(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 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 SIX MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 19 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 28 NOTES TO THE FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY 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:
While low interest rates and subdued inflation provided support for
stock and bond markets in the U.S. during the first five months of
1998, concerns about continuing economic and political difficulties in
Asia colored their performance. The stock market reached record
heights due to stronger-than-expected corporate earnings, but
retreated at times when concerns surfaced about how the Asian
volatility would affect business prospects. The bond market benefited
from these retreats, as investors sought alternatives offering lower
volatility.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
ADVISOR INTERMEDIATE BOND FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
class expenses, the past five year and past 10 year total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV INT BOND - INST CL 3.59% 8.46% 33.70% 121.09%
LB INT GOVT/CORP BOND 3.64% 8.84% 35.78% 123.06%
SHORT-INTERMEDIATE INVESTMENT GRADE DEBT 3.23% 7.56% 31.14% 108.71%
FUNDS AVERAGE
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to those of the Lehman Brothers Intermediate
Government/Corporate Bond Index - a market value weighted performance
benchmark for government and corporate fixed-rate debt issues with
maturities between one and 10 years. To measure how Institutional
Class' performance stacked up against its peers, you can compare it to
the 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 six months
average represents a peer group of 98 mutual funds. These benchmarks
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - INST CL 8.46% 5.98% 8.26%
LB INT GOVT/CORP BOND 8.84% 6.31% 8.35%
SHORT-INTERMEDIATE INVESTMENT GRADE DEBT 7.56% 5.56% 7.62%
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
1988/05/31 10000.00 10000.00
1988/06/30 10185.05 10159.38
1988/07/31 10174.39 10137.81
1988/08/31 10203.19 10153.03
1988/09/30 10391.63 10329.16
1988/10/31 10530.89 10469.51
1988/11/30 10465.87 10380.17
1988/12/31 10475.49 10389.31
1989/01/31 10589.47 10498.44
1989/02/28 10564.39 10455.04
1989/03/31 10606.14 10500.22
1989/04/30 10784.55 10710.10
1989/05/31 10987.37 10922.77
1989/06/30 11255.07 11198.13
1989/07/31 11493.18 11428.06
1989/08/31 11337.96 11280.36
1989/09/30 11391.49 11333.65
1989/10/31 11629.17 11573.23
1989/11/30 11724.82 11683.88
1989/12/31 11744.15 11715.86
1990/01/31 11627.35 11640.74
1990/02/28 11665.59 11683.12
1990/03/31 11649.28 11698.35
1990/04/30 11573.96 11657.74
1990/05/31 11848.86 11508.01
1990/06/30 12007.28 12073.45
1990/07/31 12167.59 12240.95
1990/08/31 12066.01 12190.70
1990/09/30 12155.21 12284.85
1990/10/31 12269.76 12427.48
1990/11/30 12482.15 12179.78
1990/12/31 12673.40 12788.62
1991/01/31 12767.62 12918.31
1991/02/28 12870.01 13021.60
1991/03/31 12951.55 13110.17
1991/04/30 13096.00 13253.05
1991/05/31 13165.86 13334.52
1991/06/30 13169.82 13343.91
1991/07/31 13317.94 13492.63
1991/08/31 13597.54 13750.22
1991/09/30 13850.10 13986.75
1991/10/31 14013.98 14146.38
1991/11/30 14148.06 14308.81
1991/12/31 14594.39 14658.27
1992/01/31 14407.64 14525.54
1992/02/29 14445.01 14582.90
1992/03/31 14393.02 14525.54
1992/04/30 14473.90 14653.20
1992/05/31 14738.41 14880.34
1992/06/30 14946.24 15100.63
1992/07/31 15298.02 15400.86
1992/08/31 15439.46 15554.91
1992/09/30 15636.15 15766.06
1992/10/31 15409.05 15561.51
1992/11/30 15451.74 15502.37
1992/12/31 15662.06 15709.97
1993/01/31 15992.21 16015.53
1993/02/28 16299.75 16268.05
1993/03/31 16410.32 16332.77
1993/04/30 16516.58 16464.23
1993/05/31 16536.16 16427.68
1993/06/30 16870.05 16685.53
1993/07/31 17025.41 16726.39
1993/08/31 17408.58 16991.60
1993/09/30 17465.02 17062.15
1993/10/31 17565.11 17107.83
1993/11/30 17486.95 17012.41
1993/12/31 17554.44 17090.32
1994/01/31 17746.31 17280.16
1994/02/28 17391.76 17024.59
1994/03/31 17060.66 16743.65
1994/04/30 17018.36 16629.70
1994/05/31 16973.81 16640.86
1994/06/30 16975.90 16643.15
1994/07/31 17140.81 16882.72
1994/08/31 17142.78 16935.51
1994/09/30 17063.38 16779.69
1994/10/31 17067.12 16777.40
1994/11/30 17119.86 16701.27
1994/12/31 17193.13 16760.40
1995/01/31 17383.14 17042.86
1995/02/28 17584.44 17396.39
1995/03/31 17695.00 17495.88
1995/04/30 17856.07 17711.85
1995/05/31 18313.24 18247.34
1995/06/30 18425.35 18369.67
1995/07/31 18420.60 18372.21
1995/08/31 18573.55 18539.45
1995/09/30 18691.73 18673.71
1995/10/31 18902.05 18881.81
1995/11/30 19128.44 19130.02
1995/12/31 19343.05 19330.51
1996/01/31 19489.52 19497.25
1996/02/29 19271.80 19268.33
1996/03/31 19183.33 19169.10
1996/04/30 19108.69 19101.34
1996/05/31 19070.76 19086.87
1996/06/30 19267.97 19289.65
1996/07/31 19323.10 19347.00
1996/08/31 19341.79 19362.23
1996/09/30 19596.09 19632.01
1996/10/31 19909.35 19978.94
1996/11/30 20161.64 20242.37
1996/12/31 20059.15 20112.68
1997/01/31 20128.39 20190.85
1997/02/28 20150.14 20229.42
1997/03/31 20029.33 20089.84
1997/04/30 20253.45 20325.86
1997/05/31 20384.25 20494.63
1997/06/30 20569.66 20681.67
1997/07/31 20951.00 21102.45
1997/08/31 20875.62 20996.37
1997/09/30 21114.95 21240.51
1997/10/31 21299.38 21475.78
1997/11/30 21343.22 21523.23
1997/12/31 21510.26 21695.30
1998/01/31 21776.55 21979.54
1998/02/28 21770.76 21962.79
1998/03/31 21857.00 22033.35
1998/04/30 21939.88 22143.75
1998/05/29 22108.62 22306.17
IMATRL PRASUN SHR__CHT 19980531 19980605 163913 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Institutional
Class on May 31, 1988. As the chart shows, by May 31, 1998, the value
of the investment would have grown to $22,109 - a 121.09% 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 $22,306 - a 123.06%
increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU
MIGHT LOSE MONEY. BUT IF YOU CAN
RIDE OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 2.93% 6.33% 6.79% 6.86% 5.87% 8.28%
CAPITAL RETURN 0.66% -0.47% -1.39% 4.87% -7.97% 4.89%
TOTAL RETURN 3.59% 5.86% 5.40% 11.73% -2.10% 13.17%
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 MAY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.16(CENTS) 30.51(CENTS) 61.95(CENTS)
ANNUALIZED DIVIDEND RATE 5.72% 5.76% 5.86%
30-DAY ANNUALIZED YIELD 5.55% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $10.62 over the past
one month, $10.63 over the past six months and $10.58 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
A lack of inflationary pressure
resulted in a relatively favorable
investing climate for bonds during
the six months that ended May 31,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable
investment-grade bond market -
returned 4.09% during this period.
Global volatility and historically low
interest rates were the main stories
in late 1997. As financial problems
in Asia came to a head, wary stock
investors sought investments
offering lower volatility - helping
the U.S. bond market. The
Lehman Brothers Corporate Bond
Index returned 4.48% for the six
months. Corporate bonds benefited
from continued economic growth
and demand for yield, although they
faltered somewhat in January 1998
when investors feared a slowdown
in demand in Asia would eat into
corporate earnings.
Mortgage-backed bonds
performed well during the period, as
relative interest-rate stability
generally cancelled out increased
mortgage prepayment activity
caused by low interest-rate levels.
The Lehman Brothers
Mortgage-Backed Securities Index
generated a six-month return of
3.83%. Two factors buoyed the
bond market late in the period. First,
data from the first quarter of 1998
indicated continued strong
economic growth and benign
inflation in the U.S. Second,
renewed fears of economic and
political dislocation in Asia attracted
investors to the bond market -
especially to U.S. Treasuries, which
are perceived as safe havens in
times of uncertainty. However,
corporate bonds underperformed in
May due to fears that companies
would experience earnings
slowdowns because of problems
in Asia.
An interview with Kevin Grant, Portfolio Manager of Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. The fund's returns were broadly in line with the intermediate-term
bond market. For the six months that ended May 31, 1998, the Fund's
Institutional Class shares had a total return of 3.59%. This compares
with the 3.64% return of the Lehman Brothers Intermediate
Government/Corporate Bond Index and the 3.23% return of the
short-intermediate investment grade debt funds average tracked by
Lipper Analytical Services over the same period. For the 12 months
that ended May 31, 1998, the fund's Institutional Class shares had a
total return of 8.46%, while the Lehman Brothers index returned 8.84%
and the return of the Lipper average was 7.56%.
Q. WHAT ROLE DOES THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX PLAY IN THE MANAGEMENT OF THE FUND?
A. The Lehman Brothers Government/Corporate Bond Index contains most
U.S. government and investment-grade corporate bonds with maturities
of one to 10 years. As such, it represents the overall intermediate
government/corporate market. It does not include mortgage-backed
securities. I make my investment decisions based on the relative
value of the various sectors and securities within this market, and
include mortgage-backed securities in my decision-making. If I
believe a sector of the market is cheaper than other sectors, I will
overweight that sector relative to the market as represented by the
fund's benchmark index. If I believe the sector is especially cheap,
I will be even more aggressive in my overweighting. If I don't have a
particularly strong view one way or the other, I'll market-weight the
sector. Additionally, I don't market-time the fund. That is, I don't
change the overall interest-rate sensitivity of the fund in
anticipation of changes in interest rates. Instead, I manage the fund
to maintain similar overall interest-rate risk to the index.
Q. WERE THERE ANY STRATEGIES THAT HELPED PERFORMANCE DURING THE
PERIOD?
A. The fund owned some mortgage-backed securities that posted decent
returns. The Lehman Brothers index does not include any mortgage
securities, so any investments in mortgages will result in an
overweighting in that sector. In the summer of 1997, we at Fidelity
decided that the then-current prices of mortgage-backed securities did
not reflect the risk that homeowners might refinance mortgages to take
advantage of falling interest rates. As a result, I sold most of my
mortgage-related investments, retaining only seasoned mortgages - or
mortgages that were 10 years or older and had relatively little
prepayment risk - the risk that they might be refinanced. Prepayment
can be a negative for investors in mortgage-backed securities, because
it disrupts their income stream and may force them to reinvest the
proceeds in securities offering lower current yield. When interest
rates experienced dramatic declines in December 1997 and early January
1998, investors in the mortgage market feared potential prepayments so
the prices of mortgage securities fell. At that point, I dedicated an
additional 10% of portfolio investments to mortgage securities that
had become attractively priced. I saw two major benefits. First, when
I buy a bond that has cheapened, I get a yield pickup versus what I
had sold, Treasuries in this case. Remember, bond yields move in the
opposite direction of bond prices. Second, I expected that the market
would recover, figuring I would eventually have the opportunity for
price appreciation. At the close of the six-month period, the fund had
19.4% of portfolio investments in mortgage-backed securities. About
10% were in core, seasoned holdings that carried little prepayment
risk. The remaining were in newer mortgages in which I invested
opportunistically because of cheaper prices. This strategy has helped
fund performance.
Q. IN ADDITION TO THE EMPHASIS ON MORTGAGES, WERE THERE ANY OTHER
NOTABLE STRATEGIES DURING THE SIX-MONTH PERIOD?
A. I emphasized corporate bonds because they offered a yield advantage
over Treasuries and carried relatively little credit risk in this
environment. At the close of the fiscal period, about 46% of
investment assets were in corporate bonds, including asset-backed
securities such as credit-card receivables. This has been a good
environment for corporate debt holders. In general, corporate America
has been de-leveraging - or reducing its debt - in an era of cost
control and consolidation.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. The relative value approach I use to manage the fund works best
when conditions are changing and misvaluations - or incorrect market
prices for some securities - occur. Over this period, the opportunity
to take advantage of misvaluations did not arise because of the
unusually stable interest-rate environment.
Q. WHAT IS YOUR OUTLOOK?
A. My outlook is quite good for the bond market. The favorable
conditions of the past three to four years should continue. The U.S.
government surplus, the de-leveraging of Corporate America and low
inflation combine to create a very good environment for bondholders.
The negative effects of the Asian crisis tend to be specific to a few
industries that I am avoiding.
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 EFFECTS OF
THE ASIAN FINANCIAL CRISIS ON
THE ECONOMY AND BOND
MARKET IN THE UNITED STATES:
"The real story of the global
financial markets since December
1, 1997, has been Asia and its
effects on other economies.
Essentially, a large part of the
world's gross domestic product has
been shrinking as the Asian
economies, including China, have
imploded. This has happened even
as the U.S. economy has remained
healthy, with strong employment.
Ordinarily, this strength would
create inflationary pressure, which
in turn could cause interest rates to
rise. However, the coincidence of the
Asian economic implosion has
been a powerful offset to
inflationary pressures within the
United States, for two basic reasons.
First, demand for American products
in Asia is shrinking, thereby
reducing overall demand and cost
pressures. Second, the goods that
we import from Asia now are
cheaper.
"As a result, Asia has taken the
wind out of inflation. This
environment of strong economic
growth but low inflation and falling
interest rates is very unusual. We
haven't seen anything like it since
the 1940s.
"The primary negative impact of
Asia on the U.S. economy has been
in some selected industries such as
energy, capital equipment and
semiconductors, as well as exporters
such as paper and timber companies
- - areas I've avoided. On the other
hand, the effects of Asia have been
positive on retail-related industries
and on any corporations or individuals
looking to borrow money because
they've been able to borrow at lower
interest rates."
FUND FACTS
GOAL: seeks to provide a high
current income by investing in
investment-grade debt securities
START DATE: February 2, 1984
SIZE: as of May 31, 1998,
more than $487 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in 1993
(checkmark)
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S
AAA 5 59.1
7
.
5
AA 7 10.0
.
5
A 2 22.3
0
.
6
BAA 1 5.9
0
.
9
BA 1 0.0
.
0
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 MAY 31, 1998
6 MONTHS AGO
YEARS 6.0 5.9
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF MAY 31, 1998
6 MONTHS AGO
YEARS 3.4 3.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1998* AS OF NOVEMBER 30, 1997 **
CORPORATE BONDS 45.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 25.9%
MORTGAGE-BACKED
SECURITIES 19.4%
FOREIGN GOVERNMENT
OBLIGATIONS 3.7%
OTHER 2.7%
SHORT-TERM
INVESTMENTS 2.5%
CORPORATE BONDS 42.7%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 29.7%
MORTGAGE-BACKED
SECURITIES 16.4%
FOREIGN GOVERNMENT
OBLIGATIONS 4.8%
OTHER 3.7%
SHORT-TERM
INVESTMENTS 2.7%
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: 32.7
ROW: 1, COL: 5, VALUE: 25.9
ROW: 1, COL: 6, VALUE: 32.5
ROW: 1, COL: 1, VALUE: 2.7
ROW: 1, COL: 2, VALUE: 3.7
ROW: 1, COL: 3, VALUE: 4.8
ROW: 1, COL: 4, VALUE: 16.4
ROW: 1, COL: 5, VALUE: 29.7
ROW: 1, COL: 6, VALUE: 42.7
* FOREIGN
INVESTMENTS 12.0%
** FOREIGN
INVESTMENTS 12.0%
INVESTMENTS MAY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 45.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
BASIC INDUSTRIES - 1.6%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp. yankee 8 7/8%, 11/15/01 $ 2,790,000 $ 2,910,389
PACKAGING & CONTAINERS - 1.0%
Owens Illinois, Inc.:
7.15%, 5/15/05 1,500,000 1,507,500
7.35%, 5/15/08 1,450,000 1,457,975
7.80%, 5/15/18 1,750,000 1,785,000
4,750,475
TOTAL BASIC INDUSTRIES 7,660,864
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties Trust 6 3/4%, 4/1/05 640,000 637,830
FINANCE - 31.4%
ASSET-BACKED SECURITIES - 13.5%
Aesop Funding II LLC 6.22%, 10/20/01 (b) 8,000,000 8,037,500
Arcadia Automobile Receivables Trust
6 1/2%, 6/17/02 5,000,000 5,032,813
Capital Equipment Receivables Trust 6.11%, 7/15/99 7,292,186
7,315,010
Chase Manhattan Corp. 5 1/2%, 2/15/01 600,000 593,004
Chase Manhattan Grantor Trust:
6.61%, 9/15/02 1,935,676 1,952,311
6.76%, 9/15/02 725,878 732,116
Chevy Chase Auto Receivables Trust:
6.60%, 12/15/02 654,979 660,094
5.90%, 7/15/03 1,884,025 1,883,142
Citibank Credit Card Master Trust I 10,000,000 10,070,313
Contimortgage Home Equity Loan Trust
6.26%, 7/15/12 5,000,000 5,003,100
Ford Credit Auto Owner Trust:
6.40%, 5/15/02 1,460,000 1,472,235
6.40%, 12/15/02 590,000 589,658
Ford Credit Grantor Trust 5.90%, 10/15/00 1,288,833 1,289,639
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 46,331 46,322
Key Plastics, Inc. 10 1/4%, 3/15/07 1,760,000 1,765,087
MBNA Master Credit Card Trust II Class A
6.55%, 1/15/07 10,000,000 10,286,200
PNC Student Loan Trust I 6.314%, 1/25/01 5,000,000 5,031,500
SCFC Recreational Vehicle Loan Trust
7 1/4%, 9/15/06 261,838 261,184
Sears Credit Account Master Trust II
6 1/2%, 10/15/03 3,400,000 3,422,304
65,443,532
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - 9.1%
ABN Amro Bank NV (Chicago) 6 5/8%, 10/31/01 $ 2,750,000 $ 2,793,533
Banc One Corp. 6.70%, 3/24/00 1,900,000 1,921,375
Bank of Boston 6.38%, 8/11/00 2,620,000 2,645,283
Banponce Financial Corp.:
6.69%, 9/21/00 2,250,000 2,275,178
6 3/4%, 8/9/01 3,850,000 3,904,285
Capital One Bank 7.35%, 6/20/00 5,000,000 5,107,950
Kansallis-Osake-Pankki (NY Branch) 10%, 5/1/02 650,000 733,493
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,209,340
Provident Bank (Cincinnati, Ohio)
6 1/8%, 12/15/00 5,000,000 5,001,150
Skandinaviska Enskilda Banken yankee
8.45%, 5/15/02 4,600,000 4,941,780
Star Banc Corp. 6.8%, 5/1/99 2,400,000 2,420,640
Union Planters National Bank (Tenn.)
6.81%, 8/20/01 1,500,000 1,527,720
U.S. Bancorp 7 1/2%, 6/1/26 2,000,000 2,223,360
Wachovia Corp. 6.605%, 10/1/25 5,000,000 5,159,250
43,864,337
CREDIT & OTHER FINANCE - 6.5%
Associates Corp. of North America 6 1/2%, 9/9/98 5,000,000
5,012,400
Chrysler Financial Corp. 6 3/8%, 1/28/00 2,580,000 2,596,641
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,536,725
Ford Motor Credit Co. 7 3/4%, 11/15/02 100,000 106,076
General Electric Capital Corp. 6.94%, 4/13/09 (a) 2,530,000
2,550,164
General Motors Acceptance Corp. 6.65%, 5/24/00 2,000,000 2,024,620
Morgan Guaranty Trust Co.
5 3/4%, 10/8/99 10,000,000 9,967,900
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,768,395
Sears, Roebuck Acceptance Corp. 6.15%, 11/15/05 5,000,000 5,036,900
31,599,821
INSURANCE - 2.1%
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,075,690
SunAmerica, Inc. 6.20%, 10/31/99 9,300,000 9,315,903
10,391,593
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.2%
Long Island Savings Bank 6.20%, 4/2/01 $ 900,000 $ 899,856
TOTAL FINANCE 152,199,139
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
POLLUTION CONTROL - 1.3%
WMX Technologies, Inc. 7.10%, 8/1/26 6,000,000 6,236,340
MEDIA & LEISURE - 1.0%
BROADCASTING - 1.0%
TCI Communications, Inc. 8 3/4%, 8/1/15 4,000,000 4,693,960
NONDURABLES - 1.3%
TOBACCO - 1.3%
Philip Morris Companies, Inc. 6.95%, 6/1/06 6,000,000 6,174,360
RETAIL & WHOLESALE - 0.4%
GENERAL MERCHANDISE STORES - 0.4%
Penney (J.C.) Co., Inc. 6.95%, 4/1/00 1,800,000 1,831,248
TECHNOLOGY - 2.5%
COMPUTER SERVICES & SOFTWARE - 1.0%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 5,094,950
ELECTRONICS - 1.5%
Motorola, Inc. 6 1/2%, 9/1/25 2,000,000 2,062,700
Texas Instruments, Inc. 6 7/8%, 7/15/00 5,000,000 5,092,050
7,154,750
TOTAL TECHNOLOGY 12,249,700
UTILITIES - 6.2%
CELLULAR - 1.0%
AirTouch Communications, Inc. 6.35%, 6/1/05 5,000,000 4,997,200
ELECTRIC UTILITY - 3.6%
Avon Energy Partners Holdings:
7.05%, 12/11/07 (b) 5,000,000 5,189,100
6.46%, 3/4/08 (b) 2,000,000 1,985,420
British Columbia Hydro & Power Authority yankee
12 1/2%, 1/15/14 940,000 1,010,979
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
DR Investment yankee 7.10%, 5/15/02 (b) $ 5,000,000 $ 5,125,938
Israel Electric Corp. Ltd. 7 3/4%, 12/15/27 (b) 3,840,000
3,925,210
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 156,845
17,393,492
TELEPHONE SERVICES - 1.6%
Cable & Wireless Communications PLC
6 3/8%, 3/6/03 2,090,000 2,092,696
Teleport Communications Group, Inc.
11 1/8%, 7/1/07 (a) 1,800,000 1,552,500
WorldCom, Inc. 7 3/4%, 4/1/07 4,000,000 4,320,600
7,965,796
TOTAL UTILITIES 30,356,488
TOTAL NONCONVERTIBLE BONDS
(Cost $217,543,093) 222,039,929
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 25.9%
U.S. TREASURY OBLIGATIONS - 17.2%
12 3/4%, 11/15/10 (callable) 2,498,000 3,543,638
7 7/8%, 8/15/01 1,595,000 1,699,664
6 3/8%, 9/30/01 76,500,000 78,233,490
TOTAL U.S. TREASURY OBLIGATIONS 83,476,792
U.S. GOVERNMENT AGENCY OBLIGATIONS - 8.7%
Farm Credit System Financial Assistance Corporation
9 3/8%, 7/21/03 1,800,000 2,080,116
Federal Home Loan Bank:
7.31%, 6/16/04 3,830,000 4,109,475
7.38%, 8/5/04 1,930,000 2,080,173
7.70%, 9/20/04 1,250,000 1,371,088
Fannie Mae:
6.15%, 1/13/00 1,100,000 1,107,733
6.72%, 8/1/05 2,230,000 2,335,568
Freddie Mac:
5.035%, 4/28/03 15,000,000 14,920,500
8.115%, 1/31/05 5,460,000 6,127,157
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trust Certificates (assets of Trust guaranteed
by U.S. Government through Defense Security
Assistance Agency) Class 2-E, 9.40%, 5/15/02 $ 784,950 $ 831,592
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 302,078 315,702
Series 1994-C, 6.61%, 9/15/99 40,609 40,776
U.S. Department of Housing and Urban Development
Government guaranteed participation certificates:
Series 1995-A, 8.24%, 8/1/04 1,030,000 1,151,489
Series 1996-A, 6.92%, 8/1/04 5,360,000 5,631,538
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 42,102,907
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $124,611,182) 125,579,699
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 14.2%
FANNIE MAE - 8.7%
5 1/2%, 5/1/03 to 5/1/26 $ 3,663,579 $ 3,593,258
6%, 5/1/01 to 4/1/13 26,795,227 26,490,118
6 1/2%, 10/1/27 to 4/1/28 6,005,943 5,970,268
9 1/2%, 2/1/25 3,110,538 3,357,390
10%, 1/1/20 85,033 93,669
10 1/2%, 7/1/11 to 8/1/20 434,874 484,762
11%, 8/1/15 1,974,470 2,195,669
12 1/2%, 2/1/11 to 4/1/15 96,662 113,557
42,298,691
FREDDIE MAC - 1.1%
5 1/2%, 12/1/02 to 6/1/03 1,973,408 1,936,979
7%, 11/1/00 to 7/1/01 2,263,772 2,290,539
9 1/2%, 1/1/17 14,870 15,940
10%, 4/1/05 to 8/1/10 359,764 384,091
10 1/4%, 12/1/09 35,744 38,789
10 1/2%, 5/1/21 676,553 744,513
11%, 12/1/11 36,388 40,678
11 1/2%, 10/1/15 117,664 132,629
11 3/4%, 10/1/10 40,057 44,919
5,629,077
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 4.4%
7%, 11/1/22 to 11/1/27 $ 4,796,729 $ 4,881,203
8%, 2/1/02 to 6/1/25 3,697,225 3,812,064
8 1/2%, 4/1/17 to 12/1/21 647,035 687,581
9%, 5/1/16 to 4/1/18 2,901,000 3,138,833
10%, 11/1/09 to 1/1/26 3,609,363 3,992,427
11%, 12/1/09 to 10/1/20 979,985 1,081,193
11 1/2%, 1/1/13 to 2/1/19 3,082,087 3,501,196
21,094,497
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $70,399,574) 69,022,265
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 2.6%
Freddie Mac:
planned amortization class:
Series 1645 Class ZA, 5 1/2%, 4/15/05 11,453,091 11,345,716
sequential pay Series 1838 Class A,
6 1/2%, 12/15/02 1,024,880 1,024,079
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $12,142,244) 12,369,795
COMMERCIAL MORTGAGE SECURITIES - 2.6%
BKB Commercial Mortgage Trust Series 1997-C1
Class B, 7.218%, 2/25/43 (b)(c) 3,207,565 3,201,551
CBM Funding Corp. sequential pay Series 1996-1
Class A-1, 7.55%, 7/1/99 88,992 89,979
CS First Boston Mortgage Securities Corp.
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 5,015,625
Equitable Life Assurance Society of the United States
(The) Series 1996-1 Class C1,
7.52%, 5/15/06 (b) 1,000,000 1,059,780
Thirteen Affiliates of General Growth Properties, Inc.
sequential pay Series A-2,
6.602%, 11/15/12 (b) 2,500,000 2,553,350
Wells Fargo Capital Markets Apartment Financing
Trust 6.56%,12/29/05 (b) 935,450 952,073
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $12,700,677) 12,872,358
FOREIGN GOVERNMENT OBLIGATIONS - 3.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Alberta Province yankee 9 1/4%, 4/1/00 $ 2,200,000 $ 2,322,607
Canadian Government 6 1/8%, 7/15/02 5,000,000 5,059,000
Manitoba Province yankee 6 7/8%, 9/15/02 5,000,000 5,150,650
Quebec Province yankee 6.86%, 4/15/26 (a) 5,000,000 5,215,750
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $17,263,284) 17,748,007
SUPRANATIONAL OBLIGATIONS - 2.2%
Inter American Development Bank yankee
6.29%, 7/16/27
(Cost $9,937,100) 10,000,000 10,444,000
CERTIFICATES OF DEPOSIT - 0.5%
Canadian Imperial Bank of Commerce
NY Branch yankee 6.20%, 8/1/00
(Cost $2,503,750) 2,500,000 2,511,750
CASH EQUIVALENTS - 2.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.54%, dated
5/29/98 due 6/1/98 $ 12,105,590 12,100,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $479,200,904) $ 484,687,803
LEGEND
(a) 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.
(b) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$31,829,921 or 6.5% of net assets.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.9% AAA, AA, A 83.3%
Baa 10.9% BBB 8.9%
Ba 1.0% BB 1.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings
of the sovereign credit of the issuing government.
Distribution of investments by country of issue, as a percentage of
total value of investment in securities, is as follows:
United States 87.8%
Canada 5.0
United Kingdom 2.6
Multi-National 2.2
Sweden 1.0
Others (individually less than 1%) 1.4
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31, 1998, the aggregate cost of investment securities for
income tax purposes was $479,200,904. Net unrealized appreciation
aggregated $5,486,899, of which $6,405,981 related to appreciated
investment securities and $919,082 related to depreciated investment
securities.
At November 30, 1997, the fund had a capital loss carryforward of
approximately $15,259,000 of which $2,841,000, $1,035,000, $134,000,
$9,840,000 and $1,409,000 will expire on November 30, 1998, 1999,
2002, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 484,687,803
AGREEMENTS OF $12,100,000) (COST $479,200,904) -
SEE ACCOMPANYING SCHEDULE
CASH 314
RECEIVABLE FOR INVESTMENTS SOLD 8,260,306
RECEIVABLE FOR FUND SHARES SOLD 880,119
INTEREST RECEIVABLE 5,511,206
PREPAID EXPENSES 6,064
TOTAL ASSETS 499,345,812
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 9,980,756
PAYABLE FOR FUND SHARES REDEEMED 1,337,913
DISTRIBUTIONS PAYABLE 569,012
ACCRUED MANAGEMENT FEE 175,384
DISTRIBUTION FEES PAYABLE 79,041
OTHER PAYABLES AND ACCRUED EXPENSES 131,447
TOTAL LIABILITIES 12,273,553
NET ASSETS $ 487,072,259
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 497,065,667
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (1,795,502)
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (13,684,805)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 5,486,899
NET ASSETS $ 487,072,259
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
MAY 31, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $10.63
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($6,961,871 (DIVIDED BY) 655,054 SHARES)
MAXIMUM OFFERING PRICE PER SHARE $11.04
(100/96.25 OF $10.63)
CLASS T: $10.63
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($276,826,733 (DIVIDED BY) 26,040,177 SHARES)
MAXIMUM OFFERING PRICE PER SHARE $10.93
(100/97.25 OF $10.63)
CLASS B: $10.62
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($26,497,208 (DIVIDED BY) 2,494,459 SHARES) A
CLASS C: $10.62
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($2,538,931 (DIVIDED BY) 238,994 SHARES) A
INSTITUTIONAL CLASS: $10.64
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($174,247,516 (DIVIDED BY) 16,379,689 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
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 15,692,026
INTEREST
EXPENSES
MANAGEMENT FEE $ 1,053,736
TRANSFER AGENT FEES 468,629
DISTRIBUTION FEES 464,130
ACCOUNTING FEES AND EXPENSES 98,883
NON-INTERESTED TRUSTEES' COMPENSATION 906
CUSTODIAN FEES AND EXPENSES 17,653
REGISTRATION FEES 51,041
AUDIT 21,093
LEGAL 1,104
INTEREST 699
MISCELLANEOUS 2,607
TOTAL EXPENSES BEFORE REDUCTIONS 2,180,481
EXPENSE REDUCTIONS (30,446) 2,150,035
NET INVESTMENT INCOME 13,541,991
REALIZED AND UNREALIZED GAIN (LOSS) 1,659,607
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 1,325,839
INVESTMENT SECURITIES
NET GAIN (LOSS) 2,985,446
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 16,527,437
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 13,541,991 $ 28,868,748
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 1,659,607 (1,459,900)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 1,325,839 (1,414,423)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 16,527,437 25,994,425
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (13,338,472) (28,478,083)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 1,406,755 (8,667,273)
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,595,720 (11,150,931)
NET ASSETS
BEGINNING OF PERIOD 482,476,539 493,627,470
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET $ 487,072,259 $ 482,476,539
INVESTMENT INCOME OF $1,795,502 AND
$1,999,021, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS CLASS A
SIX MONTHS ENDED YEARS ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA D
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.590 $ 10.350
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .292 .615 .159
NET REALIZED AND UNREALIZED GAIN (LOSS) .071 (.023) .235
TOTAL FROM INVESTMENT OPERATIONS .363 .592 .394
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.293) (.622) (.154)
NET ASSET VALUE, END OF PERIOD $ 10.630 $ 10.560 $ 10.590
TOTAL RETURN B, C 3.47% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,962 $ 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 5.56% A 5.93% 6.45% A
PORTFOLIO TURNOVER RATE 192% 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 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 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 INVEST-
MENT OPERATIONS
NET INVESTMENT .294 D .625 D .671 D .649 .609 .785
INCOME
NET REALIZED AND .065 (.058) (.147) .491 (.876) .511
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVEST- .359 .567 .524 1.140 (.267) 1.296
MENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.289) (.617) (.674) (.640) (.555) (.796)
INCOME
IN EXCESS OF NET - - - - (.058) -
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.289) (.617) (.674) (.640) (.613) (.796)
NET ASSET VALUE, END $ 10.630 $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140
OF PERIOD
TOTAL RETURN B, C 3.43% 5.56% 5.10% 11.43% (2.44)% 12.50%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 276,827 $ 278,869 $ 262,103 $ 228,439 $ 141,866 $ 59,184
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .96% A .96% .97% .94% E 1.02% E 1.23%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .96% A .96% .96% F .94% 1.02% 1.23%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 5.54% A 5.97% 6.38% 6.20% 6.04% 6.81%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 192% 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
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 10.540 $ 10.590 $ 10.750 $ 10.250 $ 10.430
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .256 D .551 D .597 D .579 .204
NET REALIZED AND UNREALIZED .077 (.057) (.153) .483 (.178)
GAIN (LOSS)
TOTAL FROM INVESTMENT .333 .494 .444 1.062 .026
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.253) (.544) (.604) (.562) (.187)
IN EXCESS OF NET INTEREST - - - - (.019)
INCOME
TOTAL DISTRIBUTIONS (.253) (.544) (.604) (.562) (.206)
NET ASSET VALUE, END OF PERIOD $ 10.620 $ 10.540 $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 3.19% 4.83% 4.32% 10.62% 0.24%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 26,497 $ 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 4.85% A 5.27% 5.69% 5.44% 5.42% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 192% 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 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA D
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.570
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .247 .031
NET REALIZED AND UNREALIZED GAIN (LOSS) .061 (.005)
TOTAL FROM INVESTMENT OPERATIONS .308 .026
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.248) (.036)
NET ASSET VALUE, END OF PERIOD $ 10.620 $ 10.560
TOTAL RETURN B, C 2.94% 0.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,539 $ 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 4.78% A 4.42% A
PORTFOLIO TURNOVER RATE 192% 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 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD 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 5 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
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 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 INVEST-
MENT OPERATIONS
NET INTEREST INCOME .309 D .658 D .705 D .671 .602 .832
NET REALIZED AND .066 (.060) (.151) .499 (.833) .531
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVEST- .375 .598 .554 1.170 (.231) 1.363
MENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.305) (.648) (.704) (.670) (.597) (.843)
INCOME
IN EXCESS OF NET - - - - (.062) -
INTEREST INCOME
TOTAL DISTRIBUTIONS (.305) (.648) (.704) (.670) (.659) (.843)
NET ASSET VALUE, END $ 10.640 $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160
OF PERIOD
TOTAL RETURN B, C 3.59% 5.86% 5.40% 11.73% (2.10)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 174,248 $ 177,427 $ 211,866 $ 208,861 $ 172,122 $ 183,790
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .67% A .67% .66% .67% E .61% .64%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 5.83% A 6.27% 6.69% 6.47% 6.45% 7.41%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 192% 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 May 31, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund(the fund) is a fund of
Fidelity Advisor Series IV (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class B, 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. Investment 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. 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class C and shares of Class C for distribution under federal and state
securities law. These expenses are amortized over one year.
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, futures and
options transactions, market discount, capital loss carryforwards and
losses deferred due to futures and options and wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances
into one or more joint trading accounts. These balances are invested
in one or more repurchase agreements for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
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 $427,732,402 and $422,794,190, respectively, of which U.S.
government and government agency obligations aggregated $314,812,080
and $305,701,986, 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 period, the management
fee was equivalent to an annualized rate of .44% of average net
assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. 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 period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .25%
CLASS T .50%
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
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED BY
FDC FDC
CLASS A $ 3,894 $ -
CLASS T 348,295 17,367
CLASS B 105,281 79,049
CLASS C 6,660 6,660
$ 464,130 $ 103,076
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, the following amounts were paid to third parties under the
Plans:
CLASS A $1,873
CLASS T 22,758
CLASS B 8,720
CLASS C 1,879
INSTITUTIONAL CLASS -
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 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED BY
FDC FDC
CLASS A $ 24,317 $ 15,077
CLASS T 36,573 18,035
CLASS B 50,417 50,417*
CLASS C 487 487*
$ 111,794 $ 84,016
* 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 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 period, the following amounts were paid to FIIOC:
AMOUNT % OF
AVERAGE
NET ASSETS*
CLASS A $ 6,728 .26%
CLASS T 288,638 .20%
CLASS B 30,578 .26%
CLASS C 2,400 .36%
INSTITUTIONAL CLASS 140,285 .16%
$ 468,629
* 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. 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 REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 5,706
CLASS T 1.00% -
CLASS B 1.65% 9,938
CLASS C 1.75% 14,520
INSTITUTIONAL CLASS .75% -
$ 30,164
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 period,
the fund's custodian fees were reduced by $282 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997 A
FROM NET INVESTMENT INCOME
CLASS A $ 141,634 $ 122,899
CLASS T 7,581,212 15,434,281
CLASS B 550,178 1,017,603
CLASS C 31,479 312
INSTITUTIONAL CLASS 5,033,969 11,902,988
TOTAL $ 13,338,472 $ 28,478,083
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30, ENDED MAY 31, NOVEMBER 30,
1998 1997 A 1998 1997 A
CLASS A 383,631 455,670 $ 4,071,878 $ 4,761,173
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 11,664 10,671 123,856 111,981
SHARES REDEEMED (101,991) (169,434) (1,083,467) (1,767,583)
NET INCREASE (DECREASE) 293,304 296,907 $ 3,112,267 $ 3,105,571
CLASS T 6,310,723 13,128,368 $ 67,075,482 $ 137,559,201
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 649,512 1,340,839 6,903,159 14,043,998
SHARES REDEEMED (7,328,549) (12,764,354) (77,872,308) (133,637,535)
NET INCREASE (DECREASE) (368,314) 1,704,853 $ (3,893,667) $ 17,965,664
CLASS B 1,141,243 1,113,298 $ 12,124,781 $ 11,661,677
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 41,292 76,151 438,387 796,683
SHARES REDEEMED (793,644) (874,566) (8,424,810) (9,166,397)
NET INCREASE (DECREASE) 388,891 314,883 $ 4,138,358 $ 3,291,963
CLASS C 232,493 15,175 $ 2,468,334 $ 160,441
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 2,644 16 28,072 167
SHARES REDEEMED (11,334) - (120,313) -
NET INCREASE (DECREASE) 223,803 15,191 $ 2,376,093 $ 160,608
INSTITUTIONAL CLASS 3,139,075 5,646,676 $ 33,381,103 $ 59,206,035
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 192,211 477,520 2,043,198 5,003,755
SHARES REDEEMED (3,742,449) (9,287,961) (39,750,597) (97,400,869)
NET INCREASE (DECREASE) (411,163) (3,163,765) $ (4,326,296) $ (33,191,079)
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 5,706
CLASS T 12,915
CLASS B 8,807
CLASS C 13,679
INSTITUTIONAL CLASS 9,934
$ 51,041
9. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund
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. The weighted average interest rate was 5.8125%.
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
John H. Costello, Assistant Treasurer
Leonard M. Rush, 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
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 TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
INTERMEDIATE BOND
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
MAY 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 SIX MONTHS.
INVESTMENTS 25 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 33 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 42 NOTES TO THE FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
While low interest rates and subdued inflation provided support for
stock and bond markets in the U.S. during the first five months of
1998, concerns about continuing economic and political difficulties in
Asia colored their performance. The stock market reached record
heights due to stronger-than-expected corporate earnings, but
retreated at times when concerns surfaced about how the Asian
volatility would affect business prospects. The bond market benefited
from these retreats, as investors sought alternatives offering lower
volatility.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
ADVISOR INTERMEDIATE BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class A shares
took place on September 3, 1996. Class A shares bear a 0.15% 12b-1 fee
that is reflected in returns after September 3, 1996. Returns between
September 10, 1992 (the date Class T shares were first offered) and
September 3, 1996 are those of Class T and reflect Class T's 0.25%
12b-1 fee. Returns prior to September 10, 1992 are those of the
Institutional Class, the original class of the fund which does not
bear a 12b-1 fee. Had Class A's 12b-1 fee been reflected, returns
prior to September 10, 1992 would have been lower. If Fidelity had not
reimbursed certain class expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL A 3.47% 8.32% 31.48% 116.72%
FIDELITY ADV INT BOND - CL A -0.41% 4.26% 26.55% 108.60%
(INCL. 3.75% SALES CHARGE)
LB INT GOVT/CORP BOND 3.64% 8.84% 35.78% 123.06%
SHORT-INTERMEDIATE INVESTMENT GRADE 3.23% 7.56% 31.14% 108.71%
DEBT FUNDS AVERAGE
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value weighted performance benchmark for government and
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class A's performance stacked up against its
peers, you can compare it to the 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 six months average represents a peer group of 98 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL A 8.32% 5.63% 8.04%
FIDELITY ADV INT BOND - CL A 4.26% 4.82% 7.63%
(INCL. 3.75% SALES CHARGE)
LB INT GOV/CORP BOND 8.84% 6.31% 8.35%
SHORT-INTERMEDIATE INVESTMENT GRADE 7.56% 5.56% 7.62%
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
1988/05/31 9625.00 10000.00
1988/06/30 9803.11 10159.38
1988/07/31 9792.85 10137.81
1988/08/31 9820.57 10153.03
1988/09/30 10001.95 10329.16
1988/10/31 10135.99 10469.51
1988/11/30 10073.40 10380.17
1988/12/31 10082.66 10389.31
1989/01/31 10192.37 10498.44
1989/02/28 10168.23 10455.04
1989/03/31 10208.41 10500.22
1989/04/30 10380.13 10710.10
1989/05/31 10575.34 10922.77
1989/06/30 10833.01 11198.13
1989/07/31 11062.19 11428.06
1989/08/31 10912.79 11280.36
1989/09/30 10964.31 11333.65
1989/10/31 11193.08 11573.23
1989/11/30 11285.14 11683.88
1989/12/31 11303.75 11715.86
1990/01/31 11191.32 11640.74
1990/02/28 11228.13 11683.12
1990/03/31 11212.43 11698.35
1990/04/30 11139.94 11657.74
1990/05/31 11404.53 11508.01
1990/06/30 11557.00 12073.45
1990/07/31 11711.30 12240.95
1990/08/31 11613.54 12190.70
1990/09/30 11699.39 12284.85
1990/10/31 11809.64 12427.48
1990/11/30 12014.07 12179.78
1990/12/31 12198.15 12788.62
1991/01/31 12288.83 12918.31
1991/02/28 12387.38 13021.60
1991/03/31 12465.86 13110.17
1991/04/30 12604.90 13253.05
1991/05/31 12672.14 13334.52
1991/06/30 12675.96 13343.91
1991/07/31 12818.52 13492.63
1991/08/31 13087.63 13750.22
1991/09/30 13330.72 13986.75
1991/10/31 13488.46 14146.38
1991/11/30 13617.51 14308.81
1991/12/31 14047.10 14658.27
1992/01/31 13867.35 14525.54
1992/02/29 13903.32 14582.90
1992/03/31 13853.28 14525.54
1992/04/30 13931.13 14653.20
1992/05/31 14185.72 14880.34
1992/06/30 14385.76 15100.63
1992/07/31 14724.35 15400.86
1992/08/31 14860.48 15554.91
1992/09/30 15033.36 15766.06
1992/10/31 14811.49 15561.51
1992/11/30 14849.30 15502.37
1992/12/31 15048.27 15709.97
1993/01/31 15348.21 16015.53
1993/02/28 15654.44 16268.05
1993/03/31 15757.26 16332.77
1993/04/30 15854.02 16464.23
1993/05/31 15865.16 16427.68
1993/06/30 16179.70 16685.53
1993/07/31 16305.01 16726.39
1993/08/31 16663.68 16991.60
1993/09/30 16711.41 17062.15
1993/10/31 16801.39 17107.83
1993/11/30 16705.19 17012.41
1993/12/31 16777.80 17090.32
1994/01/31 16954.99 17280.16
1994/02/28 16627.29 17024.59
1994/03/31 16305.22 16743.65
1994/04/30 16240.39 16629.70
1994/05/31 16184.35 16640.86
1994/06/30 16179.86 16643.15
1994/07/31 16333.40 16882.72
1994/08/31 16331.46 16935.51
1994/09/30 16250.40 16779.69
1994/10/31 16251.39 16777.40
1994/11/30 16297.98 16701.27
1994/12/31 16363.98 16760.40
1995/01/31 16541.85 17042.86
1995/02/28 16746.36 17396.39
1995/03/31 16831.94 17495.88
1995/04/30 16997.88 17711.85
1995/05/31 17413.09 18247.34
1995/06/30 17516.12 18369.67
1995/07/31 17506.75 18372.21
1995/08/31 17647.26 18539.45
1995/09/30 17771.52 18673.71
1995/10/31 17949.89 18881.81
1995/11/30 18160.34 19130.02
1995/12/31 18359.36 19330.51
1996/01/31 18511.10 19497.25
1996/02/29 18282.41 19268.33
1996/03/31 18211.60 19169.10
1996/04/30 18119.57 19101.34
1996/05/31 18097.44 19086.87
1996/06/30 18263.16 19289.65
1996/07/31 18311.02 19347.00
1996/08/31 18341.71 19362.23
1996/09/30 18542.51 19632.01
1996/10/31 18835.87 19978.94
1996/11/30 19053.16 20242.37
1996/12/31 18949.60 20112.68
1997/01/31 19029.75 20190.85
1997/02/28 19047.70 20229.42
1997/03/31 18929.15 20089.84
1997/04/30 19138.01 20325.86
1997/05/31 19257.92 20494.63
1997/06/30 19448.59 20681.67
1997/07/31 19805.22 21102.45
1997/08/31 19729.72 20996.37
1997/09/30 19933.57 21240.51
1997/10/31 20122.90 21475.78
1997/11/30 20160.27 21523.23
1997/12/31 20314.51 21695.30
1998/01/31 20561.91 21979.54
1998/02/28 20552.59 21962.79
1998/03/31 20630.19 22033.35
1998/04/30 20704.78 22143.75
1998/05/29 20859.77 22306.17
IMATRL PRASUN SHR__CHT 19980531 19980605 161130 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class A on May
31, 1988, and the current 3.75% sales charge was paid. As the chart
shows, by May 31, 1998, the value of the investment would have grown
to $20,860 - a 108.60% 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 $22,306 - a 123.06% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE
OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU
MIGHT LOSE MONEY. BUT IF YOU CAN
RIDE OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEAR ENDED SEPTEMBER 3, 1996
ENDED NOVEMBER 30, (COMMENCEMENT OF
MAY 31, SALE OF CLASS A
SHARES) TO
NOVEMBER 30,
1998 1997 1996
DIVIDEND RETURN 2.81% 6.09% 1.51%
CAPITAL RETURN 0.66% -0.28% 2.32%
TOTAL RETURN 3.47% 5.81% 3.83%
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 MAY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.93(CENTS) 29.27(CENTS) 59.44(CENTS)
ANNUALIZED DIVIDEND RATE 5.47% 5.53% 5.62%
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 net asset value of $10.61 over the past
one month, $10.62 over the past six months and $10.57 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 to compare
funds from different companies on an equal basis. The offering share
price used in the calculation of the yield includes the effect of
Class A's 3.75% sales charge.
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's 12b-1
fee been reflected, returns prior to September 10, 1992 would have
been lower. If Fidelity had not reimbursed certain class expenses, the
past five year and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL T 3.43% 8.14% 31.36% 116.52%
FIDELITY ADV INT BOND - CL T 0.59% 5.17% 27.74% 110.56%
(INCL. 2.75% SALES CHARGE)
LB INT GOVT/CORP BOND 3.64% 8.84% 35.78% 123.06%
SHORT-INTERMEDIATE INVESTMENT GRADE 3.23% 7.56% 31.14% 108.71%
DEBT FUNDS AVERAGE
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value weighted performance benchmark for government and
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class T's performance stacked up against its
peers, you can compare it to the 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 six months average represents a peer group of 98 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL T 8.14% 5.61% 8.03%
FIDELITY ADV INT BOND - CL T 5.17% 5.02% 7.73%
(INCL. 2.75% SALES CHARGE)
LB INT GOVT/CORP BOND 8.84% 6.31% 8.35%
SHORT-INTERMEDIATE INVESTMENT GRADE 7.56% 5.56% 7.62%
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
1988/05/31 9725.00 10000.00
1988/06/30 9904.96 10159.38
1988/07/31 9894.59 10137.81
1988/08/31 9922.60 10153.03
1988/09/30 10105.86 10329.16
1988/10/31 10241.29 10469.51
1988/11/30 10178.06 10380.17
1988/12/31 10187.42 10389.31
1989/01/31 10298.26 10498.44
1989/02/28 10273.87 10455.04
1989/03/31 10314.47 10500.22
1989/04/30 10487.97 10710.10
1989/05/31 10685.22 10922.77
1989/06/30 10945.56 11198.13
1989/07/31 11177.12 11428.06
1989/08/31 11026.17 11280.36
1989/09/30 11078.22 11333.65
1989/10/31 11309.37 11573.23
1989/11/30 11402.39 11683.88
1989/12/31 11421.19 11715.86
1990/01/31 11307.59 11640.74
1990/02/28 11344.79 11683.12
1990/03/31 11328.92 11698.35
1990/04/30 11255.68 11657.74
1990/05/31 11523.02 11508.01
1990/06/30 11677.08 12073.45
1990/07/31 11832.98 12240.95
1990/08/31 11734.20 12190.70
1990/09/30 11820.94 12284.85
1990/10/31 11932.34 12427.48
1990/11/30 12138.89 12179.78
1990/12/31 12324.88 12788.62
1991/01/31 12416.51 12918.31
1991/02/28 12516.08 13021.60
1991/03/31 12595.38 13110.17
1991/04/30 12735.86 13253.05
1991/05/31 12803.80 13334.52
1991/06/30 12807.65 13343.91
1991/07/31 12951.70 13492.63
1991/08/31 13223.61 13750.22
1991/09/30 13469.22 13986.75
1991/10/31 13628.60 14146.38
1991/11/30 13758.99 14308.81
1991/12/31 14193.04 14658.27
1992/01/31 14011.43 14525.54
1992/02/29 14047.78 14582.90
1992/03/31 13997.21 14525.54
1992/04/30 14075.86 14653.20
1992/05/31 14333.11 14880.34
1992/06/30 14535.22 15100.63
1992/07/31 14877.33 15400.86
1992/08/31 15014.88 15554.91
1992/09/30 15189.55 15766.06
1992/10/31 14965.37 15561.51
1992/11/30 15003.58 15502.37
1992/12/31 15204.61 15709.97
1993/01/31 15507.67 16015.53
1993/02/28 15817.08 16268.05
1993/03/31 15920.98 16332.77
1993/04/30 16018.74 16464.23
1993/05/31 16029.99 16427.68
1993/06/30 16347.80 16685.53
1993/07/31 16474.42 16726.39
1993/08/31 16836.81 16991.60
1993/09/30 16885.04 17062.15
1993/10/31 16975.95 17107.83
1993/11/30 16878.75 17012.41
1993/12/31 16952.12 17090.32
1994/01/31 17131.15 17280.16
1994/02/28 16800.05 17024.59
1994/03/31 16474.62 16743.65
1994/04/30 16409.12 16629.70
1994/05/31 16352.50 16640.86
1994/06/30 16347.96 16643.15
1994/07/31 16503.10 16882.72
1994/08/31 16501.14 16935.51
1994/09/30 16419.23 16779.69
1994/10/31 16420.24 16777.40
1994/11/30 16467.31 16701.27
1994/12/31 16533.99 16760.40
1995/01/31 16713.71 17042.86
1995/02/28 16920.35 17396.39
1995/03/31 17006.82 17495.88
1995/04/30 17174.48 17711.85
1995/05/31 17594.01 18247.34
1995/06/30 17698.11 18369.67
1995/07/31 17688.64 18372.21
1995/08/31 17830.61 18539.45
1995/09/30 17956.16 18673.71
1995/10/31 18136.38 18881.81
1995/11/30 18349.02 19130.02
1995/12/31 18550.11 19330.51
1996/01/31 18703.42 19497.25
1996/02/29 18472.36 19268.33
1996/03/31 18400.81 19169.10
1996/04/30 18307.82 19101.34
1996/05/31 18285.46 19086.87
1996/06/30 18452.91 19289.65
1996/07/31 18501.27 19347.00
1996/08/31 18532.28 19362.23
1996/09/30 18753.40 19632.01
1996/10/31 19048.74 19978.94
1996/11/30 19285.54 20242.37
1996/12/31 19182.46 20112.68
1997/01/31 19244.17 20190.85
1997/02/28 19260.42 20229.42
1997/03/31 19140.34 20089.84
1997/04/30 19350.29 20325.86
1997/05/31 19470.70 20494.63
1997/06/30 19643.26 20681.67
1997/07/31 20021.84 21102.45
1997/08/31 19925.93 20996.37
1997/09/30 20149.65 21240.51
1997/10/31 20339.67 21475.78
1997/11/30 20357.39 21523.23
1997/12/31 20530.62 21695.30
1998/01/31 20779.59 21979.54
1998/02/28 20769.03 21962.79
1998/03/31 20846.46 22033.35
1998/04/30 20920.22 22143.75
1998/05/29 21056.24 22306.17
IMATRL PRASUN SHR__CHT 19980531 19980605 163934 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class T on May
31, 1988, and the current 2.75% sales charge was paid. As the chart
shows, by May 31, 1998, the value of the investment would have grown
to $21,056 - a 110.56% 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 $22,306 - a 123.06% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 2.77% 6.03% 6.49% 6.56% 5.46% 7.80%
CAPITAL RETURN 0.66% -0.47% -1.39% 4.87% -7.90% 4.70%
TOTAL RETURN 3.43% 5.56% 5.10% 11.43% -2.44% 12.50%
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 MAY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.90(CENTS) 28.92(CENTS) 58.80(CENTS)
ANNUALIZED DIVIDEND RATE 5.44% 5.46% 5.56%
30-DAY ANNUALIZED YIELD 5.12% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $10.61 over the past
one month, $10.63 over the past six months and $10.57 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 to compare
funds from different companies on an equal basis. The offering share
price used in the calculation of the yield includes the effect of
Class T's 2.75% sales charge.
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's 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's 12b-1 fee been reflected, returns
prior to June 30, 1994 would have been lower. Class B's contingent
deferred sales charge included in the past six months, past one year,
past five years and past 10 years total return figures are 3%, 3%, 0%
and 0%, respectively. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL B 3.19% 7.42% 27.62% 110.35%
FIDELITY ADV INT BOND - CL B 0.19% 4.42% 27.62% 110.35%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 3.64% 8.84% 35.78% 123.06%
SHORT-INTERMEDIATE INVESTMENT GRADE 3.23% 7.56% 31.14% 108.71%
DEBT FUNDS AVERAGE
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value weighted performance benchmark for government and
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class B's performance stacked up against its
peers, you can compare it to the 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 six months average represents a peer group of 98 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL B 7.42% 5.00% 7.72%
FIDELITY ADV INT BOND - CL B 4.42% 5.00% 7.72%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 8.84% 6.31% 8.35%
SHORT-INTERMEDIATE INVESTMENT GRADE 7.56% 5.56% 7.62%
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
1988/05/31 10000.00 10000.00
1988/06/30 10185.05 10159.38
1988/07/31 10174.39 10137.81
1988/08/31 10203.19 10153.03
1988/09/30 10391.63 10329.16
1988/10/31 10530.89 10469.51
1988/11/30 10465.87 10380.17
1988/12/31 10475.49 10389.31
1989/01/31 10589.47 10498.44
1989/02/28 10564.39 10455.04
1989/03/31 10606.14 10500.22
1989/04/30 10784.55 10710.10
1989/05/31 10987.37 10922.77
1989/06/30 11255.07 11198.13
1989/07/31 11493.18 11428.06
1989/08/31 11337.96 11280.36
1989/09/30 11391.49 11333.65
1989/10/31 11629.17 11573.23
1989/11/30 11724.82 11683.88
1989/12/31 11744.15 11715.86
1990/01/31 11627.35 11640.74
1990/02/28 11665.59 11683.12
1990/03/31 11649.28 11698.35
1990/04/30 11573.96 11657.74
1990/05/31 11848.86 11508.01
1990/06/30 12007.28 12073.45
1990/07/31 12167.59 12240.95
1990/08/31 12066.01 12190.70
1990/09/30 12155.21 12284.85
1990/10/31 12269.76 12427.48
1990/11/30 12482.15 12179.78
1990/12/31 12673.40 12788.62
1991/01/31 12767.62 12918.31
1991/02/28 12870.01 13021.60
1991/03/31 12951.55 13110.17
1991/04/30 13096.00 13253.05
1991/05/31 13165.86 13334.52
1991/06/30 13169.82 13343.91
1991/07/31 13317.94 13492.63
1991/08/31 13597.54 13750.22
1991/09/30 13850.10 13986.75
1991/10/31 14013.98 14146.38
1991/11/30 14148.06 14308.81
1991/12/31 14594.39 14658.27
1992/01/31 14407.64 14525.54
1992/02/29 14445.01 14582.90
1992/03/31 14393.02 14525.54
1992/04/30 14473.90 14653.20
1992/05/31 14738.41 14880.34
1992/06/30 14946.24 15100.63
1992/07/31 15298.02 15400.86
1992/08/31 15439.46 15554.91
1992/09/30 15619.07 15766.06
1992/10/31 15388.56 15561.51
1992/11/30 15427.84 15502.37
1992/12/31 15634.57 15709.97
1993/01/31 15946.19 16015.53
1993/02/28 16264.35 16268.05
1993/03/31 16371.18 16332.77
1993/04/30 16471.71 16464.23
1993/05/31 16483.28 16427.68
1993/06/30 16810.08 16685.53
1993/07/31 16940.27 16726.39
1993/08/31 17312.92 16991.60
1993/09/30 17362.51 17062.15
1993/10/31 17455.99 17107.83
1993/11/30 17356.04 17012.41
1993/12/31 17431.48 17090.32
1994/01/31 17615.58 17280.16
1994/02/28 17275.11 17024.59
1994/03/31 16940.49 16743.65
1994/04/30 16873.13 16629.70
1994/05/31 16814.91 16640.86
1994/06/30 16810.24 16643.15
1994/07/31 16951.51 16882.72
1994/08/31 16937.06 16935.51
1994/09/30 16841.42 16779.69
1994/10/31 16814.04 16777.40
1994/11/30 16851.15 16701.27
1994/12/31 16890.81 16760.40
1995/01/31 17063.40 17042.86
1995/02/28 17264.88 17396.39
1995/03/31 17358.32 17495.88
1995/04/30 17501.93 17711.85
1995/05/31 17935.65 18247.34
1995/06/30 18047.36 18369.67
1995/07/31 18010.30 18372.21
1995/08/31 18144.98 18539.45
1995/09/30 18263.09 18673.71
1995/10/31 18436.35 18881.81
1995/11/30 18640.76 19130.02
1995/12/31 18835.08 19330.51
1996/01/31 18964.13 19497.25
1996/02/29 18737.99 19268.33
1996/03/31 18637.07 19169.10
1996/04/30 18549.53 19101.34
1996/05/31 18497.43 19086.87
1996/06/30 18674.99 19289.65
1996/07/31 18694.68 19347.00
1996/08/31 18714.80 19362.23
1996/09/30 18928.37 19632.01
1996/10/31 19234.88 19978.94
1996/11/30 19445.35 20242.37
1996/12/31 19330.07 20112.68
1997/01/31 19400.54 20190.85
1997/02/28 19406.13 20229.42
1997/03/31 19271.91 20089.84
1997/04/30 19453.67 20325.86
1997/05/31 19582.02 20494.63
1997/06/30 19744.76 20681.67
1997/07/31 20094.49 21102.45
1997/08/31 20005.21 20996.37
1997/09/30 20199.79 21240.51
1997/10/31 20379.02 21475.78
1997/11/30 20385.15 21523.23
1997/12/31 20548.14 21695.30
1998/01/31 20804.87 21979.54
1998/02/28 20783.60 21962.79
1998/03/31 20849.03 22033.35
1998/04/30 20911.56 22143.75
1998/05/29 21035.20 22306.17
IMATRL PRASUN SHR__CHT 19980531 19980605 161826 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class B on May
31, 1988. As the chart shows, by May 31, 1998 the value of the
investment would have been $21,035 - a 110.35% 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 $22,306 - a 123.06% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF INTEREST
RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT
INVESTS IN BONDS WILL VARY. THAT
MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU
MIGHT LOSE MONEY. BUT IF YOU CAN
RIDE OUT THE MARKET'S UPS AND
DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED NOVEMBER 30, JUNE 30, 1994
ENDED (COMMENCEMENT
MAY 31, OF SALE OF
CLASS B SHARES) TO
NOVEMBER 30,
1998 1997 1996 1995 1994
DIVIDEND RETURN 2.43% 5.30% 5.81% 5.74% 1.97%
CAPITAL RETURN 0.76% -0.47% -1.49% 4.88% -1.73%
TOTAL RETURN 3.19% 4.83% 4.32% 10.62% 0.24%
</TABLE>
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 MAY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.27(CENTS) 25.34(CENTS) 51.58(CENTS)
ANNUALIZED DIVIDEND RATE 4.74% 4.79% 4.88%
30-DAY ANNUALIZED YIELD 4.56% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $10.60 over the past
one month, $10.62 over the past six months and $10.56 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.
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 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 prior to
November 3, 1997 would have been lower. Class C's contingent deferred
sales charge included in the past six months and past one year total
return figure is 1.00%. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL C 2.94% 7.15% 27.34% 109.93%
FIDELITY ADV INT BOND - CL C 1.94% 6.15% 27.34% 109.93%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 3.64% 8.84% 35.78% 123.06%
SHORT-INTERMEDIATE INVESTMENT GRADE 3.23% 7.56% 31.14% 108.71%
DEBT FUNDS AVERAGE
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class 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 six months average represents a peer group of 98 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY ADV INT BOND - CL C 7.15% 4.95% 7.70%
FIDELITY ADV INT BOND - CL C 6.15% 4.95% 7.70%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LB INT GOVT/CORP BOND 8.84% 6.31% 8.35%
SHORT-INTERMEDIATE INVESTMENT GRADE 7.56% 5.56% 7.62%
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
1988/05/31 10000.00 10000.00
1988/06/30 10185.05 10159.38
1988/07/31 10174.41 10137.81
1988/08/31 10203.20 10153.03
1988/09/30 10391.63 10329.16
1988/10/31 10530.90 10469.51
1988/11/30 10465.88 10380.17
1988/12/31 10475.51 10389.31
1989/01/31 10589.48 10498.44
1989/02/28 10564.40 10455.04
1989/03/31 10606.15 10500.22
1989/04/30 10784.55 10710.10
1989/05/31 10987.37 10922.77
1989/06/30 11255.08 11198.13
1989/07/31 11493.19 11428.06
1989/08/31 11337.97 11280.36
1989/09/30 11391.49 11333.65
1989/10/31 11629.18 11573.23
1989/11/30 11724.83 11683.88
1989/12/31 11744.17 11715.86
1990/01/31 11627.35 11640.74
1990/02/28 11665.59 11683.12
1990/03/31 11649.29 11698.35
1990/04/30 11573.98 11657.74
1990/05/31 11848.87 11508.01
1990/06/30 12007.28 12073.45
1990/07/31 12167.60 12240.95
1990/08/31 12066.02 12190.70
1990/09/30 12155.22 12284.85
1990/10/31 12269.77 12427.48
1990/11/30 12482.15 12179.78
1990/12/31 12673.41 12788.62
1991/01/31 12767.62 12918.31
1991/02/28 12870.01 13021.60
1991/03/31 12951.55 13110.17
1991/04/30 13096.01 13253.05
1991/05/31 13165.88 13334.52
1991/06/30 13169.84 13343.91
1991/07/31 13317.96 13492.63
1991/08/31 13597.54 13750.22
1991/09/30 13850.10 13986.75
1991/10/31 14014.00 14146.38
1991/11/30 14148.07 14308.81
1991/12/31 14594.39 14658.27
1992/01/31 14406.96 14525.54
1992/02/29 14444.95 14582.90
1992/03/31 14392.78 14525.54
1992/04/30 14474.94 14653.20
1992/05/31 14740.26 14880.34
1992/06/30 14949.29 15100.63
1992/07/31 15302.20 15400.86
1992/08/31 15442.92 15554.91
1992/09/30 15619.46 15766.06
1992/10/31 15388.32 15561.51
1992/11/30 15427.76 15502.37
1992/12/31 15634.98 15709.97
1993/01/31 15947.78 16015.53
1993/02/28 16267.05 16268.05
1993/03/31 16374.00 16332.77
1993/04/30 16474.54 16464.23
1993/05/31 16486.03 16427.68
1993/06/30 16813.80 16685.53
1993/07/31 16944.42 16726.39
1993/08/31 17318.23 16991.60
1993/09/30 17367.60 17062.15
1993/10/31 17461.02 17107.83
1993/11/30 17361.00 17012.41
1993/12/31 17436.52 17090.32
1994/01/31 17621.14 17280.16
1994/02/28 17279.95 17024.59
1994/03/31 16944.56 16743.65
1994/04/30 16877.22 16629.70
1994/05/31 16818.96 16640.86
1994/06/30 16814.05 16643.15
1994/07/31 16955.64 16882.72
1994/08/31 16941.34 16935.51
1994/09/30 16845.58 16779.69
1994/10/31 16818.13 16777.40
1994/11/30 16855.45 16701.27
1994/12/31 16895.11 16760.40
1995/01/31 17068.19 17042.86
1995/02/28 17270.16 17396.39
1995/03/31 17363.81 17495.88
1995/04/30 17507.59 17711.85
1995/05/31 17942.24 18247.34
1995/06/30 18054.02 18369.67
1995/07/31 18016.74 18372.21
1995/08/31 18152.10 18539.45
1995/09/30 18270.44 18673.71
1995/10/31 18444.07 18881.81
1995/11/30 18649.06 19130.02
1995/12/31 18844.02 19330.51
1996/01/31 18973.60 19497.25
1996/02/29 18746.56 19268.33
1996/03/31 18645.48 19169.10
1996/04/30 18557.80 19101.34
1996/05/31 18505.47 19086.87
1996/06/30 18683.84 19289.65
1996/07/31 18703.97 19347.00
1996/08/31 18723.43 19362.23
1996/09/30 18937.59 19632.01
1996/10/31 19244.95 19978.94
1996/11/30 19455.94 20242.37
1996/12/31 19340.41 20112.68
1997/01/31 19411.39 20190.85
1997/02/28 19416.64 20229.42
1997/03/31 19281.96 20089.84
1997/04/30 19464.47 20325.86
1997/05/31 19593.22 20494.63
1997/06/30 19756.19 20681.67
1997/07/31 20106.78 21102.45
1997/08/31 20017.51 20996.37
1997/09/30 20212.55 21240.51
1997/10/31 20392.29 21475.78
1997/11/30 20393.23 21523.23
1997/12/31 20552.54 21695.30
1998/01/31 20787.66 21979.54
1998/02/28 20747.69 21962.79
1998/03/31 20811.36 22033.35
1998/04/30 20872.03 22143.75
1998/05/29 20993.48 22306.17
IMATRL PRASUN SHR__CHT 19980531 19980615 115924 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class C on May
31, 1988. As the chart shows, by May 31, 1998 the value of the
investment would have been $20,993 - a 109.93% 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 $22,306 - a 123.06% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE MONEY.
BUT IF YOU CAN RIDE OUT THE
MARKET'S UPS AND DOWNS, YOU
MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS NOVEMBER 3, 1997
ENDED (COMMENCEMENT OF
MAY 31, SALE OF CLASS C
SHARES) TO
NOVEMBER 30,
1998 1997
DIVIDEND RETURN 2.37% 0.34%
CAPITAL RETURN 0.57% -0.09%
TOTAL RETURN 2.94% 0.25%
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 MAY 31, 1998 PAST 1 PAST 6 LIFE OF
MONTH MONTHS CLASS
DIVIDENDS PER SHARE 4.17(CENTS) 24.84(CENTS) 28.46(CENTS)
ANNUALIZED DIVIDEND RATE 4.63% 4.69% 4.66%
30-DAY ANNUALIZED YIELD - - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annual dividend rate
is based on an average net asset value of $10.60 over the past one
month, $10.62 over the past six months and $10.62 over the life of the
class. 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
A lack of inflationary pressure
resulted in a relatively favorable
investing climate for bonds during
the six months that ended May 31,
1998. The Lehman Brothers
Aggregate Bond Index - a broad
gauge of the U.S. taxable
investment-grade bond market -
returned 4.09% during this period.
Global volatility and historically low
interest rates were the main stories
in late 1997. As financial problems
in Asia came to a head, wary stock
investors sought investments
offering lower volatility - helping
the U.S. bond market. The
Lehman Brothers Corporate Bond
Index returned 4.48% for the six
months. Corporate bonds benefited
from continued economic growth
and demand for yield, although they
faltered somewhat in January 1998
when investors feared a slowdown
in demand in Asia would eat into
corporate earnings.
Mortgage-backed bonds
performed well during the period, as
relative interest-rate stability
generally cancelled out increased
mortgage prepayment activity
caused by low interest-rate levels.
The Lehman Brothers
Mortgage-Backed Securities Index
generated a six-month return of
3.83%. Two factors buoyed the
bond market late in the period. First,
data from the first quarter of 1998
indicated continued strong
economic growth and benign
inflation in the U.S. Second,
renewed fears of economic and
political dislocation in Asia attracted
investors to the bond market -
especially to U.S. Treasuries, which
are perceived as safe havens in
times of uncertainty. However,
corporate bonds underperformed in
May due to fears that companies
would experience earnings
slowdowns because of problems
in Asia.
An interview with Kevin Grant, Portfolio Manager of Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. The fund's returns were broadly in line with the intermediate-term
bond market. For the six months that ended May 31, 1998, the fund's
Class A, Class T, Class B and Class C shares had total returns of
3.47%, 3.43%, 3.19% and 2.94%, respectively. This compares with the
3.64% return of the Lehman Brothers Intermediate Government/Corporate
Bond Index and the 3.23% return of the short-intermediate investment
grade debt funds average tracked by Lipper Analytical Services over
the same period. For the 12 months that ended May 31, 1998, the fund's
Class A, Class T, Class B and Class C shares had total returns of
8.32%, 8.14%, 7.42% and 7.15%, respectively, while the Lehman Brothers
index returned 8.84% and the return of the Lipper average was 7.56%.
Q. WHAT ROLE DOES THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX PLAY IN THE MANAGEMENT OF THE FUND?
A. The Lehman Brothers Government/Corporate Bond Index contains most
U.S. government and investment-grade corporate bonds with maturities
of one to 10 years. As such, it represents the overall intermediate
government/corporate market. It does not include mortgage-backed
securities. I make my investment decisions based on the relative
value of the various sectors and securities within this market, and
include mortgage-backed securities in my decision-making. If I
believe a sector of the market is cheaper than other sectors, I will
overweight that sector relative to the market as represented by the
fund's benchmark index. If I believe the sector is especially cheap,
I will be even more aggressive in my overweighting. If I don't have a
particularly strong view one way or the other, I'll market-weight the
sector. Additionally, I don't market-time the fund. That is, I don't
change the overall interest-rate sensitivity of the fund in
anticipation of changes in interest rates. Instead, I manage the fund
to maintain similar overall interest-rate risk to the index.
Q. WERE THERE ANY STRATEGIES THAT HELPED PERFORMANCE DURING THE
PERIOD?
A. The fund owned some mortgage-backed securities that posted decent
returns. The Lehman Brothers index does not include any mortgage
securities, so any investments in mortgages will result in an
overweighting in that sector. In the summer of 1997, we at Fidelity
decided that the then-current prices of mortgage-backed securities did
not reflect the risk that homeowners might refinance mortgages to take
advantage of falling interest rates. As a result, I sold most of my
mortgage-related investments, retaining only seasoned mortgages - or
mortgages that were 10 years or older and had relatively little
prepayment risk - the risk that they might be refinanced. Prepayment
can be a negative for investors in mortgage-backed securities, because
it disrupts their income stream and may force them to reinvest the
proceeds in securities offering lower current yield. When interest
rates experienced dramatic declines in December 1997 and early January
1998, investors in the mortgage market feared potential prepayments so
the prices of mortgage securities fell. At that point, I dedicated an
additional 10% of portfolio investments to mortgage securities that
had become attractively priced. I saw two major benefits. First, when
I buy a bond that has cheapened, I get a yield pickup versus what I
had sold, Treasuries in this case. Remember, bond yields move in the
opposite direction of bond prices. Second, I expected that the market
would recover, figuring I would eventually have the opportunity for
price appreciation. At the close of the six-month period, the fund had
19.4% of portfolio investments in mortgage-backed securities. About
10% were in core, seasoned holdings that carried little prepayment
risk. The remaining were in newer mortgages in which I invested
opportunistically because of cheaper prices. This strategy has helped
fund performance.
Q. IN ADDITION TO THE EMPHASIS ON MORTGAGES, WERE THERE ANY OTHER
NOTABLE STRATEGIES DURING THE SIX-MONTH PERIOD?
A. I emphasized corporate bonds because they offered a yield advantage
over Treasuries and carried relatively little credit risk in this
environment. At the close of the fiscal period, about 46% of
investment assets were in corporate bonds, including asset-backed
securities such as credit-card receivables. This has been a good
environment for corporate debt holders. In general, corporate America
has been de-leveraging - or reducing its debt - in an era of cost
control and consolidation.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. The relative value approach I use to manage the fund works best
when conditions are changing and misvaluations - or incorrect market
prices for some securities - occur. Over this period, the opportunity
to take advantage of misvaluations did not arise because of the
unusually stable interest-rate environment.
Q. WHAT IS YOUR OUTLOOK?
A. My outlook is quite good for the bond market. The favorable
conditions of the past three to four years should continue. The U.S.
government surplus, the de-leveraging of Corporate America and low
inflation combine to create a very good environment for bondholders.
The negative effects of the Asian crisis tend to be specific to a few
industries that I am avoiding.
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 EFFECTS OF
THE ASIAN FINANCIAL CRISIS ON
THE ECONOMY AND BOND
MARKET IN THE UNITED STATES:
"The real story of the global
financial markets since December
1, 1997, has been Asia and its
effects on other economies.
Essentially, a large part of the
world's gross domestic product has
been shrinking as the Asian
economies, including China, have
imploded. This has happened even
as the U.S. economy has remained
healthy, with strong employment.
Ordinarily, this strength would
create inflationary pressure, which
in turn could cause interest rates to
rise. However, the coincidence of the
Asian economic implosion has
been a powerful offset to
inflationary pressures within the
United States, for two basic reasons.
First, demand for American products
in Asia is shrinking, thereby
reducing overall demand and cost
pressures. Second, the goods that
we import from Asia now are
cheaper.
"As a result, Asia has taken the
wind out of inflation. This
environment of strong economic
growth but low inflation and falling
interest rates is very unusual. We
haven't seen anything like it since
the 1940s.
"The primary negative impact of
Asia on the U.S. economy has been
in some selected industries such as
energy, capital equipment and
semiconductors, as well as exporters
such as paper and timber companies
- - areas I've avoided. On the other
hand, the effects of Asia have been
positive on retail-related industries
and on any corporations or individuals
looking to borrow money because
they've been able to borrow at lower
interest rates."
FUND FACTS
GOAL: seeks to provide a high
current income by investing in
investment-grade debt securities
START DATE: February 2, 1984
SIZE: as of May 31, 1998,
more than $487 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in 1993
(checkmark)
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1998
(MOODY'S RATINGS) % % OF FUND'S INVESTMENTS
O 6 MONTHS AGO
F
F
U
N
D
'
S
I
N
V
E
S
T
M
E
N
T
S
AAA 5 59.1
7
.
5
AA 7 10.0
.
5
A 2 22.3
0
.
6
BAA 1 5.9
0
.
9
BA 1 0.0
.
0
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 MAY 31, 1998
6 MONTHS AGO
YEARS 6.0 5.9
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF MAY 31, 1998
6 MONTHS AGO
YEARS 3.4 3.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1998* AS OF NOVEMBER 30, 1997 **
CORPORATE BONDS 45.8%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 25.9%
MORTGAGE-BACKED
SECURITIES 19.4%
FOREIGN GOVERNMENT
OBLIGATIONS 3.7%
OTHER 2.7%
SHORT-TERM
INVESTMENTS 2.5%
CORPORATE BONDS 42.7%
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS 29.7%
MORTGAGE-BACKED
SECURITIES 16.4%
FOREIGN GOVERNMENT
OBLIGATIONS 4.8%
OTHER 3.7%
SHORT-TERM
INVESTMENTS 2.7%
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: 32.7
ROW: 1, COL: 5, VALUE: 25.9
ROW: 1, COL: 6, VALUE: 32.5
ROW: 1, COL: 1, VALUE: 2.7
ROW: 1, COL: 2, VALUE: 3.7
ROW: 1, COL: 3, VALUE: 4.8
ROW: 1, COL: 4, VALUE: 16.4
ROW: 1, COL: 5, VALUE: 29.7
ROW: 1, COL: 6, VALUE: 42.7
* FOREIGN
INVESTMENTS 12.0%
** FOREIGN
INVESTMENTS 12.0%
INVESTMENTS MAY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
NONCONVERTIBLE BONDS - 45.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
BASIC INDUSTRIES - 1.6%
CHEMICALS & PLASTICS - 0.6%
Methanex Corp. yankee 8 7/8%, 11/15/01 $ 2,790,000 $ 2,910,389
PACKAGING & CONTAINERS - 1.0%
Owens Illinois, Inc.:
7.15%, 5/15/05 1,500,000 1,507,500
7.35%, 5/15/08 1,450,000 1,457,975
7.80%, 5/15/18 1,750,000 1,785,000
4,750,475
TOTAL BASIC INDUSTRIES 7,660,864
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties Trust 6 3/4%, 4/1/05 640,000 637,830
FINANCE - 31.4%
ASSET-BACKED SECURITIES - 13.5%
Aesop Funding II LLC 6.22%, 10/20/01 (b) 8,000,000 8,037,500
Arcadia Automobile Receivables Trust
6 1/2%, 6/17/02 5,000,000 5,032,813
Capital Equipment Receivables Trust 6.11%, 7/15/99 7,292,186
7,315,010
Chase Manhattan Corp. 5 1/2%, 2/15/01 600,000 593,004
Chase Manhattan Grantor Trust:
6.61%, 9/15/02 1,935,676 1,952,311
6.76%, 9/15/02 725,878 732,116
Chevy Chase Auto Receivables Trust:
6.60%, 12/15/02 654,979 660,094
5.90%, 7/15/03 1,884,025 1,883,142
Citibank Credit Card Master Trust I 10,000,000 10,070,313
Contimortgage Home Equity Loan Trust
6.26%, 7/15/12 5,000,000 5,003,100
Ford Credit Auto Owner Trust:
6.40%, 5/15/02 1,460,000 1,472,235
6.40%, 12/15/02 590,000 589,658
Ford Credit Grantor Trust 5.90%, 10/15/00 1,288,833 1,289,639
KeyCorp Auto Grantor Trust 5.80%, 7/15/00 46,331 46,322
Key Plastics, Inc. 10 1/4%, 3/15/07 1,760,000 1,765,087
MBNA Master Credit Card Trust II Class A
6.55%, 1/15/07 10,000,000 10,286,200
PNC Student Loan Trust I 6.314%, 1/25/01 5,000,000 5,031,500
SCFC Recreational Vehicle Loan Trust
7 1/4%, 9/15/06 261,838 261,184
Sears Credit Account Master Trust II
6 1/2%, 10/15/03 3,400,000 3,422,304
65,443,532
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
BANKS - 9.1%
ABN Amro Bank NV (Chicago) 6 5/8%, 10/31/01 $ 2,750,000 $ 2,793,533
Banc One Corp. 6.70%, 3/24/00 1,900,000 1,921,375
Bank of Boston 6.38%, 8/11/00 2,620,000 2,645,283
Banponce Financial Corp.:
6.69%, 9/21/00 2,250,000 2,275,178
6 3/4%, 8/9/01 3,850,000 3,904,285
Capital One Bank 7.35%, 6/20/00 5,000,000 5,107,950
Kansallis-Osake-Pankki (NY Branch) 10%, 5/1/02 650,000 733,493
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,209,340
Provident Bank (Cincinnati, Ohio)
6 1/8%, 12/15/00 5,000,000 5,001,150
Skandinaviska Enskilda Banken yankee
8.45%, 5/15/02 4,600,000 4,941,780
Star Banc Corp. 6.8%, 5/1/99 2,400,000 2,420,640
Union Planters National Bank (Tenn.)
6.81%, 8/20/01 1,500,000 1,527,720
U.S. Bancorp 7 1/2%, 6/1/26 2,000,000 2,223,360
Wachovia Corp. 6.605%, 10/1/25 5,000,000 5,159,250
43,864,337
CREDIT & OTHER FINANCE - 6.5%
Associates Corp. of North America 6 1/2%, 9/9/98 5,000,000
5,012,400
Chrysler Financial Corp. 6 3/8%, 1/28/00 2,580,000 2,596,641
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,536,725
Ford Motor Credit Co. 7 3/4%, 11/15/02 100,000 106,076
General Electric Capital Corp. 6.94%, 4/13/09 (a) 2,530,000
2,550,164
General Motors Acceptance Corp. 6.65%, 5/24/00 2,000,000 2,024,620
Morgan Guaranty Trust Co.
5 3/4%, 10/8/99 10,000,000 9,967,900
RBSG Capital Corp. 10 1/8%, 3/1/04 1,500,000 1,768,395
Sears, Roebuck Acceptance Corp. 6.15%, 11/15/05 5,000,000 5,036,900
31,599,821
INSURANCE - 2.1%
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,075,690
SunAmerica, Inc. 6.20%, 10/31/99 9,300,000 9,315,903
10,391,593
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.2%
Long Island Savings Bank 6.20%, 4/2/01 $ 900,000 $ 899,856
TOTAL FINANCE 152,199,139
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
POLLUTION CONTROL - 1.3%
WMX Technologies, Inc. 7.10%, 8/1/26 6,000,000 6,236,340
MEDIA & LEISURE - 1.0%
BROADCASTING - 1.0%
TCI Communications, Inc. 8 3/4%, 8/1/15 4,000,000 4,693,960
NONDURABLES - 1.3%
TOBACCO - 1.3%
Philip Morris Companies, Inc. 6.95%, 6/1/06 6,000,000 6,174,360
RETAIL & WHOLESALE - 0.4%
GENERAL MERCHANDISE STORES - 0.4%
Penney (J.C.) Co., Inc. 6.95%, 4/1/00 1,800,000 1,831,248
TECHNOLOGY - 2.5%
COMPUTER SERVICES & SOFTWARE - 1.0%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 5,094,950
ELECTRONICS - 1.5%
Motorola, Inc. 6 1/2%, 9/1/25 2,000,000 2,062,700
Texas Instruments, Inc. 6 7/8%, 7/15/00 5,000,000 5,092,050
7,154,750
TOTAL TECHNOLOGY 12,249,700
UTILITIES - 6.2%
CELLULAR - 1.0%
AirTouch Communications, Inc. 6.35%, 6/1/05 5,000,000 4,997,200
ELECTRIC UTILITY - 3.6%
Avon Energy Partners Holdings:
7.05%, 12/11/07 (b) 5,000,000 5,189,100
6.46%, 3/4/08 (b) 2,000,000 1,985,420
British Columbia Hydro & Power Authority yankee
12 1/2%, 1/15/14 940,000 1,010,979
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
DR Investment yankee 7.10%, 5/15/02 (b) $ 5,000,000 $ 5,125,938
Israel Electric Corp. Ltd. 7 3/4%, 12/15/27 (b) 3,840,000
3,925,210
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 156,845
17,393,492
TELEPHONE SERVICES - 1.6%
Cable & Wireless Communications PLC
6 3/8%, 3/6/03 2,090,000 2,092,696
Teleport Communications Group, Inc.
11 1/8%, 7/1/07 (a) 1,800,000 1,552,500
WorldCom, Inc. 7 3/4%, 4/1/07 4,000,000 4,320,600
7,965,796
TOTAL UTILITIES 30,356,488
TOTAL NONCONVERTIBLE BONDS
(Cost $217,543,093) 222,039,929
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 25.9%
U.S. TREASURY OBLIGATIONS - 17.2%
12 3/4%, 11/15/10 (callable) 2,498,000 3,543,638
7 7/8%, 8/15/01 1,595,000 1,699,664
6 3/8%, 9/30/01 76,500,000 78,233,490
TOTAL U.S. TREASURY OBLIGATIONS 83,476,792
U.S. GOVERNMENT AGENCY OBLIGATIONS - 8.7%
Farm Credit System Financial Assistance Corporation
9 3/8%, 7/21/03 1,800,000 2,080,116
Federal Home Loan Bank:
7.31%, 6/16/04 3,830,000 4,109,475
7.38%, 8/5/04 1,930,000 2,080,173
7.70%, 9/20/04 1,250,000 1,371,088
Fannie Mae:
6.15%, 1/13/00 1,100,000 1,107,733
6.72%, 8/1/05 2,230,000 2,335,568
Freddie Mac:
5.035%, 4/28/03 15,000,000 14,920,500
8.115%, 1/31/05 5,460,000 6,127,157
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trust Certificates (assets of Trust guaranteed
by U.S. Government through Defense Security
Assistance Agency) Class 2-E, 9.40%, 5/15/02 $ 784,950 $ 831,592
Guaranteed Export Trust Certificates (assets of Trust
guaranteed by U.S. Government through
Export-Import Bank):
Series 1994-A, 7.12%, 4/15/06 302,078 315,702
Series 1994-C, 6.61%, 9/15/99 40,609 40,776
U.S. Department of Housing and Urban Development
Government guaranteed participation certificates:
Series 1995-A, 8.24%, 8/1/04 1,030,000 1,151,489
Series 1996-A, 6.92%, 8/1/04 5,360,000 5,631,538
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 42,102,907
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $124,611,182) 125,579,699
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 14.2%
FANNIE MAE - 8.7%
5 1/2%, 5/1/03 to 5/1/26 $ 3,663,579 $ 3,593,258
6%, 5/1/01 to 4/1/13 26,795,227 26,490,118
6 1/2%, 10/1/27 to 4/1/28 6,005,943 5,970,268
9 1/2%, 2/1/25 3,110,538 3,357,390
10%, 1/1/20 85,033 93,669
10 1/2%, 7/1/11 to 8/1/20 434,874 484,762
11%, 8/1/15 1,974,470 2,195,669
12 1/2%, 2/1/11 to 4/1/15 96,662 113,557
42,298,691
FREDDIE MAC - 1.1%
5 1/2%, 12/1/02 to 6/1/03 1,973,408 1,936,979
7%, 11/1/00 to 7/1/01 2,263,772 2,290,539
9 1/2%, 1/1/17 14,870 15,940
10%, 4/1/05 to 8/1/10 359,764 384,091
10 1/4%, 12/1/09 35,744 38,789
10 1/2%, 5/1/21 676,553 744,513
11%, 12/1/11 36,388 40,678
11 1/2%, 10/1/15 117,664 132,629
11 3/4%, 10/1/10 40,057 44,919
5,629,077
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 4.4%
7%, 11/1/22 to 11/1/27 $ 4,796,729 $ 4,881,203
8%, 2/1/02 to 6/1/25 3,697,225 3,812,064
8 1/2%, 4/1/17 to 12/1/21 647,035 687,581
9%, 5/1/16 to 4/1/18 2,901,000 3,138,833
10%, 11/1/09 to 1/1/26 3,609,363 3,992,427
11%, 12/1/09 to 10/1/20 979,985 1,081,193
11 1/2%, 1/1/13 to 2/1/19 3,082,087 3,501,196
21,094,497
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $70,399,574) 69,022,265
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 2.6%
Freddie Mac:
planned amortization class:
Series 1645 Class ZA, 5 1/2%, 4/15/05 11,453,091 11,345,716
sequential pay Series 1838 Class A,
6 1/2%, 12/15/02 1,024,880 1,024,079
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $12,142,244) 12,369,795
COMMERCIAL MORTGAGE SECURITIES - 2.6%
BKB Commercial Mortgage Trust Series 1997-C1
Class B, 7.218%, 2/25/43 (b)(c) 3,207,565 3,201,551
CBM Funding Corp. sequential pay Series 1996-1
Class A-1, 7.55%, 7/1/99 88,992 89,979
CS First Boston Mortgage Securities Corp.
Series 1995-WF1 Class A-2, 6.648%, 12/21/27 5,000,000 5,015,625
Equitable Life Assurance Society of the United States
(The) Series 1996-1 Class C1,
7.52%, 5/15/06 (b) 1,000,000 1,059,780
Thirteen Affiliates of General Growth Properties, Inc.
sequential pay Series A-2,
6.602%, 11/15/12 (b) 2,500,000 2,553,350
Wells Fargo Capital Markets Apartment Financing
Trust 6.56%,12/29/05 (b) 935,450 952,073
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $12,700,677) 12,872,358
FOREIGN GOVERNMENT OBLIGATIONS - 3.7%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Alberta Province yankee 9 1/4%, 4/1/00 $ 2,200,000 $ 2,322,607
Canadian Government 6 1/8%, 7/15/02 5,000,000 5,059,000
Manitoba Province yankee 6 7/8%, 9/15/02 5,000,000 5,150,650
Quebec Province yankee 6.86%, 4/15/26 (a) 5,000,000 5,215,750
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $17,263,284) 17,748,007
SUPRANATIONAL OBLIGATIONS - 2.2%
Inter American Development Bank yankee
6.29%, 7/16/27
(Cost $9,937,100) 10,000,000 10,444,000
CERTIFICATES OF DEPOSIT - 0.5%
Canadian Imperial Bank of Commerce
NY Branch yankee 6.20%, 8/1/00
(Cost $2,503,750) 2,500,000 2,511,750
CASH EQUIVALENTS - 2.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.54%, dated
5/29/98 due 6/1/98 $ 12,105,590 12,100,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $479,200,904) $ 484,687,803
LEGEND
(d) 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.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$31,829,921 or 6.5% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.9% AAA, AA, A 83.3%
Baa 10.9% BBB 8.9%
Ba 1.0% BB 1.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings
of the sovereign credit of the issuing government.
Distribution of investments by country of issue, as a percentage of
total value of investment in securities, is as follows:
United States 87.8%
Canada 5.0
United Kingdom 2.6
Multi-National 2.2
Sweden 1.0
Others (individually less than 1%) 1.4
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31, 1998, the aggregate cost of investment securities for
income tax purposes was $479,200,904. Net unrealized appreciation
aggregated $5,486,899, of which $6,405,981 related to appreciated
investment securities and $919,082 related to depreciated investment
securities.
At November 30, 1997, the fund had a capital loss carryforward of
approximately $15,259,000 of which $2,841,000, $1,035,000, $134,000,
$9,840,000 and $1,409,000 will expire on November 30, 1998, 1999,
2002, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 484,687,803
AGREEMENTS OF $12,100,000) (COST $479,200,904) -
SEE ACCOMPANYING SCHEDULE
CASH 314
RECEIVABLE FOR INVESTMENTS SOLD 8,260,306
RECEIVABLE FOR FUND SHARES SOLD 880,119
INTEREST RECEIVABLE 5,511,206
PREPAID EXPENSES 6,064
TOTAL ASSETS 499,345,812
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 9,980,756
PAYABLE FOR FUND SHARES REDEEMED 1,337,913
DISTRIBUTIONS PAYABLE 569,012
ACCRUED MANAGEMENT FEE 175,384
DISTRIBUTION FEES PAYABLE 79,041
OTHER PAYABLES AND ACCRUED EXPENSES 131,447
TOTAL LIABILITIES 12,273,553
NET ASSETS $ 487,072,259
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 497,065,667
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (1,795,502)
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON (13,684,805)
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 5,486,899
NET ASSETS $ 487,072,259
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
MAY 31, 1998 (UNAUDITED)
CALCULATION OF MAXIMUM OFFERING PRICE $10.63
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($6,961,871 (DIVIDED BY) 655,054 SHARES)
MAXIMUM OFFERING PRICE PER SHARE $11.04
(100/96.25 OF $10.63)
CLASS T: $10.63
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($276,826,733 (DIVIDED BY) 26,040,177 SHARES)
MAXIMUM OFFERING PRICE PER SHARE $10.93
(100/97.25 OF $10.63)
CLASS B: $10.62
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($26,497,208 (DIVIDED BY) 2,494,459 SHARES) A
CLASS C: $10.62
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($2,538,931 (DIVIDED BY) 238,994 SHARES) A
INSTITUTIONAL CLASS: $10.64
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($174,247,516 (DIVIDED BY) 16,379,689 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
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 15,692,026
INTEREST
EXPENSES
MANAGEMENT FEE $ 1,053,736
TRANSFER AGENT FEES 468,629
DISTRIBUTION FEES 464,130
ACCOUNTING FEES AND EXPENSES 98,883
NON-INTERESTED TRUSTEES' COMPENSATION 906
CUSTODIAN FEES AND EXPENSES 17,653
REGISTRATION FEES 51,041
AUDIT 21,093
LEGAL 1,104
INTEREST 699
MISCELLANEOUS 2,607
TOTAL EXPENSES BEFORE REDUCTIONS 2,180,481
EXPENSE REDUCTIONS (30,446) 2,150,035
NET INVESTMENT INCOME 13,541,991
REALIZED AND UNREALIZED GAIN (LOSS) 1,659,607
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 1,325,839
INVESTMENT SECURITIES
NET GAIN (LOSS) 2,985,446
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 16,527,437
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 13,541,991 $ 28,868,748
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 1,659,607 (1,459,900)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 1,325,839 (1,414,423)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 16,527,437 25,994,425
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (13,338,472) (28,478,083)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 1,406,755 (8,667,273)
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,595,720 (11,150,931)
NET ASSETS
BEGINNING OF PERIOD 482,476,539 493,627,470
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS OF NET $ 487,072,259 $ 482,476,539
INVESTMENT INCOME OF $1,795,502 AND
$1,999,021, RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS CLASS A
SIX MONTHS ENDED YEARS ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 1996 E
SELECTED PER-SHARE DATA D
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.590 $ 10.350
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .292 .615 .159
NET REALIZED AND UNREALIZED GAIN (LOSS) .071 (.023) .235
TOTAL FROM INVESTMENT OPERATIONS .363 .592 .394
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.293) (.622) (.154)
NET ASSET VALUE, END OF PERIOD $ 10.630 $ 10.560 $ 10.590
TOTAL RETURN B, C 3.47% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 6,962 $ 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 5.56% A 5.93% 6.45% A
PORTFOLIO TURNOVER RATE 192% 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 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 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 INVEST-
MENT OPERATIONS
NET INVESTMENT .294 D .625 D .671 D .649 .609 .785
INCOME
NET REALIZED AND .065 (.058) (.147) .491 (.876) .511
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVEST- .359 .567 .524 1.140 (.267) 1.296
MENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT (.289) (.617) (.674) (.640) (.555) (.796)
INCOME
IN EXCESS OF NET - - - - (.058) -
INVESTMENT INCOME
TOTAL DISTRIBUTIONS (.289) (.617) (.674) (.640) (.613) (.796)
NET ASSET VALUE, END $ 10.630 $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140
OF PERIOD
TOTAL RETURN B, C 3.43% 5.56% 5.10% 11.43% (2.44)% 12.50%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 276,827 $ 278,869 $ 262,103 $ 228,439 $ 141,866 $ 59,184
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .96% A .96% .97% .94% E 1.02% E 1.23%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .96% A .96% .96% F .94% 1.02% 1.23%
AVERAGE NET ASSETS
AFTER EXPENSE
REDUCTIONS
RATIO OF NET INVESTMENT 5.54% A 5.97% 6.38% 6.20% 6.04% 6.81%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 192% 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
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING $ 10.540 $ 10.590 $ 10.750 $ 10.250 $ 10.430
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .256 D .551 D .597 D .579 .204
NET REALIZED AND UNREALIZED .077 (.057) (.153) .483 (.178)
GAIN (LOSS)
TOTAL FROM INVESTMENT .333 .494 .444 1.062 .026
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.253) (.544) (.604) (.562) (.187)
IN EXCESS OF NET INTEREST - - - - (.019)
INCOME
TOTAL DISTRIBUTIONS (.253) (.544) (.604) (.562) (.206)
NET ASSET VALUE, END OF PERIOD $ 10.620 $ 10.540 $ 10.590 $ 10.750 $ 10.250
TOTAL RETURN B, C 3.19% 4.83% 4.32% 10.62% 0.24%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 26,497 $ 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 4.85% A 5.27% 5.69% 5.44% 5.42% A
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 192% 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 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 E
SELECTED PER-SHARE DATA D
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.560 $ 10.570
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .247 .031
NET REALIZED AND UNREALIZED GAIN (LOSS) .061 (.005)
TOTAL FROM INVESTMENT OPERATIONS .308 .026
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.248) (.036)
NET ASSET VALUE, END OF PERIOD $ 10.620 $ 10.560
TOTAL RETURN B, C 2.94% 0.25%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,539 $ 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 4.78% A 4.42% A
PORTFOLIO TURNOVER RATE 192% 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 5 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD 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 5 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
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 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 INVEST-
MENT OPERATIONS
NET INTEREST INCOME .309 D .658 D .705 D .671 .602 .832
NET REALIZED AND .066 (.060) (.151) .499 (.833) .531
UNREALIZED
GAIN (LOSS)
TOTAL FROM INVEST- .375 .598 .554 1.170 (.231) 1.363
MENT OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST (.305) (.648) (.704) (.670) (.597) (.843)
INCOME
IN EXCESS OF NET - - - - (.062) -
INTEREST INCOME
TOTAL DISTRIBUTIONS (.305) (.648) (.704) (.670) (.659) (.843)
NET ASSET VALUE, END $ 10.640 $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160
OF PERIOD
TOTAL RETURN B, C 3.59% 5.86% 5.40% 11.73% (2.10)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END $ 174,248 $ 177,427 $ 211,866 $ 208,861 $ 172,122 $ 183,790
OF PERIOD
(000 OMITTED)
RATIO OF EXPENSES TO .67% A .67% .66% .67% E .61% .64%
AVERAGE NET ASSETS
RATIO OF NET INTEREST 5.83% A 6.27% 6.69% 6.47% 6.45% 7.41%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 192% 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 May 31, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund(the fund) is a fund of
Fidelity Advisor Series IV (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class B, 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. Investment 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. 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses except for registering and qualifying
Class C and shares of Class C for distribution under federal and state
securities law. These expenses are amortized over one year.
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, futures and
options transactions, market discount, capital loss carryforwards and
losses deferred due to futures and options and wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances
into one or more joint trading accounts. These balances are invested
in one or more repurchase agreements for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
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 $427,732,402 and $422,794,190, respectively, of which U.S.
government and government agency obligations aggregated $314,812,080
and $305,701,986, 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 period, the management
fee was equivalent to an annualized rate of .44% of average net
assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. 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 period, this fee was based on the following annual rates of
the average net assets of each applicable class:
CLASS A .25%
CLASS T .50%
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
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO RETAINED BY
FDC FDC
CLASS A $ 3,894 $ -
CLASS T 348,295 17,367
CLASS B 105,281 79,049
CLASS C 6,660 6,660
$ 464,130 $ 103,076
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, the following amounts were paid to third parties under the
Plans:
CLASS A $1,873
CLASS T 22,758
CLASS B 8,720
CLASS C 1,879
INSTITUTIONAL CLASS -
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 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO RETAINED BY
FDC FDC
CLASS A $ 24,317 $ 15,077
CLASS T 36,573 18,035
CLASS B 50,417 50,417*
CLASS C 487 487*
$ 111,794 $ 84,016
* 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 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 period, the following amounts were paid to FIIOC:
AMOUNT % OF
AVERAGE
NET ASSETS*
CLASS A $ 6,728 .26%
CLASS T 288,638 .20%
CLASS B 30,578 .26%
CLASS C 2,400 .36%
INSTITUTIONAL CLASS 140,285 .16%
$ 468,629
* 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. 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 REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 5,706
CLASS T 1.00% -
CLASS B 1.65% 9,938
CLASS C 1.75% 14,520
INSTITUTIONAL CLASS .75% -
$ 30,164
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 period,
the fund's custodian fees were reduced by $282 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997 A
FROM NET INVESTMENT INCOME
CLASS A $ 141,634 $ 122,899
CLASS T 7,581,212 15,434,281
CLASS B 550,178 1,017,603
CLASS C 31,479 312
INSTITUTIONAL CLASS 5,033,969 11,902,988
TOTAL $ 13,338,472 $ 28,478,083
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30, ENDED MAY 31, NOVEMBER 30,
1998 1997 A 1998 1997 A
CLASS A 383,631 455,670 $ 4,071,878 $ 4,761,173
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 11,664 10,671 123,856 111,981
SHARES REDEEMED (101,991) (169,434) (1,083,467) (1,767,583)
NET INCREASE (DECREASE) 293,304 296,907 $ 3,112,267 $ 3,105,571
CLASS T 6,310,723 13,128,368 $ 67,075,482 $ 137,559,201
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 649,512 1,340,839 6,903,159 14,043,998
SHARES REDEEMED (7,328,549) (12,764,354) (77,872,308) (133,637,535)
NET INCREASE (DECREASE) (368,314) 1,704,853 $ (3,893,667) $ 17,965,664
CLASS B 1,141,243 1,113,298 $ 12,124,781 $ 11,661,677
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 41,292 76,151 438,387 796,683
SHARES REDEEMED (793,644) (874,566) (8,424,810) (9,166,397)
NET INCREASE (DECREASE) 388,891 314,883 $ 4,138,358 $ 3,291,963
CLASS C 232,493 15,175 $ 2,468,334 $ 160,441
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 2,644 16 28,072 167
SHARES REDEEMED (11,334) - (120,313) -
NET INCREASE (DECREASE) 223,803 15,191 $ 2,376,093 $ 160,608
INSTITUTIONAL CLASS 3,139,075 5,646,676 $ 33,381,103 $ 59,206,035
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 192,211 477,520 2,043,198 5,003,755
SHARES REDEEMED (3,742,449) (9,287,961) (39,750,597) (97,400,869)
NET INCREASE (DECREASE) (411,163) (3,163,765) $ (4,326,296) $ (33,191,079)
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
8. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 5,706
CLASS T 12,915
CLASS B 8,807
CLASS C 13,679
INSTITUTIONAL CLASS 9,934
$ 51,041
9. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund
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. The weighted average interest rate was 5.8125%.
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
John H. Costello, Assistant Treasurer
Leonard M. Rush, 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
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 TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
FIDELITY INSTITUTIONAL
SHORT-INTERMEDIATE
GOVERNMENT FUND
SEMIANNUAL REPORT
MAY 31, 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 SIX MONTHS.
INVESTMENTS 11 A COMPLETE LIST OF THE FUND'S INVESTMENTS
WITH THEIR MARKET VALUES.
FINANCIAL STATEMENTS 14 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 18 NOTES TO THE FINANCIAL STATEMENTS.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS
REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN
THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION.
SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
While low interest rates and subdued inflation provided support for
stock and bond markets in the U.S. during the first five months of
1998, concerns about continuing economic and political difficulties in
Asia colored their performance. The stock market reached record
heights due to stronger-than-expected corporate earnings, but
retreated at times when concerns surfaced about how the Asian
volatility would affect business prospects. The bond market benefited
from these retreats, as investors sought alternatives offering lower
volatility.
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.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $100,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at income, as reflected in the fund's yield,
to measure performance. If Fidelity had not reimbursed certain fund
expenses, the past five year and past 10 year total returns would have
been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY INST SHT-INT GOVT 3.19% 7.48% 31.21% 104.12%
LB 1-5 YEAR US GOVERNMENT BOND 3.33% 7.67% 32.60% 109.94%
SHORT-INTERMEDIATE US GOVERNMENT FUNDS AVERAGE 3.10% 7.33% 28.69% 104.26%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the Lehman
Brothers 1-5 Year U.S. Government Bond Index - a market value weighted
performance benchmark for government fixed-rate debt issues with
maturities between one and five years. To measure how the fund's
performance stacked up against its peers, you can compare it to the
short-intermediate U.S. government funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a
peer group of 100 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY INST SHT-INT GOVT 7.48% 5.58% 7.40%
LB 1-5 YEAR US GOVERNMENT BOND 7.67% 5.81% 7.70%
SHORT-INTERMEDIATE US GOVERNMENT FUNDS AVERAGE 7.33% 5.16% 7.39%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$100,000 OVER 10 YEARS
Inst Sht-Int LB 1-5 US
00662 LB069
1988/05/31 100000.00 100000.00
1988/06/30 101136.13 101220.34
1988/07/31 101343.20 101140.01
1988/08/31 101442.05 101275.95
1988/09/30 102706.85 102666.21
1988/10/31 103532.23 103852.57
1988/11/30 103560.60 103302.64
1988/12/31 103804.78 103438.58
1989/01/31 104695.26 104306.72
1989/02/28 104795.42 104124.44
1989/03/31 105186.99 104526.08
1989/04/30 106721.26 106466.26
1989/05/31 108251.89 108180.92
1989/06/30 110232.17 110535.10
1989/07/31 111669.76 112459.84
1989/08/31 111124.53 111381.61
1989/09/30 111774.91 111974.79
1989/10/31 113574.26 113992.21
1989/11/30 114551.24 115064.26
1989/12/31 115061.90 115475.16
1990/01/31 114964.18 115268.17
1990/02/28 115524.67 115796.47
1990/03/31 116034.44 116037.44
1990/04/30 116180.38 116071.43
1990/05/31 117934.82 118144.46
1990/06/30 119130.32 119531.64
1990/07/31 120482.05 121138.16
1990/08/31 120948.62 121267.92
1990/09/30 121766.33 122299.80
1990/10/31 122980.76 123813.64
1990/11/30 124333.08 125250.25
1990/12/31 125736.49 126853.68
1991/01/31 126881.54 128092.56
1991/02/28 127837.60 128892.73
1991/03/31 128633.72 129692.91
1991/04/30 129921.16 131012.11
1991/05/31 130878.19 131790.66
1991/06/30 131156.51 132108.87
1991/07/31 132403.99 133421.90
1991/08/31 134490.48 135612.33
1991/09/30 135619.47 137444.39
1991/10/31 137076.42 139041.65
1991/11/30 138398.37 140611.10
1991/12/31 141758.52 143274.22
1992/01/31 140408.48 142576.00
1992/02/29 141043.05 142949.83
1992/03/31 140984.54 142625.43
1992/04/30 142033.57 144012.61
1992/05/31 143844.94 145779.78
1992/06/30 145553.38 147655.09
1992/07/31 147087.53 149925.85
1992/08/31 148670.99 151411.89
1992/09/30 150491.41 153209.96
1992/10/31 148781.35 151723.92
1992/11/30 149082.29 151220.34
1992/12/31 150738.39 152891.74
1993/01/31 152532.34 155279.91
1993/02/28 153936.71 157096.52
1993/03/31 154656.39 157643.35
1993/04/30 155235.37 158826.62
1993/05/31 155567.45 158316.86
1993/06/30 156804.25 159997.53
1993/07/31 157273.33 160287.94
1993/08/31 158254.97 162184.87
1993/09/30 158633.56 162713.17
1993/10/31 158885.42 163108.63
1993/11/30 158818.89 162762.61
1993/12/31 159581.24 163408.30
1994/01/31 161040.10 164749.13
1994/02/28 159656.61 163108.63
1994/03/31 156980.75 161514.46
1994/04/30 156173.38 160581.44
1994/05/31 156333.28 160751.36
1994/06/30 156518.43 160995.43
1994/07/31 158249.16 162762.61
1994/08/31 158683.77 163269.28
1994/09/30 157970.57 162398.05
1994/10/31 158267.29 162601.95
1994/11/30 157698.38 161789.42
1994/12/31 158212.93 162144.71
1995/01/31 160457.00 164607.02
1995/02/28 163140.57 167393.72
1995/03/31 163962.02 168323.65
1995/04/30 165788.74 170053.76
1995/05/31 169178.01 173946.49
1995/06/30 170254.15 174959.84
1995/07/31 170661.58 175364.56
1995/08/31 172002.66 176575.63
1995/09/30 172965.48 177564.26
1995/10/31 174730.06 179266.56
1995/11/30 176292.95 181126.42
1995/12/31 177898.41 182674.25
1996/01/31 179524.80 184311.67
1996/02/29 178292.38 183066.61
1996/03/31 177858.39 182516.68
1996/04/30 177546.25 182368.39
1996/05/31 177613.62 182491.97
1996/06/30 179343.51 184070.69
1996/07/31 179962.80 184731.83
1996/08/31 180363.24 185198.34
1996/09/30 182300.84 187209.59
1996/10/31 184859.11 189776.94
1996/11/30 186626.37 191547.21
1996/12/31 186274.69 191077.61
1997/01/31 186911.27 191942.66
1997/02/28 187459.08 192307.22
1997/03/31 186731.76 191729.49
1997/04/30 188612.69 193573.90
1997/05/31 189910.44 194970.34
1997/06/30 191374.90 196474.91
1997/07/31 193866.50 199301.78
1997/08/31 193874.66 199073.16
1997/09/30 195516.68 200883.59
1997/10/31 197201.51 202761.99
1997/11/30 197810.08 203160.53
1997/12/31 199093.89 204671.28
1998/01/31 201207.01 207019.28
1998/02/28 201326.48 206982.20
1998/03/31 201982.21 207689.69
1998/04/30 202819.36 208687.59
1998/05/31 204117.96 209935.74
$100,000 OVER 10 YEARS: Let's say hypothetically that $100,000 was
invested in Fidelity Institutional Short-Intermediate Government Fund
on May 31, 1988. As the chart shows, by May 31, 1998, the value of the
investment would have grown to $204,118 - a 104.12% increase on the
initial investment. For comparison, look at how the Lehman Brothers
1-5 Year U.S. Government Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $100,000
would have grown to $209,936 - a 109.94% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS NO GUARANTEE OF
HOW IT WILL DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION OF INTEREST RATES. IN TURN, THE SHARE PRICE,
RETURN AND YIELD OF A FUND THAT INVESTS IN BONDS
WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES
DURING A MARKET DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT THE MARKET'S UPS
AND DOWNS, YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31,
1998 1997 1996 1995 1994 1993
DIVIDEND RETURN 3.30% 6.83% 6.90% 7.56% 6.07% 6.12%
CAPITAL RETURN -0.11% -0.84% -1.04% 4.23% -6.78% 0.41%
TOTAL RETURN 3.19% 5.99% 5.86% 11.79% -0.71% 6.53%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
fund. A capital return reflects both the amount paid by the fund to
shareholders as capital gain distributions and changes in the fund's
share price. Both returns assume the dividends or capital gains, if
any, paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1998 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.02(CENTS) 30.66(CENTS) 61.05(CENTS)
ANNUALIZED DIVIDEND RATE 6.29% 6.52% 6.49%
30-DAY ANNUALIZED YIELD 6.00% - -
DIVIDENDS per share show the income paid by the fund for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $9.40 over the past one
month, $9.43 over the past six months and $9.41 over the past one
year, you can compare the fund's income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds
based on the yields of the bonds in the fund, averaged over the past
30 days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A lack of inflationary pressure resulted in a relatively
favorable investing climate for bonds during the six
months that ended May 31, 1998. The Lehman
Brothers Aggregate Bond Index - a broad gauge of
the U.S. taxable investment-grade bond market -
returned 4.09% during this period. Global volatility
and historically low interest rates were the main
stories in late 1997. As financial problems in Asia
came to a head, wary stock investors sought
investments offering lower volatility - helping the
U.S. bond market. The Lehman Brothers Corporate
Bond Index returned 4.48% for the six months.
Corporate bonds benefited from continued economic
growth and demand from yield, although they
faltered somewhat in January 1998 when investors
feared a slowdown in demand from Asia would eat into
corporate earnings. Mortgage-backed bonds
performed well during the period, as relative
interest-rate stability generally cancelled out
increased mortgage prepayment activity caused by
low interest-rate levels. The Lehman Brothers
Mortgage-Backed Securities Index generated a
six-month return of 3.83%. Two factors buoyed the
bond market late in the period. First, data from the
first quarter of 1998 indicated continued strong
economic growth and benign inflation in the U.S.
Second, renewed fears of economic and political
dislocation in Asia attracted investors to the bond
market - especially to U.S. Treasuries, which are
perceived as safe havens in times of uncertainty.
However, corporate bonds underperformed in May
due to fears that companies would experience
earnings slowdowns because of problems in Asia.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Institutional Short-Intermediate Government Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the six-month period that ended May 31, 1998, the fund provided
a total return of 3.19%. To get a sense of how the fund did compared
to its competitors, the short-intermediate U.S. government funds
average returned 3.10% for the same six-month period, according to
Lipper Analytical Services. Additionally, the Lehman Brothers 1-5 Year
U.S. Government Bond Index - which tracks the types of securities in
which the fund invests (except for mortgages) - returned 3.33% for the
same six-month period. For the 12-month period that ended May 31,
1998, the fund returned 7.48%. That compared to the short-intermediate
U.S. government funds average's one-year return of 7.33%, and the
Lehman Brothers 1-5 Year U.S. Government Bond Index's one-year return
of 7.67%.
Q. WHAT ROLE DOES THE LEHMAN BROTHERS 1-5 YEAR U.S. GOVERNMENT BOND
INDEX PLAY IN THE MANAGEMENT OF THE FUND?
A. I use it as a representation of the overall market in which the
fund invests. The index includes most of the universe of government
and government agency bonds with maturities of between one and five
years, other than mortgage securities. I manage the fund to have
similar overall interest-rate risk to its benchmark index, but, beyond
that the fund can vary significantly from the index. With respect to
sector, issuer and structural composition, the fund's holdings reflect
Fidelity's research conclusions on the relative values of bonds.
Q. HOW DID YOU ALLOCATE THE FUND'S INVESTMENTS OVER THE PAST SIX
MONTHS?
A. I continued to carry a larger stake than the Lehman Brothers index
in agency securities, maintained a smaller weighting in Treasury
securities and invested in mortgage securities, which are not included
in the index. I chose to have a relatively large weighting in agency
and mortgage securities because they continued to offer attractive
yield advantages over Treasury securities.
Q. THE FUND'S STAKE IN AGENCY SECURITIES - WHICH MADE UP 54.3% OF
INVESTMENTS ON MAY 31, 1998, - FLUCTUATED DURING THE PERIOD. WHAT
PROMPTED YOU TO ALTER YOUR STAKE IN THEM?
A. During the final months of 1997, economic and currency problems in
Asia prompted more investors to seek out U.S. Treasury securities,
which are among the highest-quality securities in the world because
they are backed by the full faith and credit of the U.S. government.
As the demand for Treasuries grew, their yields fell and their prices
rose. As a result, agency securities were relatively inexpensive
compared to Treasury securities and their yield advantage made them an
attractive choice, in my opinion. So I added some additional agency
holdings at year end.
Q. HOW DID THE FUND'S AGENCY STAKE CHANGE IN 1998?
A. In the beginning of 1998, fears over the Asian turmoil faded. As a
result, agency prices strengthened and their yield advantage over
Treasuries diminished. To take advantage of the agency market's
strength, I sold some of the fund's agency holdings to lock in their
gains in January and February. In March, however, agency securities
became inexpensive again and their yields became more attractive
relative to Treasuries. So I added more agencies at the end of the
period. As far as mortgage-backed securities were concerned, I used
periods of strength and weakness in that market to buy when I thought
prices were cheap and sell when I thought I could do so at a profit
for the fund.
Q. WITHIN THE AGENCY SECTOR, WHICH SECURITIES DID YOU FOCUS ON?
A. I emphasized agency securities that are non-callable - those that
can't be redeemed by their issuers before maturity. Securities
typically are "called" - or redeemed - when interest rates fall enough
so that the issuer can save money by issuing new securities at lower
rates. A call is positive for issuers because it gives them the
opportunity to cut their borrowing costs. But holders of callable
bonds are often at a disadvantage because they may have to reinvest
the proceeds from the called bonds in new, lower-yielding bonds. I
prefer non-callable securities because they generally perform better
than callable bonds when interest rates fall and bond prices rally,
and generally fare no worse than callable bonds when interest rates
rise and bond prices fall.
Q. LET'S TALK ABOUT TREASURY SECURITIES AND THE CHOICES YOU MADE THERE
. . .
A. Within the Treasury sector, I preferred to own securities that were
issued some time ago. Newly issued Treasury securities, which are
known as "current" securities, typically are priced higher than older
Treasuries with similar maturities. That's because current securities
command a premium price for being more easily traded, or more liquid.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND?
A. At the end of the period, bonds were selling at prices that
reflected the best-case scenario - low inflation and falling interest
rates. To illustrate, the yield on a Treasury security with a two-year
maturity was virtually the same as the yield on very-short-maturity
securities. To me, that suggests that many investors are expecting the
Federal Reserve Board to lower interest rates. If the Fed surprises
investors by hiking interest rates instead, bonds could suffer. But no
matter what the direction of interest rates, I'll continue to manage
the fund with approximately the same interest-rate sensitivity as the
short-intermediate part of the government market.
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.
(solid bullet)
(solid bullet)
FUND FACTS
GOAL:
START DATE:
SIZE:
MANAGER:
(checkmark)
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MAY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
ZERO COUPON BONDS 5.4 10.1
LESS THAN 5% 0.0 0.2
5 - 5.99% 18.7 15.4
6 - 6.99% 21.7 15.6
7 - 7.99% 13.7 7.1
8 - 8.99% 14.8 21.1
9 - 9.99% 16.1 16.9
10 - 10.99% 2.1 2.5
11 - 11.99% 4.0 4.6
12 - 12.99% 1.3 1.4
13% AND OVER 0.1 0.1
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1998
6 MONTHS AGO
YEARS 3.6 3.5
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF MAY 31, 1998
6 MONTHS AGO
YEARS 2.4 2.3
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF MAY 31, 1998 AS OF NOVEMBER 30, 1997
MORTGAGE-BACKED
SECURITIES 20.4%
U.S. TREASURY
OBLIGATIONS 23.2%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 54.3%
SHORT-TERM
INVESTMENTS 2.1%
MORTGAGE-BACKED
SECURITIES 22.8%
U.S. TREASURY
OBLIGATIONS 18.8%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 53.4%
SHORT-TERM
INVESTMENTS 5.0%
ROW: 1, COL: 1, VALUE: 2.1
ROW: 1, COL: 2, VALUE: 54.3
ROW: 1, COL: 3, VALUE: 23.2
ROW: 1, COL: 4, VALUE: 20.4
ROW: 1, COL: 1, VALUE: 5.0
ROW: 1, COL: 2, VALUE: 53.4
ROW: 1, COL: 3, VALUE: 18.8
ROW: 1, COL: 4, VALUE: 22.8
INVESTMENTS MAY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 77.5%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 23.2%
5 5/8%, 5/15/01 $ 6,100,000 $ 6,116,203
6 1/2%, 8/31/01 23,300,000 23,907,897
7 3/4%, 2/15/01 31,840,000 33,561,270
8%, 8/15/99 9,000,000 9,253,080
8 7/8%, 11/15/98 10,410,000 10,567,816
TOTAL U.S. TREASURY OBLIGATIONS 83,406,266
U.S. GOVERNMENT AGENCY OBLIGATIONS - 54.3%
Fannie Mae:
6.15%, 1/13/00 6,000,000 6,042,180
5.65%, 3/05/01 21,850,000 21,802,1496.74%, 5/13/04 1,020,000
1,063,350
Federal Agricultural Mortgage Corp.:
6.92%, 8/10/00 1,040,000 1,065,834
7.61%, 10/16/00 3,000,000 3,126,270
Federal Farm Credit Bank
5.70%, 1/18/05 1,540,000 1,507,283
Freddie Mac 5.83%, 12/24/99 13,000,000 13,018,330
Government Loan Trusts (assets of Trust
guaranteed by U.S. Government
through Agency for International
Development) 8 1/2%, 4/1/06 2,800,000 3,086,804
Government Trust Certificates
(assets of Trust guaranteed by U.S.
Government through Defense
Security Assistance Agency):
Class 1-C, 9 1/4%, 11/15/01 30,674,475 32,617,703
Class 2-E, 9.40%, 5/15/02 3,351,950 3,551,123
Class T-3, 9 5/8%, 5/15/02 7,209,952 7,640,458
Guaranteed Export Trust Certificates
(assets of Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1993-C,
5.20%, 10/15/04 592,800 581,609
Series 1993-D,
5.23%, 5/15/05 518,298 508,195
Series 1994-A,
7.12%, 4/15/06 1,887,989 1,973,138
Series 1994-F,
8.187%, 12/15/04 16,151,965 17,131,807
Series1995-A,
6.28%, 6/15/04 4,580,588 4,629,656
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Guaranteed Trade Trust Certificates
(assets of Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1992-A, 7.02%, 9/1/04 $ 6,781,125 $ 7,005,540
Series 1997-A, 6.104%, 7/15/03 6,691,667 6,732,352
Housing & Urban Development
8.12%, 8/01/99 3,000,000 3,076,110
Israel Export Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Export-Import Bank)
Series 1994-1, 6.88%, 1/26/03 11,112,353 11,360,381
Overseas Private Investment Corp.
U.S. Government guaranteed
participation certificate
Series 1994-195,
6.08%, 8/15/04 (callable) . 3,130,200 3,145,381
Private Export Funding Corp. secured:
9.10%, 10/30/98 1,100,000 1,115,301
5.65%, 3/15/03 807,857 803,761
5.80%, 2/1/04 6,010,000 6,007,776
6.86%, 4/30/04 2,340,300 2,401,637
State of Israel (guaranteed by U.S.
Government through Agency for
International Development):
0%, 11/15/00 21,380,000 18,600,386
0%, 11/15/01 1,040,000 856,195
5 5/8%, 9/15/03 10,271,000 10,219,645
U.S. Department of Housing and
Urban Development government
guaranteed participation certificates:
Series 1996-A, 6.59%, 8/1/00 620,000 629,939
Series 1996-A, 6.67%, 8/1/01 3,600,000 3,679,452
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 194,979,745
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $278,286,260) 278,386,011
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 19.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FANNIE MAE - 7.9%
5 1/2%, 1/1/09 $ 1,830,276 $ 1,790,797
6%, 10/1/08 9,457,738 9,397,776
6 1/2%, 7/1/00 to 2/1/10 1,742,112 1,751,552
7%, 6/1/00 to 1/1/10 1,323,064 1,347,893
8%, 6/1/02 to 8/1/09 555,589 578,555
8 1/4%, 12/1/01 1,843,670 1,987,513
8 1/2%, 3/1/08 to 9/1/23 1,850,389 1,952,018
9%, 2/1/13 to 8/1/21 3,047,557 3,257,973
9 1/2%, 5/1/09 to 11/1/21 322,396 344,604
10%, 1/1/17 to 1/1/20 870,700 943,745
10 1/2%, 5/1/10 to 8/1/20 406,524 451,222
11%, 11/1/10 to 6/1/15 1,702,453 1,893,223
11 1/2%, 12/1/00 to 7/15/19 1,955,093 2,213,024
12%, 4/1/15 125,644 144,334
12 1/2%, 3/1/16 153,970 179,610
12 3/4%, 10/1/13 28,593 33,922
28,267,761
FREDDIE MAC - 6.2%
6 1/4%, 1/1/03 1,059,825 1,060,143
6 1/2%, 7/1/03 to 5/1/08 1,060,318 1,068,643
7%, 5/1/01 to 6/1/01 539,969 546,540
7 1/2%, 11/1/12 1,788,474 1,840,447
8%, 9/1/07 to 12/1/09 2,432,362 2,521,418
8 1/2%, 5/1/06 to 6/1/14 2,355,382 2,459,252
9%, 12/1/07 to 3/1/22 1,735,575 1,849,986
9 1/2%, 1/1/17 to 2/2/23 3,472,661 3,758,190
10%, 1/1/09 to 6/1/20 921,517 997,337
10 1/4%, 12/1/09 35,114 38,106
10 1/2%, 1/1/16 to 5/1/21 2,663,552 2,969,933
11%, 12/1/11 to 1/1/19 64,906 72,784
11 1/2%, 10/1/15 84,504 95,252
12%, 9/1/11 to 11/1/19 133,499 154,133
12 1/4%, 11/1/14 63,312 74,133
12 1/2%, 8/1/10 to 6/1/19 2,437,097 2,842,234
22,348,531
PRINCIPAL VALUE
AMOUNT (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 4.9%
8 1/2%, 5/15/16 to 4/15/17 $ 389,367 $ 415,424
9%, 1/15/05 to 12/15/16 988,655 1,067,012
9 1/2%, 11/15/09 to 11/15/20 2,627,107 2,847,078
10%, 11/15/09 to 9/15/19 561,980 617,120
10 1/2%, 1/15/16 to 1/15/18 1,473,295 1,627,989
11%, 12/15/09 to 8/15/19 4,783,996 5,357,979
11 1/2%, 4/15/10 to 5/15/19 4,057,505 4,615,721
12%, 1/15/14 to 2/15/16 821,349 951,027
12 1/2%, 11/15/14 117,204 138,377
13%, 8/15/14 to 11/15/14 110,302 130,152
13 1/2%, 7/15/11 52,696 62,772
17,830,651
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $67,109,500) 68,446,943
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.4%
U.S. GOVERNMENT AGENCY - 1.4%
Fannie Mae planned amortization class:
Series 1993-191 Class PE,
5.80%, 9/25/06 2,000,000 1,995,625Series 1993-229 Class PD,
5.60%, 7/25/06 3,000,000 2,981,250
Freddie Mac sequential pay
Series1353 Class A,
5 1/2%, 11/15/04 58,755 58,534
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $4,986,150) 5,035,409
CASH EQUIVALENTS - 2.1%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.54%,
dated 5/29/98 due 6/1/98 $ 7,561,492 7,558,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $357,939,910) $ 359,426,363
INCOME TAX INFORMATION
At May 31, 1998, the aggregate cost of investment securities for
income tax purposes was $357,939,910. Net unrealized appreciation
aggregated $1,486,453, of which $2,822,125 related to appreciated
investment securities and $1,335,672 related to depreciated investment
securities.
At November 30, 1997, the fund had a capital loss carryforward of
approximately $22,374,000 of which $14,816,000, $3,288,000, $4,169,000
and $101,000 will expire on November 30, 2002, 2003, 2004 and 2005,
respectively.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES,
AT VALUE (INCLUDING REPURCHASE
AGREEMENTS OF $7,558,000) (COST $357,939,910) $ 359,426,363
- - SEE ACCOMPANYING SCHEDULE
CASH 302
RECEIVABLE FOR INVESTMENTS SOLD 5,872,625
RECEIVABLE FOR FUND SHARES SOLD 598,351
INTEREST RECEIVABLE 4,741,204
TOTAL ASSETS 370,638,845
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 23,190,342
PAYABLE FOR FUND SHARES REDEEMED 212,836
DISTRIBUTIONS PAYABLE 163,182
ACCRUED MANAGEMENT FEE 128,456
OTHER PAYABLES AND ACCRUED EXPENSES 3,167
TOTAL LIABILITIES 23,697,983
NET ASSETS $ 346,940,862
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 366,796,222
UNDISTRIBUTED NET INVESTMENT INCOME 671,324
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS (22,013,137)
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 1,486,453
NET ASSETS $ 346,940,862
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $9.41
($346,940,862 (DIVIDED BY) 36,871,725 SHARES)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 12,227,931
INTEREST
EXPENSES
MANAGEMENT FEE $ 783,744
NON-INTERESTED TRUSTEES' COMPENSATION 660
TOTAL EXPENSES BEFORE REDUCTIONS 784,404
EXPENSE REDUCTIONS (22,761) 761,643
NET INVESTMENT INCOME 11,466,288
REALIZED AND UNREALIZED GAIN (LOSS) 378,829
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES (668,077)
NET GAIN (LOSS) (289,248)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 11,177,040
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 11,466,288 $ 23,268,975
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 378,829 (382,772)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (668,077) (2,903,614)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 11,177,040 19,982,589
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (11,404,686) (22,908,123)
SHARE TRANSACTIONS 80,820,646 148,797,833
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 10,204,583 20,933,933
COST OF SHARES REDEEMED (101,001,068) (146,792,800)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (9,975,839) 22,938,966
TOTAL INCREASE (DECREASE) IN NET ASSETS (10,203,485) 20,013,432
NET ASSETS
BEGINNING OF PERIOD 357,144,347 337,130,915
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $671,324 AND $609,722, RESPECTIVELY) $ 346,940,862 $ 357,144,347
OTHER INFORMATION
SHARES 8,568,737 15,860,798
SOLD
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,084,676 2,231,179
REDEMED (10,712,900) (15,646,982)
NET INCREASE (DECREASE) (1,059,487) 2,444,995
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED NOVEMBER 30,
MAY 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.420 $ 9.500 $ 9.600 $ 9.210 $ 9.890 $ 9.850
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .309 D .637 D .641 .669 .597 .654
NET REALIZED AND UNREALIZED GAIN (LOSS) (.012) (.090) (.102) .383 (.665) (.022)
TOTAL FROM INVESTMENT OPERATIONS .297 .547 .539 1.052 (.068) .632
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.307) (.627) (.639) (.662) (.602) (.592)
FROM NET REALIZED GAIN - - - - (.010) -
TOTAL DISTRIBUTIONS (.307) (.627) (.639) (.662) (.612) (.592)
NET ASSET VALUE, END OF PERIOD $ 9.410 $ 9.420 $ 9.500 $ 9.600 $ 9.210 $ 9.890
TOTAL RETURN B, C 3.19% 5.99% 5.86% 11.79% (.71)% 6.53%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD
(000 OMITTED) $ 346,941 $ 357,144 $ 337,131 $ 348,570 $ 339,788 $ 344,935
RATIO OF EXPENSES TO AVERAGE NET ASSETS .45% A .45% .42% E .45% .45% .45%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
AFTER EXPENSE REDUCTIONS .44% A, F .44% F .41% F .45% .45% .45%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 6.56% A 6.79% 6.95% 7.14% 7.06% 7.14%
PORTFOLIO TURNOVER RATE 231% A 147% 141% 214% 303% 351%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Institutional Short-Intermediate Government Fund (the fund)
is a fund of Fidelity Advisor Series IV (the trust) and is authorized
to issue an unlimited number of shares. The trust is registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust. The financial statements have been prepared in
conformity with generally accepted accounting principles which require
management to make certain estimates and assumptions at the date of
the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, and capital loss carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $407,318,377 and $396,361,588, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all
expenses, except the compensation of the non-interested Trustees and
certain exceptions such as interest, taxes, brokerage commissions and
extraordinary expenses. FMR receives a fee that is computed daily at
an annual rate of .45% of the fund's average net assets.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the
fund's custodian and transfer agent whereby credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's expenses were
reduced by $22,761 under these arrangements.
6. BENEFICIAL INTEREST.
At the end of the period, two shareholders were each record owners of
more than 10% of the total outstanding shares of the fund, totaling
35.4%.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Dwight D. Churchill, VICE PRESIDENT
Curtis Hollingsworth, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, 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
* INDEPENDENT TRUSTEES
