 439,155
NationsBank Corp. 8.125% 6/15/02 Aa3 3,000,000 3,224,700
Provident Bank 6.125% 12/15/00 A3 5,000,000 5,037,150
Skandinaviska Enskilda Banken yankee 8.45% A3 4,600,000 4,969,564
5/15/02
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
U.S. Bancorp 7.5% 6/1/26 A2 $ 2,000,000 $ 2,186,040
Union Planters National Bank 6.81% 8/20/01 A3 1,500,000 1,539,255
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 5,253,600
48,894,488
CREDIT & OTHER FINANCE - 3.0%
Associates Corp. of North America 6% 4/15/03 Aa3 1,350,000 1,377,756
Deere (John) Capital Corp. 9.625% 11/1/98 A3 2,500,000 2,500,000
ERP Operating LP 6.55% 11/15/01 A3 470,000 470,080
Ford Motor Credit Co. 7.75% 11/15/02 A1 100,000 107,492
General Electric Capital Corp. 6.94% Aaa 2,530,000 2,547,862
4/13/09 (b)
GS Escrow Corp. 7.125% 8/1/05 (c) Ba1 2,350,000 2,294,869
RBSG Capital Corp. 10.125% 3/1/04 A2 1,500,000 1,813,500
Sears Roebuck Acceptance Corp. 6.15% A2 5,000,000 5,095,800
11/15/05
16,207,359
INSURANCE - 1.9%
Protective Life Corp. 7.95% 7/1/04 A3 1,000,000 1,129,580
SunAmerica, Inc. 6.2% 10/31/99 Baa1 9,300,000 9,392,721
10,522,301
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB 6.2% 4/2/01 Baa3 900,000 899,019
TOTAL FINANCE 76,523,167
INDUSTRIAL MACHINERY & EQUIPMENT - 1.9%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
Tyco International Group SA yankee 6.125% Baa1 4,000,000 4,080,880
6/15/01
POLLUTION CONTROL - 1.2%
WMX Technologies, Inc. 7.1% 8/1/26 Baa3 6,000,000 6,310,380
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 10,391,260
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.7%
TCI Communications, Inc. 8.75% 8/1/15 Baa3 3,470,000 4,210,672
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.1%
Viacom, Inc. 7.75% 6/1/05 Baa3 $ 400,000 $ 431,132
TOTAL MEDIA & LEISURE 4,641,804
NONDURABLES - 1.1%
TOBACCO - 1.1%
Philip Morris Companies, Inc. 6.95% 6/1/06 A2 6,000,000 6,282,720
RETAIL & WHOLESALE - 0.4%
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 1,970,000 2,000,594
TECHNOLOGY - 1.0%
COMPUTER SERVICES & SOFTWARE - 1.0%
First Data Corp. 6.625% 4/1/03 A2 5,000,000 5,242,750
UTILITIES - 4.5%
CELLULAR - 0.9%
360 Degrees Communications Co. Baa1 1,050,000 1,164,608
7.5% 3/1/06
AirTouch Communications, Inc. Baa2 1,795,000 1,869,762
6.35% 6/1/05
Cable & Wireless Communications PLC Baa1 2,090,000 2,130,630
6.375% 3/6/03
5,165,000
ELECTRIC UTILITY - 3.2%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 2,000,000 2,015,180
7.05% 12/11/07 (c) Baa2 5,000,000 5,274,300
British Columbia Hydro & Power Authority Aa2 940,000 991,484
yankee 12.5% 1/15/14
DR Investments UK PLC yankee 7.1% A2 5,000,000 5,252,200
5/15/02 (c)
Israel Electric Corp. Ltd. 7.75% 12/15/27 (c) A3 3,840,000 3,543,706
Virginia Electric & Power Co. 7.375% 7/1/02 A2 150,000 160,356
17,237,226
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.4%
MCI WorldCom, Inc. 6.4% 8/15/05 Baa2 $ 1,850,000 $ 1,922,095
TOTAL UTILITIES 24,324,321
TOTAL NONCONVERTIBLE BONDS 141,144,579
(Cost $138,484,486)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 12.4%
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.7%
Fannie Mae:
5.75% 6/15/05 Aaa 2,320,000 2,419,690
6.15% 1/13/00 Aaa 1,100,000 1,117,875
Farm Credit Systems Financial Assistance Corp. Aaa 1,800,000 2,143,962
9.375% 7/21/03
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 3,830,000 4,254,900
7.38% 8/5/04 Aaa 1,930,000 2,160,384
7.7% 9/20/04 Aaa 1,250,000 1,422,263
Freddie Mac:
5.035% 4/28/03 Aaa 15,000,000 15,092,400
8.115% 1/31/05 Aaa 5,460,000 6,362,593
Government Trust Certificates (assets of Trust Aaa 784,950 832,911
guaranteed by U.S. Government through
Defense Security Assistance Agency)
Class 2-E, 9.4% 5/15/02
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.12% 4/15/06 Aaa 287,778 310,916
Series 1994-C, 6.61% 9/15/99 Aaa 23,509 23,679
36,141,573
U.S. TREASURY OBLIGATIONS - 5.7%
U.S. Treasury Bonds:
8.75% 5/15/17 Aaa 410,000 572,655
12.75% 11/15/10 (callable) Aaa 2,498,000 3,676,357
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - CONTINUED
U.S. Treasury Notes:
6.375% 9/30/01 Aaa $ 8,500,000 $ 8,958,065
7% 7/15/06 Aaa 9,300,000 10,709,508
7.25% 8/15/04 Aaa 6,390,000 7,289,584
31,206,169
TOTAL U.S. GOVERNMENT AND 67,347,742
GOVERNMENT AGENCY OBLIGATIONS
(Cost $65,242,339)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES - 29.9%
FANNIE MAE - 25.2%
5.5% 5/1/03 to 5/1/11 Aaa 3,347,441 3,336,570
6% 5/1/01 to 10/1/13 (e) Aaa 44,216,131 44,269,986
6% 11/1/13 (d) Aaa 19,000,000 19,083,125
6.5% 10/1/27 to 7/1/28 Aaa 36,031,841 36,313,325
6.5% 11/1/28 (d) Aaa 16,000,000 16,125,000
7% 11/1/28 (d) Aaa 970,000 991,219
7.5% 2/1/28 to 4/1/28 (e) Aaa 1,010,000 1,035,563
8.5% 6/1/11 to 2/1/28 Aaa 9,993,058 10,404,135
9.5% 2/1/25 Aaa 2,751,702 2,971,811
10% 1/1/20 Aaa 59,101 64,531
10.5% 7/1/11 to 8/1/20 Aaa 395,316 435,987
11% 8/1/15 Aaa 1,721,555 1,886,841
12.5% 2/1/11 to 4/1/15 Aaa 79,125 91,202
137,009,295
FREDDIE MAC - 1.3%
5.5% 12/1/02 to 6/1/03 Aaa 1,732,400 1,729,022
7% 11/1/00 to 7/1/01 Aaa 1,580,497 1,594,757
8.5% 9/1/24 to 8/1/27 Aaa 2,610,000 2,716,463
9.5% 1/1/17 Aaa 14,738 15,835
10% 4/1/05 to 8/1/10 Aaa 283,275 302,040
10.25% 12/1/09 Aaa 33,407 35,996
10.5% 5/1/21 Aaa 607,210 663,936
11% 12/1/11 Aaa 26,755 29,556
11.5% 10/1/15 Aaa 99,501 110,730
11.75% 10/1/10 Aaa 38,793 43,325
7,241,660
U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.4%
7% 11/15/22 to 7/15/28 Aaa $ 4,544,874 $ 4,664,830
8% 2/15/02 to 6/15/25 Aaa 3,166,251 3,263,516
8.5% 4/15/17 to 12/15/21 Aaa 560,026 594,784
9% 5/15/16 to 10/15/18 Aaa 2,574,911 2,759,564
10% 11/15/09 to 1/15/26 Aaa 2,921,561 3,149,871
11% 12/15/09 to 10/15/20 Aaa 795,402 862,375
11.5% 3/15/10 to 2/15/19 Aaa 2,616,378 2,911,662
18,206,602
TOTAL U.S. GOVERNMENT AGENCY - 162,457,557
MORTGAGE SECURITIES
(Cost $160,943,708)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET-BACKED SECURITIES - 11.1%
Aesop Funding II LLC 6.22% 10/20/01 (c) Aaa 8,000,000 8,146,250
Arcadia Automobile Receivables Trust 6.5% Aaa 5,000,000 5,114,063
6/17/02
Capital Equipment Receivables Trust 6.11% Aaa 3,442,079 3,447,104
7/15/99
Chase Manhattan Grantor Trust:
6.61% 9/15/02 Aaa 1,496,696 1,520,643
6.76% 9/15/02 A3 561,261 568,277
Chevy Chase Auto Receivables Trust:
5.9% 7/15/03 Aaa 1,482,654 1,489,141
5.91% 12/15/04 Aaa 824,200 829,545
6.6% 12/15/02 Aaa 489,089 494,283
Citibank Credit Card Master Trust I 6.45% A2 10,000,000 10,193,750
8/15/02
Contimortgage Home Equity Loan Trust 6.26% Aaa 5,000,000 5,000,000
7/15/12
Ford Credit Auto Owner Trust:
6.4% 5/15/02 A1 1,460,000 1,497,580
6.4% 12/15/02 Baa3 590,000 590,885
Ford Credit Grantor Trust 5.9% 10/15/00 Aaa 892,188 894,557
Key Auto Finance Trust 6.3% 10/15/03 A2 1,520,018 1,526,906
KeyCorp Auto Grantor Trust 5.8% 7/15/00 A3 26,892 26,889
MBNA Master Credit Card Trust II 6.55% Aaa 10,000,000 10,590,200
1/15/07
ASSET-BACKED SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
PNC Student Loan Trust I 6.314% 1/25/01 Aaa $ 5,000,000 $ 5,061,719
SCFC Recreational Vehicle Loan Trust 7.25% Aaa 222,163 220,630
9/15/06
Sears Credit Account Master Trust II 6.5% Aaa 3,400,000 3,415,912
10/15/03
TOTAL ASSET-BACKED SECURITIES 60,628,334
(Cost $59,378,095)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMMERCIAL MORTGAGE SECURITIES - 2.6%
BKB Commercial Mortgage Trust Series 1997 AA 1,117,859 1,114,715
C1, Class B, 7.218% 2/25/43 (c)(f)
CBM Funding Corp. sequential pay Series AA 56,087 56,394
1996-1 Class A 1, 7.55% 7/1/99
CS First Boston Mortgage Securities Corp.:
Series 1995-WF1 Class A-2, 6.648% AAA 4,930,135 4,950,164
12/21/27
Series 1998 FLI Class E, 6.1938% Baa2 2,970,000 2,887,397
1/10/13 (c)(f)
Equitable Life Assurance Society of the A2 1,000,000 1,025,900
United States (The) Series 1996-1 Class C1,
7.52% 5/15/06 (c)
Thirteen Affiliates of General Growth Properties, Aaa 2,500,000 2,558,825
Inc. sequential pay Series A-2, 6.602%
12/15/10 (c)
Wells Fargo Capital Markets Apartment Aaa 1,496,720 1,532,761
Financing Trust Series APT Class 1, 6.56%
12/29/05 (c)
TOTAL COMMERCIAL MORTGAGE SECURITIES 14,126,156
(Cost $14,057,804)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 2.9%
Canadian Government 6.125% 7/15/02 (g) Aa2 5,000,000 5,207,000
Manitoba Province yankee 6.875% 9/15/02 (g) Aa3 5,000,000 5,290,250
Quebec Province yankee 6.86% 4/15/26 (b)(g) A2 5,000,000 5,170,800
TOTAL FOREIGN GOVERNMENT AND 15,668,050
GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,921,450)
</TABLE>
SUPRANATIONAL OBLIGATIONS - 1.9%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Inter American Development Bank yankee Aaa $ 10,000,000 $ 10,639,600
6.29% 7/16/27
(Cost $9,937,100)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 0.5%
Canadian Imperial Bank of Commerce, Aa3 2,500,000 2,540,750
New York yankee 6.2% 8/1/00
(Cost $2,503,750)
</TABLE>
CASH EQUIVALENTS - 12.8%
MATURITY
AMOUNT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Investments in repurchase agreements $ 69,601,708 69,569,000
(U.S. Government obligations), in a joint
trading account at 5.64%, dated
10/30/98 due 11/2/98
(Cost $69,569,000)
</TABLE>
TOTAL INVESTMENT IN SECURITIES - 100% $ 544,121,768
(Cost $535,037,732)
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(c) 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 $35,646,103 or 7.0% of net assets.
(d) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
(e) A portion of the security was sold on a delayed delivery or
when-issued basis (see Note 2 of Notes to Financial Statements).
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed are assigned to the securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's
ratings of the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 75.1% AAA, AA, A 72.7%
Baa 9.4% BBB 8.7%
Ba 1.5% BB 1.5%
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
for the sovereign credit of the issuing government.
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
United States of America 88.9%
Canada 4.1
United Kingdom 3.5
Multi-National 1.9
Others (individually less than 1%) 1.6
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31, 1998, the aggregate cost of investment securities for
income tax purposes was $535,037,732. Net unrealized appreciation
aggregated $9,084,036, of which $10,896,220 related to appreciated
investment securities and $1,812,184 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $10,771,000 of which $9,361,000 and $1,410,000 will
expire on October 31, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 544,121,768
AGREEMENTS OF $69,569,000) (COST $535,037,732) -
SEE ACCOMPANYING SCHEDULE
COMMITMENT TO SELL SECURITIES ON A DELAYED DELIVERY BASIS $ (17,064,553)
RECEIVABLE FOR SECURITIES SOLD ON A DELAYED DELIVERY BASIS 16,881,675 (182,878)
RECEIVABLE FOR INVESTMENTS SOLD ON A REGULAR DELIVERY BASIS 56,003,420
CASH 809
RECEIVABLE FOR FUND SHARES SOLD 1,022,273
INTEREST RECEIVABLE 5,194,040
TOTAL ASSETS 606,159,432
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED 57,343,163
REGULAR DELIVERY
DELAYED DELIVERY 35,914,700
PAYABLE FOR FUND SHARES REDEEMED 2,189,449
DISTRIBUTIONS PAYABLE 555,583
ACCRUED MANAGEMENT FEE 184,181
DISTRIBUTION FEES PAYABLE 93,747
OTHER PAYABLES AND ACCRUED EXPENSES 151,851
TOTAL LIABILITIES 96,432,674
NET ASSETS $ 509,726,758
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 513,408,368
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (1,805,499)
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (10,777,269)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 8,901,158
NET ASSETS $ 509,726,758
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1998
CALCULATION OF MAXIMUM OFFERING PRICE $10.77
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($8,217,134 (DIVIDED BY) 763,057 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.25 OF $10.77) $11.19
CLASS T: $10.77
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($287,733,501 (DIVIDED BY) 26,715,809 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/97.25 OF $10.77) $11.07
CLASS B: $10.76
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($39,656,796 (DIVIDED BY) 3,685,158 SHARES) A
CLASS C: $10.76
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($6,100,072 (DIVIDED BY) 566,745 SHARES) A
INSTITUTIONAL CLASS: $10.78
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($168,019,255 (DIVIDED BY) 15,589,194 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
ELEVEN MONTHS YEAR ENDED
ENDED NOVEMBER 30,
OCTOBER 31, 1998 1997
INVESTMENT INCOME $ 28,854,700 $ 33,006,612
INTEREST
EXPENSES
MANAGEMENT FEE 1,941,732 2,095,786
TRANSFER AGENT FEES 891,022 876,536
DISTRIBUTION FEES 893,099 834,999
ACCOUNTING FEES AND EXPENSES 181,249 195,556
NON-INTERESTED TRUSTEES' COMPENSATION 1,224 7,862
CUSTODIAN FEES AND EXPENSES 31,734 29,201
REGISTRATION FEES 93,208 91,318
AUDIT 42,923 51,920
LEGAL 1,227 11,323
INTEREST 699 -
REPORTS TO SHAREHOLDERS 25,502 -
MISCELLANEOUS 1,469 7,221
TOTAL EXPENSES BEFORE REDUCTIONS 4,105,088 4,201,722
EXPENSE REDUCTIONS (37,684) (63,858)
TOTAL EXPENSES AFTER REDUCTIONS 4,067,404 4,137,864
NET INVESTMENT INCOME 24,787,296 28,868,748
REALIZED AND UNREALIZED GAIN (LOSS) 4,353,759 (1,460,647)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES
FOREIGN CURRENCY TRANSACTIONS - 747
TOTAL NET REALIZED GAIN (LOSS) 4,353,759 (1,459,900)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 4,922,976 (1,413,676)
DELAYED DELIVERY COMMITMENTS (182,878) -
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES - (747)
TOTAL CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 4,740,098 (1,414,423)
NET GAIN (LOSS) 9,093,857 (2,874,323)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 33,881,153 $ 25,994,425
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
ELEVEN MONTHS YEAR ENDED YEAR ENDED
ENDED NOVEMBER 30, NOVEMBER 30,
OCTOBER 31, 1998 1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 24,787,296 $ 28,868,748 $ 31,675,872
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 4,353,759 (1,459,900) (9,733,480)
CHANGE IN NET UNREALIZED 4,740,098 (1,414,423) 2,408,292
APPRECIATION (DEPRECIATION)
NET INCREASE (DECREASE) IN NET ASSETS 33,881,153 25,994,425 24,350,684
RESULTING FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET (24,380,390) (28,478,083) (31,669,310)
INVESTMENT INCOME
SHARE TRANSACTIONS - NET INCREASE 17,749,456 (8,667,273) 47,816,674
(DECREASE)
TOTAL INCREASE (DECREASE) IN NET ASSETS 27,250,219 (11,150,931) 40,498,048
NET ASSETS
BEGINNING OF PERIOD 482,476,539 493,627,470 453,129,422
END OF PERIOD (INCLUDING DISTRIBUTIONS $ 509,726,758 $ 482,476,539 $ 493,627,470
IN EXCESS OF NET INVESTMENT INCOME
OF $1,805,499 , $1,999,021 AND
$2,016,748, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.590 $ 10.350
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .537 .615 .159
NET REALIZED AND UNREALIZED GAIN (LOSS) .207 (.023) .235
TOTAL FROM INVESTMENT OPERATIONS .744 .592 .394
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.534) (.622) (.154)
NET ASSET VALUE, END OF PERIOD $ 10.770 $ 10.560 $ 10.590
TOTAL RETURN B, C 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 8,217 $ 3,819 $ 687
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% A, F .90% F .90% A, F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.51% A 5.93% 6.45% A
PORTFOLIO TURNOVER RATE 176% A 138% 200%
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .537 D .625 D .671 D .649 .609 .785
NET REALIZED AND .201 (.058) (.147) .491 (.876) .511
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT .738 .567 .524 1.140 (.267) 1.296
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.528) (.617) (.674) (.640) (.555) (.796)
INCOME
IN EXCESS OF NET - - - - (.058) -
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.528) (.617) (.674) (.640) (.613) (.796)
NET ASSET VALUE, $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140
END OF PERIOD
TOTAL RETURN B, C 7.15% 5.56% 5.10% 11.43% (2.44)% 12.50%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 287,734 $ 278,869 $ 262,103 $ 228,439 $ 141,866 $ 59,184
(000 OMITTED)
RATIO OF EXPENSES TO .98% A .96% .97% .94% E 1.02% E 1.23%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .98% A .96% .96% F .94% 1.02% 1.23%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 5.48% A 5.97% 6.38% 6.20% 6.04% 6.81%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 176% A 138% 200% 189% 68% 59%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.540 $ 10.590 $ 10.750 $ 10.250 $ 10.430
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .468 D .551 D .597 D .579 .204
NET REALIZED AND UNREALIZED .214 (.057) (.153) .483 (.178)
GAIN (LOSS)
TOTAL FROM INVESTMENT .682 .494 .444 1.062 .026
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.462) (.544) (.604) (.562) (.187)
IN EXCESS OF NET - - - - (.019)
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.462) (.544) (.604) (.562) (.206)
NET ASSET VALUE, END OF PERIOD $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 6.60% 4.83% 4.32% 10.62% 0.24%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 39,657 $ 22,201 $ 18,972 $ 15,830 $ 3,156
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.65% A, F 1.65% F 1.66% F 1.70% F 1.65% A, F
NET ASSETS
RATIO OF NET INVESTMENT INCOME 4.79% A 5.27% 5.69% 5.44% 5.42% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 176% A 138% 200% 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
ELEVEN MONTHS ENDED YEAR ENDED
OCTOBER 31, NOVEMBER 30,
1998 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.570
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .453 .031
NET REALIZED AND UNREALIZED GAIN (LOSS) .199 (.005)
TOTAL FROM INVESTMENT OPERATIONS .652 .026
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.452) (.036)
NET ASSET VALUE, END OF PERIOD $ 10.760 $ 10.560
TOTAL RETURN B, C 6.30% 0.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,100 $ 160
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.75% A, F 1.75% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.75% A 1.73% A, G
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.67% A 4.42% A
PORTFOLIO TURNOVER RATE 176% A 138%
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .566 D .658 D .705 D .671 .602 .832
NET REALIZED AND .201 (.060) (.151) .499 (.833) .531
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT .767 .598 .554 1.170 (.231) 1.363
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.557) (.648) (.704) (.670) (.597) (.843)
INCOME
IN EXCESS OF NET - - - - (.062) -
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.557) (.648) (.704) (.670) (.659) (.843)
NET ASSET VALUE, $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160
END OF PERIOD
TOTAL RETURN B, C 7.44% 5.86% 5.40% 11.73% (2.10)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 168,019 $ 177,427 $ 211,866 $ 208,861 $ 172,122 $ 183,790
(000 OMITTED)
RATIO OF EXPENSES TO .68% A .67% .66% .67% E .61% .64%
AVERAGE NET ASSETS
RATIO OF NET INVESTMENT 5.78% A 6.27% 6.69% 6.47% 6.45% 7.41%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 176% A 138% 200% 189% 68% 59%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 October 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the fund) is a fund of
Fidelity Advisor Series IV (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class B, Class C, 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
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, 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, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. At a special meeting of the shareholders of the fund held
on October 7, 1998, shareholders approved an Agreement and Plan of
Reorganization, providing for the reorganization of the fund into
Fidelity Advisor Series II, effective on or about February 26, 1999.
On October 16, 1997, the Board of Trustees approved a change in the
fiscal year-end of the fund from November 30, to October 31.
Accordingly, the financial statements of the fund are presented for
the eleven-month period ended October 31, 1998. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which quotations are
not readily available are valued at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, 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.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments 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 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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased or sold on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $724,683,134 and $740,974,760, respectively, of which U.S.
government and government agency obligations aggregated $567,982,755
and $555,547,309, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the periods ended October
31, 1998 and November 30, 1997, the management fee was equivalent to
an annualized rate of .43% and an annual rate of .44%, respectively,
of average net assets .
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.For
the periods, this fee was based on the following annual rates of the
average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the periods, each class paid FDC the following amounts, a portion
of which was retained by FDC:
ELEVEN MONTHS ENDED
OCTOBER 31, 1998
PAID TO RETAINED
FDC BY FDC
CLASS A $ 8,316 $ -
CLASS T 637,223 29,258
CLASS B 224,418 162,194
CLASS C 23,142 23,043
$ 893,099 $ 214,495
YEAR ENDED
NOVEMBER 30, 1997
PAID TO RETAINED
FDC BY FDC
CLASS A $ 3,177 $ -
CLASS T 655,179 -
CLASS B 176,588 127,539
CLASS C 55 55
$ 834,999 $ 127,594
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period ended October 31, 1998, the following amounts were paid to
third parties under the Plans:
CLASS A $ 2,629
CLASS T 124,812
CLASS B 12,549
CLASS C 2,751
INSTITUTIONAL CLASS 15,871
SALES LOAD. FDC receives a front-end sales charge of up to 3.75% for
selling Class A shares, and 2.75% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within three years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging from 3% to 1% for Class B and 1% for Class C, of the
lesser of the cost of shares at the initial date of purchase or the
net
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
asset value of the redeemed shares, excluding any reinvested dividends
and capital gains. In addition, purchases of Class A and Class T
shares that were subject to a finder's fee bear a contingent deferred
sales charge on assets that do not remain in the fund for at least one
year. The Class A and Class T contingent deferred sales charge is
based on 0.25% 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. A portion of the sales
charges paid to FDC are paid to securities dealers, banks and other
financial institutions.
For the period ended October 31, 1998, sales charge amounts paid to
and retained by FDC were as follows:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 49,160 $ 28,254
CLASS T 83,240 32,737
CLASS B 90,580 90,580*
CLASS C 3,720 3,720*
$ 226,700 $ 155,291
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the fund.
FIIOC receives account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For
the periods, the following amounts were paid to FIIOC:
ELEVEN MONTHS ENDED
OCTOBER 31, 1998
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 14,287 .26**
CLASS T 546,245 .21**
CLASS B 64,090 .26**
CLASS C 7,168 .31**
INSTITUTIONAL CLASS 259,232 .16**
$ 891,022
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
YEAR ENDED
NOVEMBER 30, 1997
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 7,231 .34
CLASS T* 521,357 .20
CLASS B 50,467 .26
CLASS C 25 .35**
INSTITUTIONAL CLASS 297,456 .15
$ 876,536
* PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER,
HAD DELEGATED CERTAIN TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER
SERVICES TO FIIOC FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL
SUCH FEES.
** ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
5. 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
balance during the period for which the loan was outstanding amounted
to $4,328,000 for the period ended October 31, 1998 . The weighted
average interest rate was 5.81%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR ELEVEN MONTHS ENDED YEAR ENDED
EXPENSE OCTOBER 31, NOVEMBER 30,
LIMITATIONS 1998 1997
CLASS A .90% $ 6,448 $ 32,105
CLASS B 1.65% 12,681 16,908
CLASS C 1.75% 15,403 5,670
$ 34,532 $ 54,683
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the periods
ended October 31, 1998 and November 30, 1997, the fund's custodian
fees were reduced by $3,152 and $9,175, respectively, under the
custodian arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
ELEVEN MONTHS ENDED YEARS ENDED
OCTOBER 31, NOVEMBER 30,
1998 1997 B 1996 A
FROM NET INVESTMENT INCOME
CLASS A $ 299,762 $ 122,899 $ 6,183
CLASS T 13,762,990 15,434,281 16,284,509
CLASS B 1,166,769 1,017,603 1,037,161
CLASS C 106,569 312 -
INSTITUTIONAL CLASS 9,044,300 11,902,988 14,341,457
TOTAL $ 24,380,390 $ 28,478,083 $ 31,669,310
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
B DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SHARES DOLLARS
ELEVEN MONTHS YEAR ENDED YEAR ENDED ELEVEN MONTHS YEAR ENDED YEAR ENDED
ENDED NOVEMBER 30, NOVEMBER 30, ENDED NOVEMBER 30, NOVEMBER 30,
OCTOBER 31, 1997 B 1996 A OCTOBER 31, 1997 B 1996 A
1998 1998
CLASS A 826,066 455,670 72,448 $ 8,801,326 $ 4,761,173 $ 756,142
SHARES SOLD
REINVESTMENT OF 24,233 10,671 475 258,506 111,981 4,998
DISTRIBUTIONS
SHARES REDEEMED (448,992) (169,434) (8,080) (4,782,656) (1,767,583) (84,516)
NET INCREASE 401,307 296,907 64,843 $ 4,277,176 $ 3,105,571 $ 676,624
(DECREASE)
CLASS T 13,142,016 13,128,368 14,999,140 $ 140,268,143 $ 137,559,201 $ 158,724,547
SHARES SOLD
REINVESTMENT OF 1,173,166 1,340,839 1,411,416 12,511,199 14,043,998 14,860,075
DISTRIBUTIONS
SHARES REDEEMED (14,007,864) (12,764,354) (12,931,481) (149,280,620) (133,637,535) (136,183,619)
NET INCREASE 307,318 1,704,853 3,479,075 $ 3,498,722 $ 17,965,664 $ 37,401,003
(DECREASE)
CLASS B 3,469,510 1,113,298 1,114,235 $ 37,025,976 $ 11,661,677 $ 11,808,349
SHARES SOLD
REINVESTMENT OF 85,515 76,151 76,373 911,937 796,683 803,087
DISTRIBUTIONS
SHARES REDEEMED (1,975,435) (874,566) (872,302) (21,073,447) (9,166,397) (9,227,658)
NET INCREASE 1,579,590 314,883 318,306 $ 16,864,466 $ 3,291,963 $ 3,383,778
(DECREASE)
CLASS C 639,302 15,175 - $ 6,829,640 $ 160,441 $ -
SHARES SOLD
REINVESTMENT OF 8,679 16 - 92,773 167 -
DISTRIBUTIONS
SHARES REDEEMED (96,427) - - (1,036,670) - -
NET INCREASE 551,554 15,191 - $ 5,885,743 $ 160,608 $ -
(DECREASE)
INSTITUTIONAL 5,436,279 5,646,676 9,022,232 $ 57,943,429 $ 59,206,035 $ 95,376,649
CLASS
SHARES SOLD
REINVESTMENT OF 349,249 477,520 561,358 3,726,467 5,003,755 5,915,605
DISTRIBUTIONS
SHARES REDEEMED (6,987,186) (9,287,961) (9,022,616) (74,446,547) (97,400,869) (94,936,985)
NET INCREASE (1,201,658) (3,163,765) 560,974 $ (12,776,651) $ (33,191,079) $ 6,355,269
(DECREASE)
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
B SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
9. REGISTRATION FEES.
For the periods, each class paid the following amounts to register its
shares for sale:
ELEVEN MONTHS YEAR ENDED
ENDED OCTOBER 31, NOVEMBER 30,
1998 1997
CLASS A $ 6,237 $ 30,352
CLASS T 36,976 22,481
CLASS B 11,223 14,929
CLASS C 13,916 5,703
INSTITUTIONAL CLASS 24,856 17,853
$ 93,208 $ 91,318
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Advisor Intermediate Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Intermediate Bond Fund (a fund of Fidelity Advisor
Series IV) at October 31, 1998, and the results of its operations for
the eleven month period then ended and the year ended November 30,
1997, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Intermediate Bond Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 9, 1998
DISTRIBUTIONS
A total of 14.25% 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 1999 of the applicable
percentage for use in preparing 1998 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on October 7,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
AFFIRMATIVE 539,625,345.29 98.805
WITHHELD 6,524,581.07 1.195
TOTAL 546,149,926.36 100.000
PHYLLIS BURKE DAVIS
AFFIRMATIVE 539,570,849.71 98.795
WITHHELD 6,579,076.65 1.205
TOTAL 546,149,926.36 100.000
ROBERT M. GATES
AFFIRMATIVE 539,510,050.47 98.784
WITHHELD 6,639,875.89 1.216
TOTAL 546,149,926.36 100.000
EDWARD C. JOHNSON 3D
AFFIRMATIVE 538,985,893.01 98.688
WITHHELD 7,164,033.35 1.312
TOTAL 546,149,926.36 100.000
E. BRADLEY JONES
AFFIRMATIVE 538,927,817.43 98.678
WITHHELD 7,222,108.93 1.322
TOTAL 546,149,926.36 100.000
DONALD J. KIRK
AFFIRMATIVE 539,628,066.94 98.806
WITHHELD 6,521,859.42 1.194
TOTAL 546,149,926.36 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
AFFIRMATIVE 539,693,497.37 98.818
WITHHELD 6,456,428.99 1.182
TOTAL 546,149,926.36 100.000
WILLIAM O. MCCOY
AFFIRMATIVE 539,146,457.11 98.718
WITHHELD 7,003,469.25 1.282
TOTAL 546,149,926.36 100.000
GERALD C. MCDONOUGH
AFFIRMATIVE 539,461,031.30 98.775
WITHHELD 6,688,895.06 1.225
TOTAL 546,149,926.36 100.000
MARVIN L. MANN
AFFIRMATIVE 539,523,857.95 98.787
WITHHELD 6,626,068.41 1.213
TOTAL 546,149,926.36 100.000
ROBERT C. POZEN
AFFIRMATIVE 539,551,908.09 98.792
WITHHELD 6,598,018.27 1.208
TOTAL 546,149,926.36 100.000
THOMAS R. WILLIAMS
AFFIRMATIVE 539,441,485.70 98.772
WITHHELD 6,708,440.66 1.228
TOTAL 546,149,926.36 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 278,609,801.55 98.139
AGAINST 1,741,723.15 .613
ABSTAIN 3,542,786.50 1.248
TOTAL 283,894,311.20 100.000
PROPOSAL 3
To authorize the Trustees to adopt an Amended and Restated Declaration
of Trust.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 479,594,533.67 95.156
AGAINST 10,033,506.32 1.991
ABSTAIN 14,379,781.75 2.853
TOTAL 504,007,821.74 100.000
BROKER 42,142,104.62
NON-VOTES
PROPOSAL 4
To approve an Agreement and Plan providing for the reorganization of
the fund from a separate series of one Massachusetts business trust to
another.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 232,211,107.81 96.169
AGAINST 2,651,523.98 1.098
ABSTAIN 6,599,384.87 2.733
TOTAL 241,462,016.66 100.000
BROKER 42,432,294.54
NON-VOTES
PROPOSAL 5
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 233,905,223.59 96.572
AGAINST 1,432,406.40 .591
ABSTAIN 6,871,578.47 2.837
TOTAL 242,209,208.46 100.000
BROKER 41,685,102.74
NON-VOTES
PROPOSAL 6
To amend the fundamental diversification limitation to exclude
"securities of other investment companies" from issuer diversification
limits.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 233,962,626.59 96.595
AGAINST 1,673,131.99 .691
ABSTAIN 6,573,449.88 2.714
TOTAL 242,209,208.46 100.000
BROKER 41,685,102.74
NON-VOTES
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
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Kevin E. Grant, Vice President
Eric D. Roiter, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
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 International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap 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
LTBI-ANN-1298 66823
1.539399.101
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(FIDELITY_LOGO_GRAPHIC) (REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK)
FIDELITY ADVISOR
INTERMEDIATE BOND
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 NED JOHNSON ON INVESTING STRATEGIES.
PERFORMANCE 4 HOW THE FUND HAS DONE OVER TIME.
FUND TALK 21 THE MANAGER'S REVIEW OF FUND
PERFORMANCE, STRATEGY AND OUTLOOK.
INVESTMENT CHANGES 24 A SUMMARY OF MAJOR SHIFTS IN THE FUND'S
INVESTMENTS OVER THE PAST FIVE MONTHS.
INVESTMENTS 25 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 34 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 43 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 52 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 53
PROXY VOTING RESULTS 54
NOTE TO SHAREHOLDERS: The fiscal year end for Fidelity Advisor
Intermediate Bond Fund recently changed from November 30 to October
31. This change was made in order to align the fund's fiscal year end
with other similar Fidelity Advisor FundsSM.
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:
What a difference one month can make. The stock and bond markets did
an about-face in October, as renewed optimism in many emerging markets
and more encouraging corporate earnings forecasts in the U.S. replaced
the concerns that had shaped the financial markets in recent months.
Equity markets worldwide bounced back strongly, while the major U.S.
bond indexes were off slightly as the flight to safety eased.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class A shares
took place on September 3, 1996. Class A shares bear a 0.15% 12b-1 fee
that is reflected in returns after September 3, 1996. Returns between
September 10, 1992 (the date Class T shares were first offered) and
September 3, 1996 are those of Class T and reflect Class T shares'
0.25% 12b-1 fee. Returns prior to September 10, 1992 are those of the
Institutional Class, the original class of the fund, which does not
bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected,
returns prior to September 10, 1992 would have been lower. If Fidelity
had not reimbursed certain class expenses, the total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL A 7.41% 28.65% 113.25%
FIDELITY ADV INT BOND - CL A 3.39% 23.82% 105.25%
(INCL. 3.75% SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 36.97% 123.83%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 30.54% 105.48%
DEBT 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 issues with maturities between one and 10 years. To measure how
Class A's performance stacked up against its peers, you can compare it
to the short-intermediate investment grade debt funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 94 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL A 7.41% 5.17% 7.87%
FIDELITY ADV INT BOND - CL A 3.39% 4.37% 7.46%
(INCL. 3.75% SALES CHARGE)
LB INT GOV/CORP BOND 9.12% 6.49% 8.39%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 5.47% 7.46%
DEBT FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURNS take Class A's cumulative return and show
you what would have happened if Class A had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Intermed Bond -CL A LB Intermediate Govt/Corp
00261 LB007
1988/10/31 9625.00 10000.00
1988/11/30 9565.57 9914.67
1988/12/31 9574.37 9923.40
1989/01/31 9678.54 10027.63
1989/02/28 9655.62 9986.18
1989/03/31 9693.77 10029.33
1989/04/30 9856.83 10229.80
1989/05/31 10042.21 10432.94
1989/06/30 10286.88 10695.95
1989/07/31 10504.51 10915.57
1989/08/31 10362.64 10774.49
1989/09/30 10411.56 10825.39
1989/10/31 10628.80 11054.23
1989/11/30 10716.22 11159.92
1989/12/31 10733.89 11190.46
1990/01/31 10627.13 11118.71
1990/02/28 10662.09 11159.19
1990/03/31 10647.18 11173.73
1990/04/30 10578.34 11134.95
1990/05/31 10829.59 10991.93
1990/06/30 10974.38 11532.01
1990/07/31 11120.90 11692.00
1990/08/31 11028.06 11644.00
1990/09/30 11109.58 11733.93
1990/10/31 11214.28 11870.17
1990/11/30 11408.40 11633.58
1990/12/31 11583.21 12215.11
1991/01/31 11669.31 12338.98
1991/02/28 11762.90 12437.64
1991/03/31 11837.42 12522.24
1991/04/30 11969.45 12658.72
1991/05/31 12033.30 12736.53
1991/06/30 12036.92 12745.50
1991/07/31 12172.30 12887.55
1991/08/31 12427.84 13133.59
1991/09/30 12658.68 13359.51
1991/10/31 12808.46 13511.99
1991/11/30 12931.01 13667.13
1991/12/31 13338.94 14000.92
1992/01/31 13168.26 13874.14
1992/02/29 13202.42 13928.93
1992/03/31 13154.90 13874.14
1992/04/30 13228.82 13996.07
1992/05/31 13470.58 14213.03
1992/06/30 13660.53 14423.44
1992/07/31 13982.05 14710.20
1992/08/31 14111.32 14857.34
1992/09/30 14275.48 15059.03
1992/10/31 14064.80 14863.65
1992/11/30 14100.70 14807.17
1992/12/31 14289.64 15005.45
1993/01/31 14574.46 15297.31
1993/02/28 14865.25 15538.51
1993/03/31 14962.89 15600.32
1993/04/30 15054.77 15725.89
1993/05/31 15065.35 15690.98
1993/06/30 15364.03 15937.27
1993/07/31 15483.03 15976.29
1993/08/31 15823.62 16229.61
1993/09/30 15868.94 16297.00
1993/10/31 15954.38 16340.63
1993/11/30 15863.03 16249.48
1993/12/31 15931.98 16323.90
1994/01/31 16100.24 16505.22
1994/02/28 15789.06 16261.12
1994/03/31 15483.22 15992.78
1994/04/30 15421.66 15883.94
1994/05/31 15368.45 15894.60
1994/06/30 15364.18 15896.78
1994/07/31 15509.99 16125.62
1994/08/31 15508.14 16176.04
1994/09/30 15431.17 16027.20
1994/10/31 15432.11 16025.02
1994/11/30 15476.35 15952.29
1994/12/31 15539.02 16008.78
1995/01/31 15707.93 16278.57
1995/02/28 15902.13 16616.25
1995/03/31 15983.39 16711.27
1995/04/30 16140.96 16917.56
1995/05/31 16535.25 17429.04
1995/06/30 16633.08 17545.88
1995/07/31 16624.19 17548.30
1995/08/31 16757.61 17708.05
1995/09/30 16875.60 17836.28
1995/10/31 17044.98 18035.05
1995/11/30 17244.83 18272.13
1995/12/31 17433.81 18463.63
1996/01/31 17577.90 18622.89
1996/02/29 17360.74 18404.24
1996/03/31 17293.49 18309.46
1996/04/30 17206.10 18244.73
1996/05/31 17185.09 18230.92
1996/06/30 17342.46 18424.60
1996/07/31 17387.91 18479.38
1996/08/31 17417.05 18493.93
1996/09/30 17607.73 18751.61
1996/10/31 17886.29 19082.98
1996/11/30 18092.63 19334.59
1996/12/31 17994.30 19210.72
1997/01/31 18070.40 19285.39
1997/02/28 18087.45 19322.23
1997/03/31 17974.87 19188.91
1997/04/30 18173.20 19414.35
1997/05/31 18287.07 19575.55
1997/06/30 18468.13 19754.20
1997/07/31 18806.78 20156.11
1997/08/31 18735.08 20054.78
1997/09/30 18928.66 20287.98
1997/10/31 19108.44 20512.69
1997/11/30 19143.93 20558.02
1997/12/31 19290.40 20722.37
1998/01/31 19525.32 20993.87
1998/02/28 19516.47 20977.87
1998/03/31 19590.16 21045.26
1998/04/30 19660.99 21150.70
1998/05/31 19808.16 21305.84
1998/06/30 19917.02 21441.83
1998/07/31 19971.99 21517.47
1998/08/31 20195.19 21855.62
1998/09/30 20567.46 22404.67
1998/10/30 20524.99 22382.61
IMATRL PRASUN SHR__CHT 19981031 19981111 155706 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class A on
October 31, 1988, and the current 3.75% sales charge was paid. As the
chart shows, by October 31, 1998, the value of the investment would
have grown to $20,525 - a 105.25% 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 and capital gains, if any, reinvested, the same $10,000
investment would have grown to $22,383 - a 123.83% 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 OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF
SALE OF CLASS A
SHARES) TO
OCTOBER 31,
1998 1997 1996
DIVIDEND RETURNS 5.71% 6.16% 1.00%
CAPITAL RETURNS 1.70% 0.67% 1.64%
TOTAL RETURNS 7.41% 6.83% 2.64%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.76(CENTS) 29.05(CENTS) 58.35(CENTS)
ANNUALIZED DIVIDEND RATE 5.19% 5.40% 5.48%
30-DAY ANNUALIZED YIELD 4.71% - -
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 share price of $10.80 over the past one
month, $10.68 over the past six months and $10.65 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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 includes the effect of Class A's
current 3.75% sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class T shares,
took place on September 10, 1992. Class T shares bear a 0.25% 12b-1
fee that is reflected in returns after September 10, 1992. Returns
prior to that date are those of the Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Had Class T
shares' 12b-1 fee been reflected, returns prior to September 10, 1992
would have been lower. If Fidelity had not reimbursed certain class
expenses, the past five year and past 10 year total returns and
dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL T 7.24% 28.49% 112.99%
FIDELITY ADV INT BOND - CL T 4.29% 24.96% 107.13%
(INCL. 2.75% SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 36.97% 123.83%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 30.54% 105.48%
DEBT 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 short-intermediate investment grade debt funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 94 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL T 7.24% 5.14% 7.85%
FIDELITY ADV INT BOND - CL T 4.29% 4.56% 7.55%
(INCL. 2.75% SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 6.49% 8.39%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 5.47% 7.46%
DEBT FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURNS take Class T's cumulative return and show
you what would have happened if Class T had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Intermed Bond -CL T LB Intermediate Govt/Corp
00287 LB007
1988/10/31 9725.00 10000.00
1988/11/30 9664.95 9914.67
1988/12/31 9673.84 9923.40
1989/01/31 9779.09 10027.63
1989/02/28 9755.94 9986.18
1989/03/31 9794.49 10029.33
1989/04/30 9959.24 10229.80
1989/05/31 10146.54 10432.94
1989/06/30 10393.76 10695.95
1989/07/31 10613.65 10915.57
1989/08/31 10470.31 10774.49
1989/09/30 10519.73 10825.39
1989/10/31 10739.23 11054.23
1989/11/30 10827.56 11159.92
1989/12/31 10845.41 11190.46
1990/01/31 10737.54 11118.71
1990/02/28 10772.86 11159.19
1990/03/31 10757.80 11173.73
1990/04/30 10688.25 11134.95
1990/05/31 10942.11 10991.93
1990/06/30 11088.40 11532.01
1990/07/31 11236.44 11692.00
1990/08/31 11142.64 11644.00
1990/09/30 11225.01 11733.93
1990/10/31 11330.79 11870.17
1990/11/30 11526.93 11633.58
1990/12/31 11703.55 12215.11
1991/01/31 11790.55 12338.98
1991/02/28 11885.11 12437.64
1991/03/31 11960.41 12522.24
1991/04/30 12093.81 12658.72
1991/05/31 12158.32 12736.53
1991/06/30 12161.98 12745.50
1991/07/31 12298.76 12887.55
1991/08/31 12556.97 13133.59
1991/09/30 12790.19 13359.51
1991/10/31 12941.54 13511.99
1991/11/30 13065.36 13667.13
1991/12/31 13477.53 14000.92
1992/01/31 13305.07 13874.14
1992/02/29 13339.58 13928.93
1992/03/31 13291.57 13874.14
1992/04/30 13366.26 13996.07
1992/05/31 13610.53 14213.03
1992/06/30 13802.45 14423.44
1992/07/31 14127.32 14710.20
1992/08/31 14257.93 14857.34
1992/09/30 14423.80 15059.03
1992/10/31 14210.92 14863.65
1992/11/30 14247.20 14807.17
1992/12/31 14438.10 15005.45
1993/01/31 14725.88 15297.31
1993/02/28 15019.70 15538.51
1993/03/31 15118.35 15600.32
1993/04/30 15211.18 15725.89
1993/05/31 15221.87 15690.98
1993/06/30 15523.66 15937.27
1993/07/31 15643.89 15976.29
1993/08/31 15988.02 16229.61
1993/09/30 16033.81 16297.00
1993/10/31 16120.14 16340.63
1993/11/30 16027.84 16249.48
1993/12/31 16097.51 16323.90
1994/01/31 16267.52 16505.22
1994/02/28 15953.11 16261.12
1994/03/31 15644.09 15992.78
1994/04/30 15581.89 15883.94
1994/05/31 15528.12 15894.60
1994/06/30 15523.81 15896.78
1994/07/31 15671.13 16125.62
1994/08/31 15669.27 16176.04
1994/09/30 15591.49 16027.20
1994/10/31 15592.44 16025.02
1994/11/30 15637.14 15952.29
1994/12/31 15700.47 16008.78
1995/01/31 15871.13 16278.57
1995/02/28 16067.35 16616.25
1995/03/31 16149.45 16711.27
1995/04/30 16308.66 16917.56
1995/05/31 16707.04 17429.04
1995/06/30 16805.89 17545.88
1995/07/31 16796.91 17548.30
1995/08/31 16931.72 17708.05
1995/09/30 17050.93 17836.28
1995/10/31 17222.07 18035.05
1995/11/30 17423.99 18272.13
1995/12/31 17614.94 18463.63
1996/01/31 17760.53 18622.89
1996/02/29 17541.11 18404.24
1996/03/31 17473.17 18309.46
1996/04/30 17384.87 18244.73
1996/05/31 17363.64 18230.92
1996/06/30 17522.64 18424.60
1996/07/31 17568.56 18479.38
1996/08/31 17598.01 18493.93
1996/09/30 17807.99 18751.61
1996/10/31 18088.43 19082.98
1996/11/30 18313.30 19334.59
1996/12/31 18215.42 19210.72
1997/01/31 18274.01 19285.39
1997/02/28 18289.44 19322.23
1997/03/31 18175.42 19188.91
1997/04/30 18374.78 19414.35
1997/05/31 18489.12 19575.55
1997/06/30 18652.98 19754.20
1997/07/31 19012.48 20156.11
1997/08/31 18921.41 20054.78
1997/09/30 19133.85 20287.98
1997/10/31 19314.29 20512.69
1997/11/30 19331.11 20558.02
1997/12/31 19495.61 20722.37
1998/01/31 19732.03 20993.87
1998/02/28 19722.00 20977.87
1998/03/31 19795.52 21045.26
1998/04/30 19865.57 21150.70
1998/05/31 19994.74 21305.84
1998/06/30 20104.07 21441.83
1998/07/31 20158.87 21517.47
1998/08/31 20383.31 21855.62
1998/09/30 20757.45 22404.67
1998/10/30 20713.00 22382.61
IMATRL PRASUN SHR__CHT 19981031 19981111 155306 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class T on
October 31, 1988, and the current 2.75% sales charge was paid. As the
chart shows, by October 31, 1998, the value of the investment would
have grown to $20,713 - a 107.13% 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 and capital gains, if any, reinvested, the same $10,000
investment would have grown to $22,383 - a 123.83% 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 OCTOBER 31,
1998 1997 1996 1995 1994
DIVIDEND RETURNS 5.64% 6.12% 6.53% 6.46% 5.43%
CAPITAL RETURNS 1.60% 0.66% -1.50% 3.99% -8.70%
TOTAL RETURNS 7.24% 6.78% 5.03% 10.45% -3.27%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.68(CENTS) 28.74(CENTS) 57.68(CENTS)
ANNUALIZED DIVIDEND RATE 5.10% 5.34% 5.42%
30-DAY ANNUALIZED YIELD 4.67% - -
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 share price of $10.80 over the past one
month, $10.68 over the past six months and $10.65 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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 includes the effect of Class T's
current 2.75% sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
The initial offering of Class B shares took place on June 30, 1994.
Class B shares bear a 0.90% 12b-1 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 shares' 0.25%
12b-1 fee. Returns prior to September 10, 1992 are those of the
Institutional Class, the original class of the fund, which does not
bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges 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 OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL B 6.63% 24.49% 106.35%
FIDELITY ADV INT BOND - CL B 3.63% 24.49% 106.35%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 36.97% 123.83%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 30.54% 105.48%
DEBT 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 short-intermediate investment grade debt funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 94 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL B 6.63% 4.48% 7.51%
FIDELITY ADV INT BOND - CL B 3.63% 4.48% 7.51%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 6.49% 8.39%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 5.47% 7.46%
DEBT FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURNS take Class B's cumulative return and show
you what would have happened if Class B had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Intermed Bond -CL B LB Intermediate Govt/Corp
00687 LB007
1988/10/31 10000.00 10000.00
1988/11/30 9938.25 9914.67
1988/12/31 9947.39 9923.40
1989/01/31 10055.62 10027.63
1989/02/28 10031.81 9986.18
1989/03/31 10071.45 10029.33
1989/04/30 10240.87 10229.80
1989/05/31 10433.46 10432.94
1989/06/30 10687.67 10695.95
1989/07/31 10913.78 10915.57
1989/08/31 10766.38 10774.49
1989/09/30 10817.21 10825.39
1989/10/31 11042.91 11054.23
1989/11/30 11133.74 11159.92
1989/12/31 11152.09 11190.46
1990/01/31 11041.18 11118.71
1990/02/28 11077.49 11159.19
1990/03/31 11062.00 11173.73
1990/04/30 10990.48 11134.95
1990/05/31 11251.52 10991.93
1990/06/30 11401.95 11532.01
1990/07/31 11554.18 11692.00
1990/08/31 11457.73 11644.00
1990/09/30 11542.43 11733.93
1990/10/31 11651.20 11870.17
1990/11/30 11852.88 11633.58
1990/12/31 12034.50 12215.11
1991/01/31 12123.96 12338.98
1991/02/28 12221.19 12437.64
1991/03/31 12298.62 12522.24
1991/04/30 12435.80 12658.72
1991/05/31 12502.13 12736.53
1991/06/30 12505.89 12745.50
1991/07/31 12646.54 12887.55
1991/08/31 12912.05 13133.59
1991/09/30 13151.87 13359.51
1991/10/31 13307.49 13511.99
1991/11/30 13434.82 13667.13
1991/12/31 13858.64 14000.92
1992/01/31 13681.31 13874.14
1992/02/29 13716.80 13928.93
1992/03/31 13667.42 13874.14
1992/04/30 13744.22 13996.07
1992/05/31 13995.41 14213.03
1992/06/30 14192.76 14423.44
1992/07/31 14526.80 14710.20
1992/08/31 14661.11 14857.34
1992/09/30 14831.67 15059.03
1992/10/31 14612.78 14863.65
1992/11/30 14650.08 14807.17
1992/12/31 14846.38 15005.45
1993/01/31 15142.29 15297.31
1993/02/28 15444.42 15538.51
1993/03/31 15545.86 15600.32
1993/04/30 15641.32 15725.89
1993/05/31 15652.31 15690.98
1993/06/30 15962.63 15937.27
1993/07/31 16086.26 15976.29
1993/08/31 16440.12 16229.61
1993/09/30 16487.21 16297.00
1993/10/31 16575.98 16340.63
1993/11/30 16481.07 16249.48
1993/12/31 16552.71 16323.90
1994/01/31 16727.52 16505.22
1994/02/28 16404.22 16261.12
1994/03/31 16086.47 15992.78
1994/04/30 16022.51 15883.94
1994/05/31 15967.22 15894.60
1994/06/30 15962.79 15896.78
1994/07/31 16096.93 16125.62
1994/08/31 16083.21 16176.04
1994/09/30 15992.40 16027.20
1994/10/31 15966.39 16025.02
1994/11/30 16001.63 15952.29
1994/12/31 16039.30 16008.78
1995/01/31 16203.18 16278.57
1995/02/28 16394.50 16616.25
1995/03/31 16483.24 16711.27
1995/04/30 16619.60 16917.56
1995/05/31 17031.46 17429.04
1995/06/30 17137.54 17545.88
1995/07/31 17102.35 17548.30
1995/08/31 17230.24 17708.05
1995/09/30 17342.39 17836.28
1995/10/31 17506.92 18035.05
1995/11/30 17701.02 18272.13
1995/12/31 17885.54 18463.63
1996/01/31 18008.09 18622.89
1996/02/29 17793.35 18404.24
1996/03/31 17697.52 18309.46
1996/04/30 17614.39 18244.73
1996/05/31 17564.92 18230.92
1996/06/30 17733.53 18424.60
1996/07/31 17752.23 18479.38
1996/08/31 17771.33 18493.93
1996/09/30 17974.14 18751.61
1996/10/31 18265.20 19082.98
1996/11/30 18465.05 19334.59
1996/12/31 18355.58 19210.72
1997/01/31 18422.50 19285.39
1997/02/28 18427.81 19322.23
1997/03/31 18300.35 19188.91
1997/04/30 18472.95 19414.35
1997/05/31 18594.84 19575.55
1997/06/30 18749.37 19754.20
1997/07/31 19081.46 20156.11
1997/08/31 18996.68 20054.78
1997/09/30 19181.46 20287.98
1997/10/31 19351.65 20512.69
1997/11/30 19357.47 20558.02
1997/12/31 19512.24 20722.37
1998/01/31 19756.03 20993.87
1998/02/28 19735.84 20977.87
1998/03/31 19797.97 21045.26
1998/04/30 19857.35 21150.70
1998/05/31 19974.75 21305.84
1998/06/30 20091.46 21441.83
1998/07/31 20115.25 21517.47
1998/08/31 20327.86 21855.62
1998/09/30 20690.46 22404.67
1998/10/30 20634.85 22382.61
IMATRL PRASUN SHR__CHT 19981031 19981111 155545 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class B on
October 31, 1988. As the chart shows, by October 31, 1998 the value of
the investment would have been $20,635 - a 106.35% 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 and capital gains, if any, reinvested, the same $10,000
investment would have grown to $22,383 - a 123.83% 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 OCTOBER 31, JUNE 30, 1994
(COMMENCEMENT
OF SALE OF
CLASS B SHARES) TO
OCTOBER 31,
1998 1997 1996 1995 1994
DIVIDEND RETURNS 4.93% 5.38% 5.83% 5.66% 1.55%
CAPITAL RETURNS 1.70% 0.57% -1.50% 3.99% -1.53%
TOTAL RETURNS 6.63% 5.95% 4.33% 9.65% 0.02%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.09(CENTS) 25.09(CENTS) 50.49(CENTS)
ANNUALIZED DIVIDEND RATE 4.46% 4.66% 4.75%
30-DAY ANNUALIZED YIELD 4.15% - -
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 share price of $10.79 over the past one
month, $10.68 over the past six months and $10.64 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
The initial offering of Class C shares took place on November 3, 1997.
Class C shares bear a 1.00% 12b-1 fee that is reflected in returns
after November 3, 1997. Returns between June 30, 1994 (the date Class
B shares were first offered) and November 3, 1997 are those of Class B
and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1,
1996). Returns between September 10, 1992 (the date Class T shares
were first offered) and June 30, 1994 are those of Class T shares and
reflect Class T shares' 0.25% 12b-1 fee. Returns prior to September
10, 1992 are those of the Institutional Class, the original class of
the fund, which does not bear a 12b-1 fee. Had Class C shares' 12b-1
fee been reflected, returns between November 3, 1997 and January 1,
1996 and prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past one year, past
five years and past 10 years total return figures are 1%, 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 OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL C 6.31% 24.11% 105.72%
FIDELITY ADV INT BOND - CL C 5.31% 24.11% 105.72%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 36.97% 123.83%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 30.54% 105.48%
DEBT FUNDS AVERAGE
CUMULATIVE TOTAL RETURNS show Class C'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 C'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 C's performance stacked up against its peers, you can compare it
to the short-intermediate investment grade debt funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 94 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL C 6.31% 4.41% 7.48%
FIDELITY ADV INT BOND - CL C 5.31% 4.41% 7.48%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 9.12% 6.49% 8.39%
SHORT-INTERMEDIATE INVESTMENT GRADE 6.97% 5.47% 7.46%
DEBT FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURNS take Class C's cumulative return and show
you what would have happened if Class C had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Intermed Bond -CL C LB Intermediate Govt/Corp
00524 LB007
1988/10/31 10000.00 10000.00
1988/11/30 9938.25 9914.67
1988/12/31 9947.39 9923.40
1989/01/31 10055.62 10027.63
1989/02/28 10031.81 9986.18
1989/03/31 10071.45 10029.33
1989/04/30 10240.87 10229.80
1989/05/31 10433.46 10432.94
1989/06/30 10687.67 10695.95
1989/07/31 10913.78 10915.57
1989/08/31 10766.38 10774.49
1989/09/30 10817.21 10825.39
1989/10/31 11042.91 11054.23
1989/11/30 11133.74 11159.92
1989/12/31 11152.09 11190.46
1990/01/31 11041.18 11118.71
1990/02/28 11077.49 11159.19
1990/03/31 11062.00 11173.73
1990/04/30 10990.48 11134.95
1990/05/31 11251.52 10991.93
1990/06/30 11401.95 11532.01
1990/07/31 11554.18 11692.00
1990/08/31 11457.73 11644.00
1990/09/30 11542.43 11733.93
1990/10/31 11651.20 11870.17
1990/11/30 11852.88 11633.58
1990/12/31 12034.50 12215.11
1991/01/31 12123.96 12338.98
1991/02/28 12221.19 12437.64
1991/03/31 12298.62 12522.24
1991/04/30 12435.80 12658.72
1991/05/31 12502.13 12736.53
1991/06/30 12505.89 12745.50
1991/07/31 12646.54 12887.55
1991/08/31 12912.05 13133.59
1991/09/30 13151.87 13359.51
1991/10/31 13307.49 13511.99
1991/11/30 13434.82 13667.13
1991/12/31 13858.64 14000.92
1992/01/31 13681.31 13874.14
1992/02/29 13716.80 13928.93
1992/03/31 13667.42 13874.14
1992/04/30 13744.22 13996.07
1992/05/31 13995.41 14213.03
1992/06/30 14192.76 14423.44
1992/07/31 14526.80 14710.20
1992/08/31 14661.11 14857.34
1992/09/30 14831.67 15059.03
1992/10/31 14612.78 14863.65
1992/11/30 14650.08 14807.17
1992/12/31 14846.38 15005.45
1993/01/31 15142.29 15297.31
1993/02/28 15444.42 15538.51
1993/03/31 15545.86 15600.32
1993/04/30 15641.32 15725.89
1993/05/31 15652.31 15690.98
1993/06/30 15962.63 15937.27
1993/07/31 16086.26 15976.29
1993/08/31 16440.12 16229.61
1993/09/30 16487.21 16297.00
1993/10/31 16575.98 16340.63
1993/11/30 16481.07 16249.48
1993/12/31 16552.71 16323.90
1994/01/31 16727.52 16505.22
1994/02/28 16404.22 16261.12
1994/03/31 16086.47 15992.78
1994/04/30 16022.51 15883.94
1994/05/31 15967.22 15894.60
1994/06/30 15962.79 15896.78
1994/07/31 16096.93 16125.62
1994/08/31 16083.21 16176.04
1994/09/30 15992.40 16027.20
1994/10/31 15966.39 16025.02
1994/11/30 16001.63 15952.29
1994/12/31 16039.30 16008.78
1995/01/31 16203.18 16278.57
1995/02/28 16394.50 16616.25
1995/03/31 16483.24 16711.27
1995/04/30 16619.60 16917.56
1995/05/31 17031.46 17429.04
1995/06/30 17137.54 17545.88
1995/07/31 17102.35 17548.30
1995/08/31 17230.24 17708.05
1995/09/30 17342.39 17836.28
1995/10/31 17506.92 18035.05
1995/11/30 17701.02 18272.13
1995/12/31 17885.54 18463.63
1996/01/31 18008.09 18622.89
1996/02/29 17793.35 18404.24
1996/03/31 17697.52 18309.46
1996/04/30 17614.39 18244.73
1996/05/31 17564.92 18230.92
1996/06/30 17733.53 18424.60
1996/07/31 17752.23 18479.38
1996/08/31 17771.33 18493.93
1996/09/30 17974.14 18751.61
1996/10/31 18265.20 19082.98
1996/11/30 18465.05 19334.59
1996/12/31 18355.58 19210.72
1997/01/31 18422.50 19285.39
1997/02/28 18427.81 19322.23
1997/03/31 18300.35 19188.91
1997/04/30 18472.95 19414.35
1997/05/31 18594.84 19575.55
1997/06/30 18749.37 19754.20
1997/07/31 19081.46 20156.11
1997/08/31 18996.68 20054.78
1997/09/30 19181.46 20287.98
1997/10/31 19351.65 20512.69
1997/11/30 19352.52 20558.02
1997/12/31 19503.70 20722.37
1998/01/31 19726.82 20993.87
1998/02/28 19688.88 20977.87
1998/03/31 19749.31 21045.26
1998/04/30 19806.88 21150.70
1998/05/31 19922.14 21305.84
1998/06/30 20036.99 21441.83
1998/07/31 20059.10 21517.47
1998/08/31 20269.18 21855.62
1998/09/30 20648.33 22404.67
1998/10/30 20572.20 22382.61
IMATRL PRASUN SHR__CHT 19981031 19981111 155436 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class C on
October 31, 1988. As the chart shows, by October 31, 1998 the value of
the investment would have been $20,572 - a 105.72% 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 and capital gains, if any, reinvested, the same $10,000
investment would have grown to $22,383 - a 123.83% 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 3, 1997
(COMMENCEMENT OF
SALE OF CLASS C
SHARES) TO
OCTOBER 31,
1998
DIVIDEND RETURNS 4.77%
CAPITAL RETURNS 1.80%
TOTAL RETURNS 6.57%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital 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, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIOD ENDED OCTOBER 31, 1998 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
DIVIDENDS PER SHARE 4.00(CENTS) 24.56(CENTS) 48.85(CENTS)
ANNUALIZED DIVIDEND RATE 4.36% 4.56% 4.62%
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 share price of $10.79 over the past one
month, $10.68 over the past six months and $10.65 over the life of the
class, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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. Yield information will be
reported once Class C has a longer more stable operating history.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Uncertainty in the global equity
markets, combined with two
interest-rate cuts by the Federal
Reserve Board, provided the
backdrop for strong gains in the
bond market during the 12-month
period ended October 31, 1998. The
Lehman Brothers Aggregate Bond
Index - a broad measure of the U.S.
taxable investment-grade bond
market - returned 9.34% over the
past year. Global market volatility,
low interest rates and a sharp
decline in stock prices sent U.S.
Treasury yields - which move in
the opposite direction of bond
prices - to their lowest levels in
30 years. While the extreme flight
to quality helped Treasuries
outperform all other sectors of the
bond market, corporate bond
investors benefited from a stable
domestic economy, low interest rates
and low inflation. The Lehman
Brothers Corporate Bond Index
returned 7.99% for the past 12
months. Despite high refinancing
activity, mortgage bonds also
performed well. The Lehman Brothers
Mortgage Backed Securities Index
posted a 12-month return of 7.30%.
Late in the period, the bond market
stumbled as the Group of Seven
leading industrial nations eased
global market fears with
announcements that the International
Monetary Fund would establish a
precautionary line of credit to help
certain countries resolve their
financial crises. In spite of weakness
toward the end of the period, the
yield on the benchmark 30-year
Treasury closed at 5.15%.
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the 12-month period that ended October 31, 1998, the fund's
Class A, Class T, Class B and Class C shares returned 7.41%, 7.24%,
6.63% and 6.31%, respectively. The fund's performance compares with
the short-intermediate investment grade debt funds average tracked by
Lipper Analytical Services, which returned 6.97%. The fund lagged the
Lehman Brothers Intermediate Government/Corporate Bond Index, which
returned 9.12% during the same period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S UNDERPERFORMANCE OF THE
LEHMAN BROTHERS INDEX?
A. Historically, the fund has been overweighted in corporate bonds as
well as mortgage and asset-backed securities compared to Treasury
bonds. The Lehman Brothers Intermediate Government/Corporate Bond
Index tends to have over 40% of its assets in short- and
intermediate-maturity Treasuries. For many years, we've been able to
replace the short-term Treasuries that the fund would ordinarily hold
with short-term, high-grade corporate bonds. Over the long haul, the
yield advantage of the short-term corporate bonds helps generate
higher total return than government bonds. However, in an environment
like we experienced in August and September, the markets seemed to
care only about government-guaranteed bonds, and Treasuries benefited
from a massive flight to quality. While this situation was good for
Treasury bonds, it caused the fund to underperform the Lehman Brothers
Intermediate Government/Corporate Bond Index because the rally was for
the most part limited to Treasuries.
Q. CAN YOU GIVE US YOUR THOUGHTS REGARDING THE RECENT INTEREST-RATE
CUTS?
A. During most of the period, we witnessed an extreme demand for
safety that we haven't seen since the 1987 market crash. Toward the
end of the period, however, two interest-rate cuts by the Federal
Reserve Board, most notably the surprise rate cut on October 15, were
instrumental in changing market sentiment. The market seemed to
believe that the Fed would not let the economy slide into recession
and that it was willing to act aggressively to prevent an economic
downturn. At the end of the period, the federal funds rate - the
overnight interbank loan rate - stood at 5.00%, yet the yield on the
two-year Treasury dropped to approximately 4.25%. This yield spread is
telling us that the bond market believes the Federal Reserve will cut
rates further. This may or may not come to pass, but it's clear that
the market is very concerned about the potential for recession over
the next few quarters.
Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD?
A. During most of the year, I felt the mortgage-securities market was
expensive relative to Treasuries and I kept the fund's position close
to the index. As it turns out, we experienced a massive re-pricing of
these securities and the mortgage market was much cheaper as the
period drew to a close. In fact, over the past eight to 10 years,
mortgage rates have ranged anywhere from 80 to 130 basis points higher
than the 10-year Treasury bond. At the end of September, the yield
spread between Ginnie Mae Mortgage bonds and the 10-year Treasury was
over 200 points.
Q. DID YOU TAKE ANY ACTION AT THAT POINT?
A. I did. As a result, I increased the fund's position in mortgage
securities to take advantage of the interest-rate advantage over
Treasuries. Additionally, the fund held approximately 37% of its
investments in corporate bonds at the end of the period. This sector
was contributing to performance until we had the massive flight to
quality - and to Treasuries - at the end of the summer. The fund's
overweighted position in corporate bonds relative to the index hurt
performance in the long run.
Q. WHAT'S YOUR OUTLOOK?
A. I think we need to take a cautious view. However, with the federal
funds rate at 5.00% at the end of the period, combined with the
Federal Reserve Board's recent bias to ease rates, there are now more
reasons to be optimistic. At the same time, I have positioned the fund
relatively defensively because I believe it may take some time before
corporate America returns to a solid growth path. The underlying
economy seems to be in good shape, however, and we are beginning to
see a light at the end of the tunnel. Corporate bonds will continue to
be a focus for the fund and I will continue to look closely at
mortgage securities, maybe adding to the fund's position.
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.
KEVIN GRANT ON THE FUND'S
BENCHMARK, THE LEHMAN
BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND
INDEX AND ITS ROLE IN THE
MANAGEMENT OF THE FUND:
"The Lehman Brothers Intermediate
Government/Corporate Bond Index
- - a market value weighted
benchmark of investment-grade
fixed-rate debt issues with
maturities of at least one year -
plays a very important role in the
management of the fund. It's the
fund's benchmark index and
includes most of the universe of
investment-grade bonds with
maturities of one year or more. I
use the index as a guideline for the
structure of the overall bond
market, managing the fund to be
generally as sensitive to changes in
interest rates as the index. In
addition, I refer to the index when
deciding how to allocate assets
among different maturities and
market sectors - such as
corporate, mortgage or government
securities - based on my view of
the relative value of each maturity
or sector."
FUND FACTS
GOAL: high current income, by
investing mainly in
investment-grade debt
securities
START DATE: February 2, 1984
SIZE: as of October 31, 1998,
more than $509 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in 1993
(checkmark)
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF OCTOBER 31, 1998
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 5 MONTHS AGO
AAA 54.8 57.5
AA 4.3 7.5
A 17.2 20.6
BAA 9.4 10.9
BA 1.5 1.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS BA OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1998
5 MONTHS AGO
YEARS 5.5 6.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1998
5 MONTHS AGO
YEARS 3.2 3.4
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 OCTOBER 31, 1998 * AS OF MAY 31, 1998 **
CORPORATE BONDS 37.0%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 12.4%
MORTGAGE
SECURITIES 32.5%
FOREIGN GOVERNMENT
OBLIGATIONS 2.9%
OTHER 2.4%
SHORT-TERM
INVESTMENTS 12.8%
* FOREIGN
INVESTMENTS 11.1%
CORPORATE BONDS 45.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 25.9%
MORTGAGE
SECURITIES 19.4%
FOREIGN GOVERNMENT
OBLIGATIONS 3.7%
OTHER 2.7%
SHORT-TERM
INVESTMENTS 2.5%
** FOREIGN
INVESTMENTS 12.0%
ROW: 1, COL: 1, VALUE: 12.8
ROW: 1, COL: 2, VALUE: 2.4
ROW: 1, COL: 3, VALUE: 2.9
ROW: 1, COL: 4, VALUE: 32.5
ROW: 1, COL: 5, VALUE: 12.4
ROW: 1, COL: 6, VALUE: 37.0
ROW: 1, COL: 1, VALUE: 2.5
ROW: 1, COL: 2, VALUE: 2.7
ROW: 1, COL: 3, VALUE: 3.7
ROW: 1, COL: 4, VALUE: 19.4
ROW: 1, COL: 5, VALUE: 25.9
ROW: 1, COL: 6, VALUE: 45.8
INVESTMENTS OCTOBER 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 25.9%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
BASIC INDUSTRIES - 2.0%
CHEMICALS & PLASTICS - 1.2%
Methanex Corp. yankee 8.875% 11/15/01 A2 $ 2,790,000 $ 2,877,299
Praxair, Inc. 6.15% 4/15/03 A3 3,640,000 3,671,086
6,548,385
PACKAGING & CONTAINERS - 0.8%
Owens-Illinois, Inc.:
7.15% 5/15/05 Ba1 1,500,000 1,492,254
7.35% 5/15/08 Ba1 1,450,000 1,428,563
7.8% 5/15/18 Ba1 1,750,000 1,656,377
4,577,194
TOTAL BASIC INDUSTRIES 11,125,579
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
CenterPoint Properties Trust 6.75% 4/1/05 Baa2 640,000 612,384
FINANCE - 14.1%
BANKS - 9.0%
ABN-Amro Bank NV, Chicago 6.625% Aa3 2,750,000 2,856,178
10/31/01
BankAmerica Corp. 10% 2/1/03 Aa3 210,000 242,243
BankBoston Companies 6.625% 2/1/04 A3 3,200,000 3,321,536
BanPonce Financial Corp.:
6.69% 9/21/00 A3 2,250,000 2,298,983
6.75% 8/9/01 A3 3,850,000 3,936,240
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 2,700,000 2,728,134
5.95% 7/15/01 A1 3,050,000 3,099,715
Capital One Bank 7.35% 6/20/00 Baa3 5,000,000 5,077,650
Capital One Financial Corp. 7.125% 8/1/08 Ba1 1,390,000 1,344,950
Chase Manhattan Corp. 5.5% 2/15/01 Aa3 600,000 598,512
Kansallis-Osake-Pankki, New York 10% 5/1/02 A3 650,000 740,883
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 439,155
NationsBank Corp. 8.125% 6/15/02 Aa3 3,000,000 3,224,700
Provident Bank 6.125% 12/15/00 A3 5,000,000 5,037,150
Skandinaviska Enskilda Banken yankee 8.45% A3 4,600,000 4,969,564
5/15/02
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
U.S. Bancorp 7.5% 6/1/26 A2 $ 2,000,000 $ 2,186,040
Union Planters National Bank 6.81% 8/20/01 A3 1,500,000 1,539,255
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 5,253,600
48,894,488
CREDIT & OTHER FINANCE - 3.0%
Associates Corp. of North America 6% 4/15/03 Aa3 1,350,000 1,377,756
Deere (John) Capital Corp. 9.625% 11/1/98 A3 2,500,000 2,500,000
ERP Operating LP 6.55% 11/15/01 A3 470,000 470,080
Ford Motor Credit Co. 7.75% 11/15/02 A1 100,000 107,492
General Electric Capital Corp. 6.94% Aaa 2,530,000 2,547,862
4/13/09 (b)
GS Escrow Corp. 7.125% 8/1/05 (c) Ba1 2,350,000 2,294,869
RBSG Capital Corp. 10.125% 3/1/04 A2 1,500,000 1,813,500
Sears Roebuck Acceptance Corp. 6.15% A2 5,000,000 5,095,800
11/15/05
16,207,359
INSURANCE - 1.9%
Protective Life Corp. 7.95% 7/1/04 A3 1,000,000 1,129,580
SunAmerica, Inc. 6.2% 10/31/99 Baa1 9,300,000 9,392,721
10,522,301
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB 6.2% 4/2/01 Baa3 900,000 899,019
TOTAL FINANCE 76,523,167
INDUSTRIAL MACHINERY & EQUIPMENT - 1.9%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
Tyco International Group SA yankee 6.125% Baa1 4,000,000 4,080,880
6/15/01
POLLUTION CONTROL - 1.2%
WMX Technologies, Inc. 7.1% 8/1/26 Baa3 6,000,000 6,310,380
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 10,391,260
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.7%
TCI Communications, Inc. 8.75% 8/1/15 Baa3 3,470,000 4,210,672
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.1%
Viacom, Inc. 7.75% 6/1/05 Baa3 $ 400,000 $ 431,132
TOTAL MEDIA & LEISURE 4,641,804
NONDURABLES - 1.1%
TOBACCO - 1.1%
Philip Morris Companies, Inc. 6.95% 6/1/06 A2 6,000,000 6,282,720
RETAIL & WHOLESALE - 0.4%
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 1,970,000 2,000,594
TECHNOLOGY - 1.0%
COMPUTER SERVICES & SOFTWARE - 1.0%
First Data Corp. 6.625% 4/1/03 A2 5,000,000 5,242,750
UTILITIES - 4.5%
CELLULAR - 0.9%
360 Degrees Communications Co. Baa1 1,050,000 1,164,608
7.5% 3/1/06
AirTouch Communications, Inc. Baa2 1,795,000 1,869,762
6.35% 6/1/05
Cable & Wireless Communications PLC Baa1 2,090,000 2,130,630
6.375% 3/6/03
5,165,000
ELECTRIC UTILITY - 3.2%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 2,000,000 2,015,180
7.05% 12/11/07 (c) Baa2 5,000,000 5,274,300
British Columbia Hydro & Power Authority Aa2 940,000 991,484
yankee 12.5% 1/15/14
DR Investments UK PLC yankee 7.1% A2 5,000,000 5,252,200
5/15/02 (c)
Israel Electric Corp. Ltd. 7.75% 12/15/27 (c) A3 3,840,000 3,543,706
Virginia Electric & Power Co. 7.375% 7/1/02 A2 150,000 160,356
17,237,226
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.4%
MCI WorldCom, Inc. 6.4% 8/15/05 Baa2 $ 1,850,000 $ 1,922,095
TOTAL UTILITIES 24,324,321
TOTAL NONCONVERTIBLE BONDS 141,144,579
(Cost $138,484,486)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 12.4%
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.7%
Fannie Mae:
5.75% 6/15/05 Aaa 2,320,000 2,419,690
6.15% 1/13/00 Aaa 1,100,000 1,117,875
Farm Credit Systems Financial Assistance Corp. Aaa 1,800,000 2,143,962
9.375% 7/21/03
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 3,830,000 4,254,900
7.38% 8/5/04 Aaa 1,930,000 2,160,384
7.7% 9/20/04 Aaa 1,250,000 1,422,263
Freddie Mac:
5.035% 4/28/03 Aaa 15,000,000 15,092,400
8.115% 1/31/05 Aaa 5,460,000 6,362,593
Government Trust Certificates (assets of Trust Aaa 784,950 832,911
guaranteed by U.S. Government through
Defense Security Assistance Agency)
Class 2-E, 9.4% 5/15/02
Guaranteed Export Trust Certificates (assets of
Trust guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.12% 4/15/06 Aaa 287,778 310,916
Series 1994-C, 6.61% 9/15/99 Aaa 23,509 23,679
36,141,573
U.S. TREASURY OBLIGATIONS - 5.7%
U.S. Treasury Bonds:
8.75% 5/15/17 Aaa 410,000 572,655
12.75% 11/15/10 (callable) Aaa 2,498,000 3,676,357
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - CONTINUED
U.S. Treasury Notes:
6.375% 9/30/01 Aaa $ 8,500,000 $ 8,958,065
7% 7/15/06 Aaa 9,300,000 10,709,508
7.25% 8/15/04 Aaa 6,390,000 7,289,584
31,206,169
TOTAL U.S. GOVERNMENT AND 67,347,742
GOVERNMENT AGENCY OBLIGATIONS
(Cost $65,242,339)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES - 29.9%
FANNIE MAE - 25.2%
5.5% 5/1/03 to 5/1/11 Aaa 3,347,441 3,336,570
6% 5/1/01 to 10/1/13 (e) Aaa 44,216,131 44,269,986
6% 11/1/13 (d) Aaa 19,000,000 19,083,125
6.5% 10/1/27 to 7/1/28 Aaa 36,031,841 36,313,325
6.5% 11/1/28 (d) Aaa 16,000,000 16,125,000
7% 11/1/28 (d) Aaa 970,000 991,219
7.5% 2/1/28 to 4/1/28 (e) Aaa 1,010,000 1,035,563
8.5% 6/1/11 to 2/1/28 Aaa 9,993,058 10,404,135
9.5% 2/1/25 Aaa 2,751,702 2,971,811
10% 1/1/20 Aaa 59,101 64,531
10.5% 7/1/11 to 8/1/20 Aaa 395,316 435,987
11% 8/1/15 Aaa 1,721,555 1,886,841
12.5% 2/1/11 to 4/1/15 Aaa 79,125 91,202
137,009,295
FREDDIE MAC - 1.3%
5.5% 12/1/02 to 6/1/03 Aaa 1,732,400 1,729,022
7% 11/1/00 to 7/1/01 Aaa 1,580,497 1,594,757
8.5% 9/1/24 to 8/1/27 Aaa 2,610,000 2,716,463
9.5% 1/1/17 Aaa 14,738 15,835
10% 4/1/05 to 8/1/10 Aaa 283,275 302,040
10.25% 12/1/09 Aaa 33,407 35,996
10.5% 5/1/21 Aaa 607,210 663,936
11% 12/1/11 Aaa 26,755 29,556
11.5% 10/1/15 Aaa 99,501 110,730
11.75% 10/1/10 Aaa 38,793 43,325
7,241,660
U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.4%
7% 11/15/22 to 7/15/28 Aaa $ 4,544,874 $ 4,664,830
8% 2/15/02 to 6/15/25 Aaa 3,166,251 3,263,516
8.5% 4/15/17 to 12/15/21 Aaa 560,026 594,784
9% 5/15/16 to 10/15/18 Aaa 2,574,911 2,759,564
10% 11/15/09 to 1/15/26 Aaa 2,921,561 3,149,871
11% 12/15/09 to 10/15/20 Aaa 795,402 862,375
11.5% 3/15/10 to 2/15/19 Aaa 2,616,378 2,911,662
18,206,602
TOTAL U.S. GOVERNMENT AGENCY - 162,457,557
MORTGAGE SECURITIES
(Cost $160,943,708)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET-BACKED SECURITIES - 11.1%
Aesop Funding II LLC 6.22% 10/20/01 (c) Aaa 8,000,000 8,146,250
Arcadia Automobile Receivables Trust 6.5% Aaa 5,000,000 5,114,063
6/17/02
Capital Equipment Receivables Trust 6.11% Aaa 3,442,079 3,447,104
7/15/99
Chase Manhattan Grantor Trust:
6.61% 9/15/02 Aaa 1,496,696 1,520,643
6.76% 9/15/02 A3 561,261 568,277
Chevy Chase Auto Receivables Trust:
5.9% 7/15/03 Aaa 1,482,654 1,489,141
5.91% 12/15/04 Aaa 824,200 829,545
6.6% 12/15/02 Aaa 489,089 494,283
Citibank Credit Card Master Trust I 6.45% A2 10,000,000 10,193,750
8/15/02
Contimortgage Home Equity Loan Trust 6.26% Aaa 5,000,000 5,000,000
7/15/12
Ford Credit Auto Owner Trust:
6.4% 5/15/02 A1 1,460,000 1,497,580
6.4% 12/15/02 Baa3 590,000 590,885
Ford Credit Grantor Trust 5.9% 10/15/00 Aaa 892,188 894,557
Key Auto Finance Trust 6.3% 10/15/03 A2 1,520,018 1,526,906
KeyCorp Auto Grantor Trust 5.8% 7/15/00 A3 26,892 26,889
MBNA Master Credit Card Trust II 6.55% Aaa 10,000,000 10,590,200
1/15/07
ASSET-BACKED SECURITIES - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
PNC Student Loan Trust I 6.314% 1/25/01 Aaa $ 5,000,000 $ 5,061,719
SCFC Recreational Vehicle Loan Trust 7.25% Aaa 222,163 220,630
9/15/06
Sears Credit Account Master Trust II 6.5% Aaa 3,400,000 3,415,912
10/15/03
TOTAL ASSET-BACKED SECURITIES 60,628,334
(Cost $59,378,095)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMMERCIAL MORTGAGE SECURITIES - 2.6%
BKB Commercial Mortgage Trust Series 1997 AA 1,117,859 1,114,715
C1, Class B, 7.218% 2/25/43 (c)(f)
CBM Funding Corp. sequential pay Series AA 56,087 56,394
1996-1 Class A 1, 7.55% 7/1/99
CS First Boston Mortgage Securities Corp.:
Series 1995-WF1 Class A-2, 6.648% AAA 4,930,135 4,950,164
12/21/27
Series 1998 FLI Class E, 6.1938% Baa2 2,970,000 2,887,397
1/10/13 (c)(f)
Equitable Life Assurance Society of the A2 1,000,000 1,025,900
United States (The) Series 1996-1 Class C1,
7.52% 5/15/06 (c)
Thirteen Affiliates of General Growth Properties, Aaa 2,500,000 2,558,825
Inc. sequential pay Series A-2, 6.602%
12/15/10 (c)
Wells Fargo Capital Markets Apartment Aaa 1,496,720 1,532,761
Financing Trust Series APT Class 1, 6.56%
12/29/05 (c)
TOTAL COMMERCIAL MORTGAGE SECURITIES 14,126,156
(Cost $14,057,804)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 2.9%
Canadian Government 6.125% 7/15/02 (g) Aa2 5,000,000 5,207,000
Manitoba Province yankee 6.875% 9/15/02 (g) Aa3 5,000,000 5,290,250
Quebec Province yankee 6.86% 4/15/26 (b)(g) A2 5,000,000 5,170,800
TOTAL FOREIGN GOVERNMENT AND 15,668,050
GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,921,450)
</TABLE>
SUPRANATIONAL OBLIGATIONS - 1.9%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (A) AMOUNT (NOTE 1)
Inter American Development Bank yankee Aaa $ 10,000,000 $ 10,639,600
6.29% 7/16/27
(Cost $9,937,100)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 0.5%
Canadian Imperial Bank of Commerce, Aa3 2,500,000 2,540,750
New York yankee 6.2% 8/1/00
(Cost $2,503,750)
</TABLE>
CASH EQUIVALENTS - 12.8%
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MATURITY
AMOUNT
Investments in repurchase agreements $ 69,601,708 69,569,000
(U.S. Government obligations), in a joint
trading account at 5.64%, dated
10/30/98 due 11/2/98
(Cost $69,569,000)
</TABLE>
TOTAL INVESTMENT IN SECURITIES - 100% $ 544,121,768
(Cost $535,037,732)
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(c) 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 $35,646,103 or 7.0% of net assets.
(d) Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
(e) A portion of the security was sold on a delayed delivery or
when-issued basis (see Note 2 of Notes to Financial Statements).
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed are assigned to the securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's
ratings of the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 75.1% AAA, AA, A 72.7%
Baa 9.4% BBB 8.7%
Ba 1.5% BB 1.5%
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
for the sovereign credit of the issuing government.
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
United States of America 88.9%
Canada 4.1
United Kingdom 3.5
Multi-National 1.9
Others (individually less than 1%) 1.6
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31, 1998, the aggregate cost of investment securities for
income tax purposes was $535,037,732. Net unrealized appreciation
aggregated $9,084,036, of which $10,896,220 related to appreciated
investment securities and $1,812,184 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $10,771,000 of which $9,361,000 and $1,410,000 will
expire on October 31, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 544,121,768
AGREEMENTS OF $69,569,000) (COST $535,037,732) -
SEE ACCOMPANYING SCHEDULE
COMMITMENT TO SELL SECURITIES ON A DELAYED DELIVERY BASIS $ (17,064,553)
RECEIVABLE FOR SECURITIES SOLD ON A DELAYED DELIVERY BASIS 16,881,675 (182,878)
RECEIVABLE FOR INVESTMENTS SOLD ON A REGULAR DELIVERY BASIS 56,003,420
CASH 809
RECEIVABLE FOR FUND SHARES SOLD 1,022,273
INTEREST RECEIVABLE 5,194,040
TOTAL ASSETS 606,159,432
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED 57,343,163
REGULAR DELIVERY
DELAYED DELIVERY 35,914,700
PAYABLE FOR FUND SHARES REDEEMED 2,189,449
DISTRIBUTIONS PAYABLE 555,583
ACCRUED MANAGEMENT FEE 184,181
DISTRIBUTION FEES PAYABLE 93,747
OTHER PAYABLES AND ACCRUED EXPENSES 151,851
TOTAL LIABILITIES 96,432,674
NET ASSETS $ 509,726,758
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 513,408,368
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (1,805,499)
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (10,777,269)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 8,901,158
NET ASSETS $ 509,726,758
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1998
CALCULATION OF MAXIMUM OFFERING PRICE $10.77
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($8,217,134 (DIVIDED BY) 763,057 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.25 OF $10.77) $11.19
CLASS T: $10.77
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($287,733,501 (DIVIDED BY) 26,715,809 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/97.25 OF $10.77) $11.07
CLASS B: $10.76
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($39,656,796 (DIVIDED BY) 3,685,158 SHARES) A
CLASS C: $10.76
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($6,100,072 (DIVIDED BY) 566,745 SHARES) A
INSTITUTIONAL CLASS: $10.78
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($168,019,255 (DIVIDED BY) 15,589,194 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
ELEVEN MONTHS YEAR ENDED
ENDED NOVEMBER 30,
OCTOBER 31, 1998 1997
INVESTMENT INCOME $ 28,854,700 $ 33,006,612
INTEREST
EXPENSES
MANAGEMENT FEE 1,941,732 2,095,786
TRANSFER AGENT FEES 891,022 876,536
DISTRIBUTION FEES 893,099 834,999
ACCOUNTING FEES AND EXPENSES 181,249 195,556
NON-INTERESTED TRUSTEES' COMPENSATION 1,224 7,862
CUSTODIAN FEES AND EXPENSES 31,734 29,201
REGISTRATION FEES 93,208 91,318
AUDIT 42,923 51,920
LEGAL 1,227 11,323
INTEREST 699 -
REPORTS TO SHAREHOLDERS 25,502 -
MISCELLANEOUS 1,469 7,221
TOTAL EXPENSES BEFORE REDUCTIONS 4,105,088 4,201,722
EXPENSE REDUCTIONS (37,684) (63,858)
TOTAL EXPENSES AFTER REDUCTIONS 4,067,404 4,137,864
NET INVESTMENT INCOME 24,787,296 28,868,748
REALIZED AND UNREALIZED GAIN (LOSS) 4,353,759 (1,460,647)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES
FOREIGN CURRENCY TRANSACTIONS - 747
TOTAL NET REALIZED GAIN (LOSS) 4,353,759 (1,459,900)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 4,922,976 (1,413,676)
DELAYED DELIVERY COMMITMENTS (182,878) -
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES - (747)
TOTAL CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 4,740,098 (1,414,423)
NET GAIN (LOSS) 9,093,857 (2,874,323)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 33,881,153 $ 25,994,425
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
ELEVEN MONTHS YEAR ENDED YEAR ENDED
ENDED NOVEMBER 30, NOVEMBER 30,
OCTOBER 31, 1998 1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 24,787,296 $ 28,868,748 $ 31,675,872
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 4,353,759 (1,459,900) (9,733,480)
CHANGE IN NET UNREALIZED 4,740,098 (1,414,423) 2,408,292
APPRECIATION (DEPRECIATION)
NET INCREASE (DECREASE) IN NET ASSETS 33,881,153 25,994,425 24,350,684
RESULTING FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET (24,380,390) (28,478,083) (31,669,310)
INVESTMENT INCOME
SHARE TRANSACTIONS - NET INCREASE 17,749,456 (8,667,273) 47,816,674
(DECREASE)
TOTAL INCREASE (DECREASE) IN NET ASSETS 27,250,219 (11,150,931) 40,498,048
NET ASSETS
BEGINNING OF PERIOD 482,476,539 493,627,470 453,129,422
END OF PERIOD (INCLUDING DISTRIBUTIONS $ 509,726,758 $ 482,476,539 $ 493,627,470
IN EXCESS OF NET INVESTMENT INCOME
OF $1,805,499 , $1,999,021 AND
$2,016,748, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.590 $ 10.350
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .537 .615 .159
NET REALIZED AND UNREALIZED GAIN (LOSS) .207 (.023) .235
TOTAL FROM INVESTMENT OPERATIONS .744 .592 .394
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.534) (.622) (.154)
NET ASSET VALUE, END OF PERIOD $ 10.770 $ 10.560 $ 10.590
TOTAL RETURN B, C 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 8,217 $ 3,819 $ 687
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% A, F .90% F .90% A, F
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.51% A 5.93% 6.45% A
PORTFOLIO TURNOVER RATE 176% A 138% 200%
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140 $ 10.640
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .537 D .625 D .671 D .649 .609 .785
NET REALIZED AND .201 (.058) (.147) .491 (.876) .511
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT .738 .567 .524 1.140 (.267) 1.296
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.528) (.617) (.674) (.640) (.555) (.796)
INCOME
IN EXCESS OF NET - - - - (.058) -
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.528) (.617) (.674) (.640) (.613) (.796)
NET ASSET VALUE, $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140
END OF PERIOD
TOTAL RETURN B, C 7.15% 5.56% 5.10% 11.43% (2.44)% 12.50%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 287,734 $ 278,869 $ 262,103 $ 228,439 $ 141,866 $ 59,184
(000 OMITTED)
RATIO OF EXPENSES TO .98% A .96% .97% .94% E 1.02% E 1.23%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .98% A .96% .96% F .94% 1.02% 1.23%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 5.48% A 5.97% 6.38% 6.20% 6.04% 6.81%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 176% A 138% 200% 189% 68% 59%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.540 $ 10.590 $ 10.750 $ 10.250 $ 10.430
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .468 D .551 D .597 D .579 .204
NET REALIZED AND UNREALIZED .214 (.057) (.153) .483 (.178)
GAIN (LOSS)
TOTAL FROM INVESTMENT .682 .494 .444 1.062 .026
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.462) (.544) (.604) (.562) (.187)
IN EXCESS OF NET - - - - (.019)
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.462) (.544) (.604) (.562) (.206)
NET ASSET VALUE, END OF PERIOD $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 6.60% 4.83% 4.32% 10.62% 0.24%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 39,657 $ 22,201 $ 18,972 $ 15,830 $ 3,156
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE 1.65% A, F 1.65% F 1.66% F 1.70% F 1.65% A, F
NET ASSETS
RATIO OF NET INVESTMENT INCOME 4.79% A 5.27% 5.69% 5.44% 5.42% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 176% A 138% 200% 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
ELEVEN MONTHS ENDED YEAR ENDED
OCTOBER 31, NOVEMBER 30,
1998 1997 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.570
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME D .453 .031
NET REALIZED AND UNREALIZED GAIN (LOSS) .199 (.005)
TOTAL FROM INVESTMENT OPERATIONS .652 .026
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.452) (.036)
NET ASSET VALUE, END OF PERIOD $ 10.760 $ 10.560
TOTAL RETURN B, C 6.30% 0.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,100 $ 160
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.75% A, F 1.75% A, F
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.75% A 1.73% A, G
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.67% A 4.42% A
PORTFOLIO TURNOVER RATE 176% A 138%
</TABLE>
A ANNUALIZED
B 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).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
ELEVEN MONTHS ENDED YEARS ENDED NOVEMBER 30,
OCTOBER 31,
1998 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160 $ 10.640
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .566 D .658 D .705 D .671 .602 .832
NET REALIZED AND .201 (.060) (.151) .499 (.833) .531
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT .767 .598 .554 1.170 (.231) 1.363
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.557) (.648) (.704) (.670) (.597) (.843)
INCOME
IN EXCESS OF NET - - - - (.062) -
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.557) (.648) (.704) (.670) (.659) (.843)
NET ASSET VALUE, $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160
END OF PERIOD
TOTAL RETURN B, C 7.44% 5.86% 5.40% 11.73% (2.10)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 168,019 $ 177,427 $ 211,866 $ 208,861 $ 172,122 $ 183,790
(000 OMITTED)
RATIO OF EXPENSES TO .68% A .67% .66% .67% E .61% .64%
AVERAGE NET ASSETS
RATIO OF NET INVESTMENT 5.78% A 6.27% 6.69% 6.47% 6.45% 7.41%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 176% A 138% 200% 189% 68% 59%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 October 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the fund) is a fund of
Fidelity Advisor Series IV (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class B, Class C, 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
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, 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, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. At a special meeting of the shareholders of the fund held
on October 7, 1998, shareholders approved an Agreement and Plan of
Reorganization, providing for the reorganization of the fund into
Fidelity Advisor Series II, effective on or about February 26, 1999.
On October 16, 1997, the Board of Trustees approved a change in the
fiscal year-end of the fund from November 30, to October 31.
Accordingly, the financial statements of the fund are presented for
the eleven-month period ended October 31, 1998. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which quotations are
not readily available are valued at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, 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.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments 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 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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased or sold on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $724,683,134 and $740,974,760, respectively, of which U.S.
government and government agency obligations aggregated $567,982,755
and $555,547,309, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .30%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the periods ended October
31, 1998 and November 30, 1997, the management fee was equivalent to
an annualized rate of .43% and an annual rate of .44%, respectively,
of average net assets .
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. A portion of this fee may be reallowed to securities
dealers, banks and other financial institutions for the distribution
of each class of shares and providing shareholder support services.For
the periods, this fee was based on the following annual rates of the
average net assets of each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the periods, each class paid FDC the following amounts, a portion
of which was retained by FDC:
ELEVEN MONTHS ENDED
OCTOBER 31, 1998
PAID TO RETAINED
FDC BY FDC
CLASS A $ 8,316 $ -
CLASS T 637,223 29,258
CLASS B 224,418 162,194
CLASS C 23,142 23,043
$ 893,099 $ 214,495
YEAR ENDED
NOVEMBER 30, 1997
PAID TO RETAINED
FDC BY FDC
CLASS A $ 3,177 $ -
CLASS T 655,179 -
CLASS B 176,588 127,539
CLASS C 55 55
$ 834,999 $ 127,594
Under the Plans, FMR may use its resources to pay administrative and
promotional expenses related to the sale of each class' shares. The
Plans also authorize payments to third parties that assist in the sale
of each class' shares or render shareholder support services. For the
period ended October 31, 1998, the following amounts were paid to
third parties under the Plans:
CLASS A $ 2,629
CLASS T 124,812
CLASS B 12,549
CLASS C 2,751
INSTITUTIONAL CLASS 15,871
SALES LOAD. FDC receives a front-end sales charge of up to 3.75% for
selling Class A shares, and 2.75% for selling Class T shares of the
fund. FDC receives the proceeds of contingent deferred sales charges
levied on Class B share redemptions occurring within three years of
purchase and Class C share redemptions occurring within one year of
purchase. Contingent deferred sales charges are based on declining
rates ranging from 3% to 1% for Class B and 1% for Class C, of the
lesser of the cost of shares at the initial date of purchase or the
net
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
asset value of the redeemed shares, excluding any reinvested dividends
and capital gains. In addition, purchases of Class A and Class T
shares that were subject to a finder's fee bear a contingent deferred
sales charge on assets that do not remain in the fund for at least one
year. The Class A and Class T contingent deferred sales charge is
based on 0.25% 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. A portion of the sales
charges paid to FDC are paid to securities dealers, banks and other
financial institutions.
For the period ended October 31, 1998, sales charge amounts paid to
and retained by FDC were as follows:
PAID TO RETAINED
FDC BY FDC
CLASS A $ 49,160 $ 28,254
CLASS T 83,240 32,737
CLASS B 90,580 90,580*
CLASS C 3,720 3,720*
$ 226,700 $ 155,291
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the fund.
FIIOC receives account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For
the periods, the following amounts were paid to FIIOC:
ELEVEN MONTHS ENDED
OCTOBER 31, 1998
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 14,287 .26**
CLASS T 546,245 .21**
CLASS B 64,090 .26**
CLASS C 7,168 .31**
INSTITUTIONAL CLASS 259,232 .16**
$ 891,022
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
YEAR ENDED
NOVEMBER 30, 1997
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 7,231 .34
CLASS T* 521,357 .20
CLASS B 50,467 .26
CLASS C 25 .35**
INSTITUTIONAL CLASS 297,456 .15
$ 876,536
* PRIOR TO JANUARY 1, 1997 STATE STREET BANK AND TRUST COMPANY WAS THE
TRANSFER AGENT FOR THE FUND'S CLASS T SHARES. STATE STREET, HOWEVER,
HAD DELEGATED CERTAIN TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER
SERVICES TO FIIOC FOR WHICH FIIOC RECEIVED ITS ALLOCABLE SHARE OF ALL
SUCH FEES.
** ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
5. 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
balance during the period for which the loan was outstanding amounted
to $4,328,000 for the period ended October 31, 1998 . The weighted
average interest rate was 5.81%.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each of the following classes:
FMR ELEVEN MONTHS ENDED YEAR ENDED
EXPENSE OCTOBER 31, NOVEMBER 30,
LIMITATIONS 1998 1997
CLASS A .90% $ 6,448 $ 32,105
CLASS B 1.65% 12,681 16,908
CLASS C 1.75% 15,403 5,670
$ 34,532 $ 54,683
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the periods
ended October 31, 1998 and November 30, 1997, the fund's custodian
fees were reduced by $3,152 and $9,175, respectively, under the
custodian arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
ELEVEN MONTHS ENDED YEARS ENDED
OCTOBER 31, NOVEMBER 30,
1998 1997 B 1996 A
FROM NET INVESTMENT INCOME
CLASS A $ 299,762 $ 122,899 $ 6,183
CLASS T 13,762,990 15,434,281 16,284,509
CLASS B 1,166,769 1,017,603 1,037,161
CLASS C 106,569 312 -
INSTITUTIONAL CLASS 9,044,300 11,902,988 14,341,457
TOTAL $ 24,380,390 $ 28,478,083 $ 31,669,310
A DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
B DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SHARES DOLLARS
ELEVEN MONTHS YEAR ENDED YEAR ENDED ELEVEN MONTHS YEAR ENDED YEAR ENDED
ENDED NOVEMBER 30, NOVEMBER 30, ENDED NOVEMBER 30, NOVEMBER 30,
OCTOBER 31, 1997 B 1996 A OCTOBER 31, 1997 B 1996 A
1998 1998
CLASS A 826,066 455,670 72,448 $ 8,801,326 $ 4,761,173 $ 756,142
SHARES SOLD
REINVESTMENT OF 24,233 10,671 475 258,506 111,981 4,998
DISTRIBUTIONS
SHARES REDEEMED (448,992) (169,434) (8,080) (4,782,656) (1,767,583) (84,516)
NET INCREASE 401,307 296,907 64,843 $ 4,277,176 $ 3,105,571 $ 676,624
(DECREASE)
CLASS T 13,142,016 13,128,368 14,999,140 $ 140,268,143 $ 137,559,201 $ 158,724,547
SHARES SOLD
REINVESTMENT OF 1,173,166 1,340,839 1,411,416 12,511,199 14,043,998 14,860,075
DISTRIBUTIONS
SHARES REDEEMED (14,007,864) (12,764,354) (12,931,481) (149,280,620) (133,637,535) (136,183,619)
NET INCREASE 307,318 1,704,853 3,479,075 $ 3,498,722 $ 17,965,664 $ 37,401,003
(DECREASE)
CLASS B 3,469,510 1,113,298 1,114,235 $ 37,025,976 $ 11,661,677 $ 11,808,349
SHARES SOLD
REINVESTMENT OF 85,515 76,151 76,373 911,937 796,683 803,087
DISTRIBUTIONS
SHARES REDEEMED (1,975,435) (874,566) (872,302) (21,073,447) (9,166,397) (9,227,658)
NET INCREASE 1,579,590 314,883 318,306 $ 16,864,466 $ 3,291,963 $ 3,383,778
(DECREASE)
CLASS C 639,302 15,175 - $ 6,829,640 $ 160,441 $ -
SHARES SOLD
REINVESTMENT OF 8,679 16 - 92,773 167 -
DISTRIBUTIONS
SHARES REDEEMED (96,427) - - (1,036,670) - -
NET INCREASE 551,554 15,191 - $ 5,885,743 $ 160,608 $ -
(DECREASE)
INSTITUTIONAL 5,436,279 5,646,676 9,022,232 $ 57,943,429 $ 59,206,035 $ 95,376,649
CLASS
SHARES SOLD
REINVESTMENT OF 349,249 477,520 561,358 3,726,467 5,003,755 5,915,605
DISTRIBUTIONS
SHARES REDEEMED (6,987,186) (9,287,961) (9,022,616) (74,446,547) (97,400,869) (94,936,985)
NET INCREASE (1,201,658) (3,163,765) 560,974 $ (12,776,651) $ (33,191,079) $ 6,355,269
(DECREASE)
</TABLE>
A SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1996.
B SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
9. REGISTRATION FEES.
For the periods, each class paid the following amounts to register its
shares for sale:
ELEVEN MONTHS YEAR ENDED
ENDED OCTOBER 31, NOVEMBER 30,
1998 1997
CLASS A $ 6,237 $ 30,352
CLASS T 36,976 22,481
CLASS B 11,223 14,929
CLASS C 13,916 5,703
INSTITUTIONAL CLASS 24,856 17,853
$ 93,208 $ 91,318
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Advisor Intermediate Bond Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Intermediate Bond Fund (a fund of Fidelity Advisor
Series IV) at October 31, 1998, and the results of its operations for
the eleven month period then ended and the year ended November 30,
1997, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Intermediate Bond Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 9, 1998
DISTRIBUTIONS
A total of 14.25% 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 1999 of the applicable
percentage for use in preparing 1998 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on October 7,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
AFFIRMATIVE 539,625,345.29 98.805
WITHHELD 6,524,581.07 1.195
TOTAL 546,149,926.36 100.000
PHYLLIS BURKE DAVIS
AFFIRMATIVE 539,570,849.71 98.795
WITHHELD 6,579,076.65 1.205
TOTAL 546,149,926.36 100.000
ROBERT M. GATES
AFFIRMATIVE 539,510,050.47 98.784
WITHHELD 6,639,875.89 1.216
TOTAL 546,149,926.36 100.000
EDWARD C. JOHNSON 3D
AFFIRMATIVE 538,985,893.01 98.688
WITHHELD 7,164,033.35 1.312
TOTAL 546,149,926.36 100.000
E. BRADLEY JONES
AFFIRMATIVE 538,927,817.43 98.678
WITHHELD 7,222,108.93 1.322
TOTAL 546,149,926.36 100.000
DONALD J. KIRK
AFFIRMATIVE 539,628,066.94 98.806
WITHHELD 6,521,859.42 1.194
TOTAL 546,149,926.36 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
AFFIRMATIVE 539,693,497.37 98.818
WITHHELD 6,456,428.99 1.182
TOTAL 546,149,926.36 100.000
WILLIAM O. MCCOY
AFFIRMATIVE 539,146,457.11 98.718
WITHHELD 7,003,469.25 1.282
TOTAL 546,149,926.36 100.000
GERALD C. MCDONOUGH
AFFIRMATIVE 539,461,031.30 98.775
WITHHELD 6,688,895.06 1.225
TOTAL 546,149,926.36 100.000
MARVIN L. MANN
AFFIRMATIVE 539,523,857.95 98.787
WITHHELD 6,626,068.41 1.213
TOTAL 546,149,926.36 100.000
ROBERT C. POZEN
AFFIRMATIVE 539,551,908.09 98.792
WITHHELD 6,598,018.27 1.208
TOTAL 546,149,926.36 100.000
THOMAS R. WILLIAMS
AFFIRMATIVE 539,441,485.70 98.772
WITHHELD 6,708,440.66 1.228
TOTAL 546,149,926.36 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the fund.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 278,609,801.55 98.139
AGAINST 1,741,723.15 .613
ABSTAIN 3,542,786.50 1.248
TOTAL 283,894,311.20 100.000
PROPOSAL 3
To authorize the Trustees to adopt an Amended and Restated Declaration
of Trust.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 479,594,533.67 95.156
AGAINST 10,033,506.32 1.991
ABSTAIN 14,379,781.75 2.853
TOTAL 504,007,821.74 100.000
BROKER 42,142,104.62
NON-VOTES
PROPOSAL 4
To approve an Agreement and Plan providing for the reorganization of
the fund from a separate series of one Massachusetts business trust to
another.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 232,211,107.81 96.169
AGAINST 2,651,523.98 1.098
ABSTAIN 6,599,384.87 2.733
TOTAL 241,462,016.66 100.000
BROKER 42,432,294.54
NON-VOTES
PROPOSAL 5
To approve an amended management contract for the fund that would
reduce the management fee payable to FMR by the fund as FMR's assets
under management increase.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 233,905,223.59 96.572
AGAINST 1,432,406.40 .591
ABSTAIN 6,871,578.47 2.837
TOTAL 242,209,208.46 100.000
BROKER 41,685,102.74
NON-VOTES
PROPOSAL 6
To amend the fundamental diversification limitation to exclude
"securities of other investment companies" from issuer diversification
limits.
# OF % OF
VOTES CAST VOTES CAST
AFFIRMATIVE 233,962,626.59 96.595
AGAINST 1,673,131.99 .691
ABSTAIN 6,573,449.88 2.714
TOTAL 242,209,208.46 100.000
BROKER 41,685,102.74
NON-VOTES
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
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Kevin E. Grant, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
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 International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap 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
LTB-ANN-1298 66822
1.539398.101
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(FIDELITY_LOGO_GRAPHIC) (REGISTERED TRADEMARK)
