FIDELITY ADVISOR
GOVERNMENT INVESTMENT
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 19 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 22 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 23 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 28 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 37 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR GOVERNMENT INVESTMENT 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. Returns prior to September 3, 1996 are those of Class T, the
original class of the fund, and reflect Class T shares' 0.25% 12b-1
fee. If Fidelity had not reimbursed certain class expenses, the past
one year, past five years and past 10 years total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -0.82% 5.49% 41.52% 110.18%
CL A
FIDELITY ADV GOVERNMENT INV - -5.53% 0.48% 34.79% 100.20%
CL A (INCL. 4.75% SALES
CHARGE)
LB Government Bond -0.95% 6.44% 45.25% 130.06%
General US Government Funds -0.61% 5.12% 39.23% 112.27%
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 Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class A's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 189 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 5.49% 7.19% 7.71%
CL A
FIDELITY ADV GOVERNMENT INV - 0.48% 6.15% 7.19%
CL A (INCL. 4.75% SALES
CHARGE)
LB Government Bond 6.44% 7.75% 8.69%
General US Government Funds 5.12% 6.83% 7.80%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' cumulative return
and show you what would have happened if Class A shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Govt Inv -CL A LB Government Bond
00265 LB003
1989/04/30 9525.00 10000.00
1989/05/31 9711.06 10235.81
1989/06/30 9927.96 10577.33
1989/07/31 10082.55 10800.71
1989/08/31 9979.35 10618.95
1989/09/30 10037.30 10664.63
1989/10/31 10226.81 10940.62
1989/11/30 10304.50 11046.56
1989/12/31 10355.49 11065.22
1990/01/31 10242.82 10908.57
1990/02/28 10276.56 10930.33
1990/03/31 10291.76 10927.94
1990/04/30 10199.30 10831.56
1990/05/31 10498.15 11133.62
1990/06/30 10649.37 11309.88
1990/07/31 10778.45 11454.57
1990/08/31 10709.53 11295.05
1990/09/30 10780.72 11403.39
1990/10/31 10889.03 11589.70
1990/11/30 11078.89 11846.55
1990/12/31 11221.78 12029.75
1991/01/31 11344.91 12158.90
1991/02/28 11439.37 12228.49
1991/03/31 11485.35 12290.68
1991/04/30 11580.79 12425.56
1991/05/31 11641.56 12473.87
1991/06/30 11634.96 12456.17
1991/07/31 11759.68 12603.97
1991/08/31 11942.07 12896.23
1991/09/30 12157.90 13166.72
1991/10/31 12266.52 13281.99
1991/11/30 12337.43 13415.21
1991/12/31 12731.20 13872.24
1992/01/31 12558.51 13656.28
1992/02/29 12616.28 13709.61
1992/03/31 12529.73 13629.49
1992/04/30 12603.15 13715.35
1992/05/31 12834.50 13968.38
1992/06/30 13012.17 14168.56
1992/07/31 13231.88 14525.63
1992/08/31 13345.78 14660.99
1992/09/30 13469.77 14868.34
1992/10/31 13307.36 14653.82
1992/11/30 13341.04 14628.46
1992/12/31 13556.67 14874.80
1993/01/31 13788.85 15190.73
1993/02/28 14047.61 15494.94
1993/03/31 14128.15 15546.84
1993/04/30 14234.59 15666.42
1993/05/31 14257.02 15649.20
1993/06/30 14537.65 15996.46
1993/07/31 14609.65 16094.04
1993/08/31 14847.85 16453.26
1993/09/30 14875.10 16516.16
1993/10/31 14974.87 16578.58
1993/11/30 14745.80 16396.81
1993/12/31 14825.20 16460.19
1994/01/31 15083.69 16685.48
1994/02/28 14734.36 16332.24
1994/03/31 14289.05 15964.89
1994/04/30 14146.49 15839.33
1994/05/31 14161.23 15819.00
1994/06/30 14113.01 15782.65
1994/07/31 14420.69 16072.75
1994/08/31 14412.28 16075.86
1994/09/30 14209.79 15849.38
1994/10/31 14185.76 15837.42
1994/11/30 14158.71 15808.48
1994/12/31 14254.55 15904.62
1995/01/31 14510.45 16200.70
1995/02/28 14827.53 16549.40
1995/03/31 14925.80 16653.19
1995/04/30 15102.57 16870.83
1995/05/31 15689.96 17551.24
1995/06/30 15800.08 17685.89
1995/07/31 15744.60 17620.84
1995/08/31 15923.52 17827.95
1995/09/30 16068.56 17999.67
1995/10/31 16301.43 18273.74
1995/11/30 16533.98 18558.58
1995/12/31 16770.76 18821.66
1996/01/31 16856.82 18937.17
1996/02/29 16511.27 18551.41
1996/03/31 16358.82 18396.43
1996/04/30 16253.75 18279.00
1996/05/31 16219.35 18248.39
1996/06/30 16408.16 18483.96
1996/07/31 16441.28 18529.64
1996/08/31 16402.83 18488.27
1996/09/30 16663.32 18795.11
1996/10/31 17017.55 19208.62
1996/11/30 17298.10 19542.73
1996/12/31 17113.39 19343.27
1997/01/31 17127.16 19364.79
1997/02/28 17152.65 19391.34
1997/03/31 16964.95 19186.14
1997/04/30 17216.02 19463.09
1997/05/31 17341.06 19630.98
1997/06/30 17520.08 19851.24
1997/07/31 18018.02 20414.70
1997/08/31 17841.65 20212.85
1997/09/30 18096.08 20516.82
1997/10/31 18393.84 20871.74
1997/11/30 18468.38 20978.64
1997/12/31 18655.82 21197.95
1998/01/31 18934.99 21515.08
1998/02/28 18880.17 21456.72
1998/03/31 18910.61 21517.47
1998/04/30 18976.99 21614.33
1998/05/31 19164.55 21836.27
1998/06/30 19352.24 22084.52
1998/07/31 19383.56 22118.72
1998/08/31 19790.46 22694.14
1998/09/30 20296.43 23305.91
1998/10/31 20185.83 23226.51
1998/11/30 20195.54 23234.40
1998/12/31 20228.49 23286.30
1999/01/31 20361.46 23421.42
1999/02/28 19874.79 22864.42
1999/03/31 19949.11 22954.18
1999/04/30 20019.63 23006.19
IMATRL PRASUN SHR__CHT 19990430 19990514 103316 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class A on
April 30, 1989, and the current 4.75% sales charge was paid. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $20,020 - a 100.20% increase on the initial investment. For
comparison, look at how the Lehman Brothers Government Bond Index did
over the same period. With dividends reinvested, the same $10,000
would have grown to $23,006- a 130.06% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER
31,
1999 1998 1997 1996
Dividend returns 2.87% 6.12% 6.19% 0.99%
Capital returns -3.69% 3.62% 1.90% 2.59%
Total returns -0.82% 9.74% 8.09% 3.58%
</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 effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.41(cents) 28.89(cents) 55.85(cents)
Annualized dividend rate 5.53% 5.93% 5.68%
30-day annualized yield 4.91% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $9.70 over the past one
month, $9.83 over the past six months and $9.84 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering price used in
the calculation of the yield includes the effect of Class A's current
4.75% sales charge.
FIDELITY ADVISOR GOVERNMENT INVESTMENT 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. If Fidelity had not reimbursed certain
class expenses, the past one year, past five years and past 10 years
total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -0.86% 5.40% 41.06% 109.51%
CL T
FIDELITY ADV GOVERNMENT INV - -4.33% 1.71% 36.13% 102.18%
CL T (INCL. 3.50% SALES
CHARGE)
LB Government Bond -0.95% 6.44% 45.25% 130.06%
General US Government Funds -0.61% 5.12% 39.23% 112.27%
Average
</TABLE>
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 Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class T's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 189 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 5.40% 7.12% 7.68%
CL T
FIDELITY ADV GOVERNMENT INV - 1.71% 6.36% 7.29%
CL T (INCL. 3.50% SALES
CHARGE)
LB Government Bond 6.44% 7.75% 8.69%
General US Government Funds 5.12% 6.83% 7.80%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' cumulative return
and show you what would have happened if Class T shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Govt Inv -CL T LB Government Bond
00167 LB003
1989/04/30 9650.00 10000.00
1989/05/31 9838.50 10235.81
1989/06/30 10058.25 10577.33
1989/07/31 10214.86 10800.71
1989/08/31 10110.32 10618.95
1989/09/30 10169.03 10664.63
1989/10/31 10361.02 10940.62
1989/11/30 10439.73 11046.56
1989/12/31 10491.39 11065.22
1990/01/31 10377.24 10908.57
1990/02/28 10411.42 10930.33
1990/03/31 10426.83 10927.94
1990/04/30 10333.15 10831.56
1990/05/31 10635.92 11133.62
1990/06/30 10789.13 11309.88
1990/07/31 10919.90 11454.57
1990/08/31 10850.08 11295.05
1990/09/30 10922.20 11403.39
1990/10/31 11031.93 11589.70
1990/11/30 11224.28 11846.55
1990/12/31 11369.05 12029.75
1991/01/31 11493.79 12158.90
1991/02/28 11589.50 12228.49
1991/03/31 11636.08 12290.68
1991/04/30 11732.76 12425.56
1991/05/31 11794.34 12473.87
1991/06/30 11787.65 12456.17
1991/07/31 11914.01 12603.97
1991/08/31 12098.79 12896.23
1991/09/30 12317.46 13166.72
1991/10/31 12427.49 13281.99
1991/11/30 12499.34 13415.21
1991/12/31 12898.27 13872.24
1992/01/31 12723.32 13656.28
1992/02/29 12781.84 13709.61
1992/03/31 12694.16 13629.49
1992/04/30 12768.55 13715.35
1992/05/31 13002.93 13968.38
1992/06/30 13182.93 14168.56
1992/07/31 13405.53 14525.63
1992/08/31 13520.93 14660.99
1992/09/30 13646.54 14868.34
1992/10/31 13482.00 14653.82
1992/11/30 13516.12 14628.46
1992/12/31 13734.58 14874.80
1993/01/31 13969.81 15190.73
1993/02/28 14231.97 15494.94
1993/03/31 14313.56 15546.84
1993/04/30 14421.40 15666.42
1993/05/31 14444.12 15649.20
1993/06/30 14728.43 15996.46
1993/07/31 14801.38 16094.04
1993/08/31 15042.71 16453.26
1993/09/30 15070.31 16516.16
1993/10/31 15171.39 16578.58
1993/11/30 14939.31 16396.81
1993/12/31 15019.76 16460.19
1994/01/31 15281.63 16685.48
1994/02/28 14927.72 16332.24
1994/03/31 14476.57 15964.89
1994/04/30 14332.14 15839.33
1994/05/31 14347.08 15819.00
1994/06/30 14298.22 15782.65
1994/07/31 14609.94 16072.75
1994/08/31 14601.41 16075.86
1994/09/30 14396.27 15849.38
1994/10/31 14371.92 15837.42
1994/11/30 14344.52 15808.48
1994/12/31 14441.62 15904.62
1995/01/31 14700.87 16200.70
1995/02/28 15022.12 16549.40
1995/03/31 15121.68 16653.19
1995/04/30 15300.76 16870.83
1995/05/31 15895.86 17551.24
1995/06/30 16007.43 17685.89
1995/07/31 15951.22 17620.84
1995/08/31 16132.49 17827.95
1995/09/30 16279.43 17999.67
1995/10/31 16515.36 18273.74
1995/11/30 16750.96 18558.58
1995/12/31 16990.85 18821.66
1996/01/31 17078.04 18937.17
1996/02/29 16727.95 18551.41
1996/03/31 16573.51 18396.43
1996/04/30 16467.06 18279.00
1996/05/31 16432.20 18248.39
1996/06/30 16623.49 18483.96
1996/07/31 16657.05 18529.64
1996/08/31 16618.09 18488.27
1996/09/30 16881.19 18795.11
1996/10/31 17238.43 19208.62
1996/11/30 17521.36 19542.73
1996/12/31 17351.41 19343.27
1997/01/31 17344.28 19364.79
1997/02/28 17368.89 19391.34
1997/03/31 17177.33 19186.14
1997/04/30 17411.69 19463.09
1997/05/31 17555.60 19630.98
1997/06/30 17754.20 19851.24
1997/07/31 18237.75 20414.70
1997/08/31 18057.14 20212.85
1997/09/30 18313.25 20516.82
1997/10/31 18613.08 20871.74
1997/11/30 18679.14 20978.64
1997/12/31 18862.48 21197.95
1998/01/31 19143.55 21515.08
1998/02/28 19086.65 21456.72
1998/03/31 19115.82 21517.47
1998/04/30 19181.36 21614.33
1998/05/31 19369.13 21836.27
1998/06/30 19577.23 22084.52
1998/07/31 19587.28 22118.72
1998/08/31 19976.68 22694.14
1998/09/30 20506.52 23305.91
1998/10/31 20393.22 23226.51
1998/11/30 20400.48 23234.40
1998/12/31 20432.62 23286.30
1999/01/31 20566.27 23421.42
1999/02/28 20053.05 22864.42
1999/03/31 20147.74 22954.18
1999/04/30 20217.62 23006.19
IMATRL PRASUN SHR__CHT 19990430 19990521 113647 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class T on
April 30, 1989, and the current 3.50% sales charge was paid. As the
chart shows, by April 30, 1999 the value of the investment would have
grown to $20,218 - a 102.18% increase on the initial investment. For
comparison, look at how the Lehman Brothers Government Bond Index did
over the same period. With dividends reinvested the same $10,000 would
have grown to $23,006 - a 130.06% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.83% 5.94% 6.07% 6.24% 6.99% 5.01%
Capital returns -3.69% 3.62% 1.90% -1.86% 7.92% -10.28%
Total returns -0.86% 9.56% 7.97% 4.38% 14.91% -5.27%
</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 effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.35(cents) 28.51(cents) 54.99(cents)
Annualized dividend rate 5.46% 5.85% 5.59%
30-day annualized yield 4.91% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $9.70 over the past one
month, $9.82 over the past six months and $9.84 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering price used in
the calculation of the yield includes the effect of Class T's current
3.50% sales charge.
FIDELITY ADVISOR GOVERNMENT INVESTMENT 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). Returns prior to June 30, 1994 are
those of Class T, the original class of the fund, and reflect Class T
shares' 0.25% 12b-1 fee. Had Class B's 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six months,
past one year, past five years and past 10 years total return figures
are 5%, 5%, 2% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses, the past one past year, past five years and
past 10 years total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.17% 4.74% 36.37% 102.53%
CL B
FIDELITY ADV GOVERNMENT INV - -5.99% -0.25% 34.37% 102.53%
CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond -0.95% 6.44% 45.25% 130.06%
General US Government Funds -0.61% 5.12% 39.23% 112.27%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class B's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 189 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 4.74% 6.40% 7.31%
CL B
FIDELITY ADV GOVERNMENT INV - -0.25% 6.09% 7.31%
CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond 6.44% 7.75% 8.69%
General US Government Funds 5.12% 6.83% 7.80%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' cumulative return
and show you what would have happened if Class B shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Govt Inv -CL B LB Government Bond
00667 LB003
1989/04/30 10000.00 10000.00
1989/05/31 10195.34 10235.81
1989/06/30 10423.06 10577.33
1989/07/31 10585.35 10800.71
1989/08/31 10477.01 10618.95
1989/09/30 10537.85 10664.63
1989/10/31 10736.81 10940.62
1989/11/30 10818.37 11046.56
1989/12/31 10871.91 11065.22
1990/01/31 10753.61 10908.57
1990/02/28 10789.04 10930.33
1990/03/31 10805.00 10927.94
1990/04/30 10707.93 10831.56
1990/05/31 11021.68 11133.62
1990/06/30 11180.44 11309.88
1990/07/31 11315.96 11454.57
1990/08/31 11243.61 11295.05
1990/09/30 11318.34 11403.39
1990/10/31 11432.05 11589.70
1990/11/30 11631.38 11846.55
1990/12/31 11781.40 12029.75
1991/01/31 11910.67 12158.90
1991/02/28 12009.84 12228.49
1991/03/31 12058.11 12290.68
1991/04/30 12158.31 12425.56
1991/05/31 12222.11 12473.87
1991/06/30 12215.18 12456.17
1991/07/31 12346.12 12603.97
1991/08/31 12537.60 12896.23
1991/09/30 12764.20 13166.72
1991/10/31 12878.23 13281.99
1991/11/30 12952.68 13415.21
1991/12/31 13366.09 13872.24
1992/01/31 13184.79 13656.28
1992/02/29 13245.43 13709.61
1992/03/31 13154.57 13629.49
1992/04/30 13231.66 13715.35
1992/05/31 13474.54 13968.38
1992/06/30 13661.07 14168.56
1992/07/31 13891.74 14525.63
1992/08/31 14011.32 14660.99
1992/09/30 14141.49 14868.34
1992/10/31 13970.99 14653.82
1992/11/30 14006.34 14628.46
1992/12/31 14232.73 14874.80
1993/01/31 14476.49 15190.73
1993/02/28 14748.15 15494.94
1993/03/31 14832.71 15546.84
1993/04/30 14944.45 15666.42
1993/05/31 14968.00 15649.20
1993/06/30 15262.63 15996.46
1993/07/31 15338.22 16094.04
1993/08/31 15588.30 16453.26
1993/09/30 15616.90 16516.16
1993/10/31 15721.64 16578.58
1993/11/30 15481.15 16396.81
1993/12/31 15564.52 16460.19
1994/01/31 15835.89 16685.48
1994/02/28 15469.14 16332.24
1994/03/31 15001.63 15964.89
1994/04/30 14851.95 15839.33
1994/05/31 14867.44 15819.00
1994/06/30 14816.80 15782.65
1994/07/31 15114.03 16072.75
1994/08/31 15108.11 16075.86
1994/09/30 14865.82 15849.38
1994/10/31 14831.04 15837.42
1994/11/30 14793.05 15808.48
1994/12/31 14883.22 15904.62
1995/01/31 15140.72 16200.70
1995/02/28 15465.34 16549.40
1995/03/31 15558.35 16653.19
1995/04/30 15732.75 16870.83
1995/05/31 16334.80 17551.24
1995/06/30 16439.30 17685.89
1995/07/31 16370.57 17620.84
1995/08/31 16546.20 17827.95
1995/09/30 16686.64 17999.67
1995/10/31 16935.15 18273.74
1995/11/30 17166.25 18558.58
1995/12/31 17402.14 18821.66
1996/01/31 17481.23 18937.17
1996/02/29 17113.94 18551.41
1996/03/31 16947.35 18396.43
1996/04/30 16812.57 18279.00
1996/05/31 16766.89 18248.39
1996/06/30 16970.80 18483.96
1996/07/31 16995.65 18529.64
1996/08/31 16946.12 18488.27
1996/09/30 17205.68 18795.11
1996/10/31 17560.37 19208.62
1996/11/30 17840.52 19542.73
1996/12/31 17640.85 19343.27
1997/01/31 17643.38 19364.79
1997/02/28 17640.82 19391.34
1997/03/31 17455.21 19186.14
1997/04/30 17684.04 19463.09
1997/05/31 17801.36 19630.98
1997/06/30 17993.37 19851.24
1997/07/31 18473.97 20414.70
1997/08/31 18280.77 20212.85
1997/09/30 18549.80 20516.82
1997/10/31 18823.87 20871.74
1997/11/30 18881.00 20978.64
1997/12/31 19056.12 21197.95
1998/01/31 19349.50 21515.08
1998/02/28 19262.58 21456.72
1998/03/31 19281.47 21517.47
1998/04/30 19337.33 21614.33
1998/05/31 19516.16 21836.27
1998/06/30 19715.49 22084.52
1998/07/31 19734.77 22118.72
1998/08/31 20116.37 22694.14
1998/09/30 20619.43 23305.91
1998/10/31 20494.11 23226.51
1998/11/30 20491.05 23234.40
1998/12/31 20533.24 23286.30
1999/01/31 20636.23 23421.42
1999/02/28 20130.76 22864.42
1999/03/31 20193.92 22954.18
1999/04/30 20253.33 23006.19
IMATRL PRASUN SHR__CHT 19990430 19990514 103313 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class B on
April 30, 1989. As the chart shows, by April 30, 1999, the value of
the investment would have grown to $20,253 - a 102.53% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Government Bond Index did over the same period. With dividends
reinvested the same $10,000 would have grown to $23,006 - a 130.06%
increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JUNE 30, 1994 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.53% 5.25% 5.41% 5.55% 6.15% 1.75%
Capital returns -3.70% 3.62% 1.79% -1.86% 8.04% -1.65%
Total returns -1.17% 8.87% 7.20% 3.69% 14.19% 0.10%
</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 effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.84(cents) 25.41(cents) 48.70(cents)
Annualized dividend rate 4.82% 5.22% 4.95%
30-day annualized yield 4.44% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $9.69 over the past one
month, $9.82 over the past six months, and $9.83 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge.
FIDELITY ADVISOR GOVERNMENT INVESTMENT 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.
Returns between June 30, 1994 and November 3, 1997 are those of Class
B shares and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to
January 1, 1996). Returns prior to June 30, 1994 are those of Class T,
the original class of the fund, and reflect Class T shares' 0.25%
12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns
between November 3, 1997 and January 1, 1996 and prior to June 30,
1994 would have been lower. Class C shares' contingent deferred sales
charge included in the past six months, past one year, past five years
and past 10 years total return figures are 1%, 1%, 0%, and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past one year, past five years and past 10 years total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.22% 4.62% 36.12% 102.16%
CL C
FIDELITY ADV GOVERNMENT INV - -2.18% 3.63% 36.12% 102.16%
CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond -0.95% 6.44% 45.25% 130.06%
General US Government Funds -0.61% 5.12% 39.23% 112.27%
Average
</TABLE>
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 Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class C's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 189 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 4.62% 6.36% 7.29%
CL C
FIDELITY ADV GOVERNMENT INV - 3.63% 6.36% 7.29%
CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond 6.44% 7.75% 8.69%
General US Government Funds 5.12% 6.83% 7.80%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class C shares' cumulative return
and show you what would have happened if Class C shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Govt Inv -CL C LB Government Bond
00489 LB003
1989/04/30 10000.00 10000.00
1989/05/31 10195.34 10235.81
1989/06/30 10423.06 10577.33
1989/07/31 10585.35 10800.71
1989/08/31 10477.01 10618.95
1989/09/30 10537.85 10664.63
1989/10/31 10736.81 10940.62
1989/11/30 10818.37 11046.56
1989/12/31 10871.91 11065.22
1990/01/31 10753.61 10908.57
1990/02/28 10789.04 10930.33
1990/03/31 10805.00 10927.94
1990/04/30 10707.93 10831.56
1990/05/31 11021.68 11133.62
1990/06/30 11180.44 11309.88
1990/07/31 11315.96 11454.57
1990/08/31 11243.61 11295.05
1990/09/30 11318.34 11403.39
1990/10/31 11432.05 11589.70
1990/11/30 11631.38 11846.55
1990/12/31 11781.40 12029.75
1991/01/31 11910.67 12158.90
1991/02/28 12009.84 12228.49
1991/03/31 12058.11 12290.68
1991/04/30 12158.31 12425.56
1991/05/31 12222.11 12473.87
1991/06/30 12215.18 12456.17
1991/07/31 12346.12 12603.97
1991/08/31 12537.60 12896.23
1991/09/30 12764.20 13166.72
1991/10/31 12878.23 13281.99
1991/11/30 12952.68 13415.21
1991/12/31 13366.09 13872.24
1992/01/31 13184.79 13656.28
1992/02/29 13245.43 13709.61
1992/03/31 13154.57 13629.49
1992/04/30 13231.66 13715.35
1992/05/31 13474.54 13968.38
1992/06/30 13661.07 14168.56
1992/07/31 13891.74 14525.63
1992/08/31 14011.32 14660.99
1992/09/30 14141.49 14868.34
1992/10/31 13970.99 14653.82
1992/11/30 14006.34 14628.46
1992/12/31 14232.73 14874.80
1993/01/31 14476.49 15190.73
1993/02/28 14748.15 15494.94
1993/03/31 14832.71 15546.84
1993/04/30 14944.45 15666.42
1993/05/31 14968.00 15649.20
1993/06/30 15262.63 15996.46
1993/07/31 15338.22 16094.04
1993/08/31 15588.30 16453.26
1993/09/30 15616.90 16516.16
1993/10/31 15721.64 16578.58
1993/11/30 15481.15 16396.81
1993/12/31 15564.52 16460.19
1994/01/31 15835.89 16685.48
1994/02/28 15469.14 16332.24
1994/03/31 15001.63 15964.89
1994/04/30 14851.95 15839.33
1994/05/31 14867.44 15819.00
1994/06/30 14816.80 15782.65
1994/07/31 15114.03 16072.75
1994/08/31 15108.11 16075.86
1994/09/30 14865.82 15849.38
1994/10/31 14831.04 15837.42
1994/11/30 14793.05 15808.48
1994/12/31 14883.22 15904.62
1995/01/31 15140.72 16200.70
1995/02/28 15465.34 16549.40
1995/03/31 15558.35 16653.19
1995/04/30 15732.75 16870.83
1995/05/31 16334.80 17551.24
1995/06/30 16439.30 17685.89
1995/07/31 16370.57 17620.84
1995/08/31 16546.20 17827.95
1995/09/30 16686.64 17999.67
1995/10/31 16935.15 18273.74
1995/11/30 17166.25 18558.58
1995/12/31 17402.14 18821.66
1996/01/31 17481.23 18937.17
1996/02/29 17113.94 18551.41
1996/03/31 16947.35 18396.43
1996/04/30 16812.57 18279.00
1996/05/31 16766.89 18248.39
1996/06/30 16970.80 18483.96
1996/07/31 16995.65 18529.64
1996/08/31 16946.12 18488.27
1996/09/30 17205.68 18795.11
1996/10/31 17560.37 19208.62
1996/11/30 17840.52 19542.73
1996/12/31 17640.85 19343.27
1997/01/31 17643.38 19364.79
1997/02/28 17640.82 19391.34
1997/03/31 17455.21 19186.14
1997/04/30 17684.04 19463.09
1997/05/31 17801.36 19630.98
1997/06/30 17993.37 19851.24
1997/07/31 18473.97 20414.70
1997/08/31 18280.77 20212.85
1997/09/30 18549.80 20516.82
1997/10/31 18823.87 20871.74
1997/11/30 18876.48 20978.64
1997/12/31 19049.09 21197.95
1998/01/31 19320.46 21515.08
1998/02/28 19250.54 21456.72
1998/03/31 19268.81 21517.47
1998/04/30 19322.93 21614.33
1998/05/31 19499.71 21836.27
1998/06/30 19696.94 22084.52
1998/07/31 19694.35 22118.72
1998/08/31 20072.96 22694.14
1998/09/30 20593.06 23305.91
1998/10/31 20466.35 23226.51
1998/11/30 20461.96 23234.40
1998/12/31 20482.16 23286.30
1999/01/31 20603.69 23421.42
1999/02/28 20077.11 22864.42
1999/03/31 20158.96 22954.18
1999/04/30 20216.43 23006.19
IMATRL PRASUN SHR__CHT 19990430 19990521 140603 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class C on
April 30, 1989. As the chart shows, by April 30, 1999, the value of
the investment would have grown to $20,216 - a 102.16% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Government Bond Index did over the same period. With dividends
reinvested the same $10,000 would have grown to $23,006 - a 130.06%
increase.
(checkmark)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.
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 2.47% 5.08%
Capital returns -3.69% 3.94%
Total returns -1.22% 9.02%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.75(cents) 24.92(cents) 47.66(cents)
Annualized dividend rate 4.70% 5.12% 4.84%
30-day annualized yield 4.33% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $9.70 over the past one
month, $9.82 over the past six months, and $9.84 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering price used in
the calculation of the yield excludes the effect of Class C's
contingent deferred sales charge.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Tom Silvia)
NOTE TO SHAREHOLDERS: Tom Silvia became Portfolio Manager of Fidelity
Advisor Government Investment Fund on December 7, 1998.
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 1999, the fund's
Class A, Class T, Class B and Class C shares provided total returns of
- -0.82%, -0.86%, -1.17% and -1.22%, respectively. To get a sense of how
the fund did relative to its competitors, the general U.S. government
funds average returned -0.61% for the same six-month period, according
to Lipper Inc. Additionally, the Lehman Brothers Government Bond Index
- - which tracks the types of securities in which the fund invests -
returned -0.95% for the same six-month period. For the 12-month period
that ended April 30, 1999, the fund's Class A, Class T, Class B and
Class C shares had total returns of 5.49%, 5.40%, 4.74% and 4.62%,
respectively. Those returns compared to the general U.S. government
funds average's 5.12% return and the Lehman Brothers index's 6.44%
return.
Q. THE BOND MARKET CAME UNDER PRESSURE DURING THE PAST SIX MONTHS,
MAINLY BECAUSE OF A DRAMATIC SHIFT IN INVESTOR SENTIMENT. WHAT WAS
BEHIND INVESTORS' FLAGGING OPTIMISM ABOUT BONDS?
A. Repeated signs that the U.S. economy was growing at a
faster-than-expected pace - despite weaker conditions in many other
parts of the world - doused hopes that the Federal Reserve Board would
continue to cut interest rates. That made investors more bearish about
the short-term prospects of bonds. In fact, many market observers
worried that employment, purchasing and Gross Domestic Product reports
were strong enough to warrant the Fed raising - rather than cutting -
interest rates in order to stifle any brewing inflationary pressures.
In addition, some trouble spots around the globe showed signs of being
on the mend. In response to these two factors, investors pushed bond
yields - which move in the opposite direction of their prices -
significantly higher from November 1998 through April 1999.
Q. HOW DID YOU POSITION THE FUND DURING THE PAST SIX MONTHS?
A. The fund had a much larger weighting - compared to the Lehman
Brothers Government Bond Index - in agency securities and a much
smaller weighting in U.S. Treasuries. In addition, the fund had
between 16% and 24% of its investments in mortgage securities during
the period, which are not contained in the index. Throughout the past
six months, there was fading demand for the relative safety of U.S.
Treasuries and growing demand for higher-yielding bonds, including
agency and mortgage securities. In contrast to their performance last
fall, agency and mortgage securities generally held up better against
rising rates and outpaced their Treasury counterparts over the course
of the reporting period.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. In the first four months of 1999, the agency market experienced
rather heavy supply. As a result, agency securities didn't perform as
well as I would have hoped. But because I believed that agency
securities would perform better once supply normalized, I maintained
my holdings in them.
Q. WHICH MORTGAGE SECURITIES DID YOU EMPHASIZE?
A. The fund was concentrated in what are known as "seasoned" mortgage
securities, made up of home loans that originated between five and 10
years ago. Seasoned mortgages are perceived to be more immunized from
increased prepayment activity that typically occurs when interest
rates fall. While these seasoned securities suffered from
higher-than-expected prepayment activity last fall, they've been among
the mortgage sector's best performers more recently.
Q. WHAT'S YOUR OUTLOOK?
A. There's more evidence each day that the worst of the crisis that
plagued global financial markets last fall is behind us. Given that, I
think we'll enter a more "normal," less volatile market environment
than we experienced in late 1998. Against that backdrop, I believe
that agency and mortgage securities are poised to do better than
Treasuries over the near term. While they had gained some ground on
Treasuries, agency and mortgage securities remained, in my view,
undervalued relative to Treasuries at the end of the period.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a high level of
current income by investing
in U.S. government securities
and instruments related to
U.S. government securities
START DATE: January 7, 1987
SIZE: as of April 30, 1999
more than $374 million
MANAGER: Tom Silvia, since
December 1998; joined
Fidelity in 1993
TOM SILVIA ON HIS INVESTMENT
APPROACH:
"My investment style and
approach are extremely similar to
those of the fund's previous
portfolio manager. As my
predecessor did, I manage the
fund so that its duration - a
measure of its interest-rate
sensitivity - is in line with the
Lehman Brothers Government
Bond Index. By doing so, I hope to
avoid the problems that can occur
if the fund's duration is too long
when interest rates are on the
rise, or too short when rates are
falling. In addition, I focus my
efforts on other areas where
Fidelity's research efforts can add
value. Those areas include asset
allocation - how the fund is
divided among various sectors of
the bond market - and individual
security selection."
(solid bullet) During the past six months, the
manager emphasized non-callable
securities - those that can't be
redeemed by their issuers before
maturity. Bonds typically are called
when interest rates fall enough so
that issuers can save money by
issuing new bonds at lower rates.
A call is usually positive for
issuers because it cuts their
borrowing costs, but bondholders
don't share that enthusiasm.
When a bond is called, a bondholder
is left to reinvest the proceeds,
often at lower interest rates.
Non-callable bonds generally
perform better than callable
securities when interest rates fall.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Zero coupon bonds 1.0 -
5 - 5.99% 11.9 11.6
6 - 6.99% 43.0 23.8
7 - 7.99% 9.9 8.4
8 - 8.99% 16.7 28.7
9 - 9.99% 9.6 13.0
10% and over 2.5 1.6
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 9.0 8.2
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 APRIL 30, 1999
6 MONTHS AGO
Years 5.2 5.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999
Mortgage
securities 24.2%
U.S. Treasury
obligations 26.5%
U.S. government
agency obligations 43.9%
Short-term
investments 5.4%
Row: 1, Col: 1, Value: 24.2
Row: 1, Col: 2, Value: 26.5
Row: 1, Col: 3, Value: 43.9
Row: 1, Col: 4, Value: 5.4
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
AS OF OCTOBER 31, 1998
Mortgage
securities 16.2%
U.S. Treasury
obligations 25.5%
U.S. government
agency obligations 45.4%
Short-term
investments 12.9%
Row: 1, Col: 1, Value: 16.2
Row: 1, Col: 2, Value: 25.5
Row: 1, Col: 3, Value: 45.4
Row: 1, Col: 4, Value: 12.9
Row: 1, Col: 5, Value: 0.0
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 70.4%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 43.9%
Fannie Mae:
6.16% 8/7/28 $ 8,300,000 $ 8,340,172
6.5% 7/16/07 6,000,000 6,207,180
6.59% 9/17/07 13,000,000 13,532,220
Federal Farm Credit Bank:
5.7% 1/18/05 3,460,000 3,404,778
5.95% 5/18/05 2,000,000 2,019,380
Federal Home Loan Bank:
5.125% 4/17/01 7,725,000 7,696,031
5.83% 8/25/05 8,670,000 8,705,200
Financing Corp. stripped 4,500,000 4,031,010
principal 0% 4/6/01
Freddie Mac:
5% 2/15/01 5,000,000 4,974,650
5.85% 2/21/06 1,000,000 1,004,370
6.33% 9/21/05 2,800,000 2,886,632
Government Loan Trusts 992,439 1,087,624
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
Government Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9.25% 11/15/01 4,641,718 4,868,373
Class 2-E 9.4% 5/15/02 713,488 742,242
Class T-3, 9.625% 5/15/02 392,763 408,316
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1993 C, 5.2% 10/15/04 233,689 231,039
Series 1993 D, 5.23% 5/15/05 260,638 257,389
Series 1994 A, 7.12% 4/15/06 11,136,969 11,547,923
Series 1994 C, 6.61% 9/15/99 12,255 12,292
Series 1994 F, 8.187% 12/15/04 4,806,795 5,075,682
Series 1995 A, 6.28% 6/15/04 2,271,176 2,305,380
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 A, 7.39% 6/26/06 5,625,000 5,880,938
Series 1994 B, 7.5% 1/26/06 213,043 225,785
Series 1997 A, 6.104% 7/15/03 3,000,000 3,025,800
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Israel Export Trust $ 249,412 $ 255,024
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 1, 6.88% 1/26/03
Overseas Private Investment
Corp. U.S. Government
guaranteed participation
certificate:
Series 1994 195, 6.08% 1,757,875 1,786,493
8/15/04 (callable)
Series 1996 A1, 6.726% 2,000,000 2,048,260
9/15/10 (callable)
Private Export Funding Corp.:
secured:
5.65% 3/15/03 686,000 686,240
5.82% 6/15/03 (a) 8,600,000 8,535,500
6.31% 9/30/04 19,500,000 19,949,280
6.86% 4/30/04 1,007,500 1,141,153
6.9% 1/31/03 13,830,000 14,417,775
7.3% 1/31/02 1,500,000 1,567,260
8.35% 1/31/01 4,000,000 4,195,000
5.31% 11/15/03 (a) 1,700,000 1,653,386
State of Israel (guaranteed 8,000,000 8,263,360
by U.S. Government through
Agency for International
Development) 6.6% 2/15/08
Tennessee Valley Authority 6% 1,000,000 1,010,780
11/1/00
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates
Series 99-A:
5.67% 8/1/05 2,100,000 2,081,730
5.96% 8/1/09 1,800,000 1,773,126
U.S. Trade Trust Certificates 480,000 514,608
(assets of Trust guaranteed
by U.S. government through
Export-Import Bank) 8.17%
1/15/07
168,349,381
U.S. TREASURY OBLIGATIONS -
26.5%
U.S. Treasury Bonds:
6.375% 8/15/27 11,065,000 11,817,088
6.5% 11/15/26 3,000,000 3,246,570
8.875% 8/15/17 35,905,000 47,647,012
9% 11/15/18 16,605,000 22,481,676
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds: -
continued
14% 11/15/11 $ 3,500,000 $ 5,295,920
U.S. Treasury Notes 6.25% 10,900,000 11,043,008
5/31/00
101,531,274
TOTAL U.S. GOVERNMENT AND 269,880,655
GOVERNMENT AGENCY OBLIGATIONS
(Cost $272,948,077)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 21.8%
FANNIE MAE - 14.5%
5.5% 7/1/09 2,304,960 2,252,200
6% 9/1/08 to 11/1/09 11,295,005 11,238,996
6.5% 6/1/07 to 4/1/29 22,059,454 21,933,720
6.5% 5/1/29 4,000,000 3,977,500
7% 4/1/26 to 11/1/28 11,895,420 12,054,663
8.25% 12/1/01 667,690 695,198
8.5% 9/1/16 to 1/1/17 90,325 95,242
9% 11/1/11 394,015 414,555
9.25% 9/1/16 102,696 109,613
9.5% 11/1/06 to 5/1/20 2,032,759 2,153,190
11.5% 6/1/19 370,448 418,355
12.5% 8/1/15 16,746 19,295
55,362,527
FREDDIE MAC - 3.5%
6.5% 5/1/08 237,185 239,542
6.775% 11/15/03 4,683,463 4,774,937
8.5% 8/1/09 to 4/1/27 4,903,318 5,150,895
9% 10/1/08 to 10/1/20 960,421 1,015,704
9.5% 5/1/21 to 7/1/21 610,969 657,451
10.5% 1/1/16 to 12/1/20 453,303 496,607
11% 7/1/13 to 5/1/14 448,829 492,770
12.5% 2/1/10 to 6/1/19 418,160 478,992
13,306,898
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.8%
6.5% 5/15/29 8,600,000 8,551,625
7.5% 9/15/06 to 1/15/08 1,931,306 1,995,722
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
9% 5/15/01 to 12/15/09 $ 380,944 $ 391,486
9.5% 11/15/09 to 11/15/20 1,019,615 1,094,159
10.5% 8/15/16 to 1/20/18 579,698 635,542
11% 12/15/15 to 7/15/19 428,481 479,808
11.5% 3/15/10 to 8/15/20 1,365,761 1,536,611
13.5% 7/15/11 48,801 56,907
14,741,860
TOTAL U.S. GOVERNMENT AGENCY 83,411,285
- - MORTGAGE SECURITIES
(Cost $83,441,462)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.7%
U.S. GOVERNMENT AGENCY - 1.7%
Fannie Mae planned 2,730,000 2,761,566
amortization class Series
1993-134 Class GA, 6.5%
2/25/07
Freddie Mac:
Series 1141 Class G, 9% 2,000,000 2,123,740
9/15/21
Series 1535 Class PM, 7% 1,852,616 1,860,455
6/15/01
TOTAL COLLATERALIZED MORTGAGE 6,745,761
OBLIGATIONS
(Cost $6,673,237)
COMMERCIAL MORTGAGE
SECURITIES - 0.7%
Fannie Mae ACES REMIC 2,500,721 2,559,331
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,522,752)
CASH EQUIVALENTS - 5.4%
MATURITY AMOUNT
Investments in repurchase $ 20,569,481 20,561,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $20,561,000)
TOTAL INVESTMENT IN $ 383,158,032
SECURITIES - 100%
(Cost $386,146,528)
</TABLE>
LEGEND
(a) 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 $10,188,886 or 2.7% of net assets.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $386,220,036. Net unrealized depreciation
aggregated $3,062,004, of which $1,284,606 related to appreciated
investment securities and $4,346,610 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 383,158,032
value (including repurchase
agreements of $20,561,000)
(cost $386,146,528) - See
accompanying schedule
Commitment to sell securities $ (12,628,563)
on a delayed delivery basis
Receivable for securities 12,700,117 71,554
sold on a delayed delivery
basis
Receivable for investments 61,770
sold, regular delivery
Cash 101,007
Receivable for fund shares 1,334,050
sold
Interest receivable 4,781,388
TOTAL ASSETS 389,507,801
LIABILITIES
Payable for investments 3,999,055
purchased Regular delivery
Delayed delivery 8,635,714
Payable for fund shares 1,328,350
redeemed
Distributions payable 325,954
Accrued management fee 133,438
Distribution fees payable 137,896
Other payables and accrued 97,498
expenses
TOTAL LIABILITIES 14,657,905
NET ASSETS $ 374,849,896
Net Assets consist of:
Paid in capital $ 379,899,000
Undistributed net investment 386,585
income
Accumulated undistributed net (2,518,747)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (2,916,942)
(depreciation) on investments
NET ASSETS $ 374,849,896
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $9.65
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($12,122,355 (divided by)
1,256,572 shares)
Maximum offering price per $10.13
share (100/95.25 of $9.65)
CLASS T: NET ASSET VALUE and $9.65
redemption price per share
($219,080,359 (divided by)
22,710,349 shares)
Maximum offering price per $10.00
share (100/96.50 of $9.65)
CLASS B: NET ASSET VALUE and $9.64
offering price per share
($90,216,609 (divided by)
9,358,317 shares) A
CLASS C: NET ASSET VALUE and $9.65
offering price per share
($29,517,632 (divided by)
3,059,741 shares) A
INSTITUTIONAL CLASS: NET $9.62
ASSET VALUE, offering price
and redemption price per
share ($23,912,941 (divided
by) 2,486,870 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 11,275,918
Interest
EXPENSES
Management fee $ 745,639
Transfer agent fees 320,908
Distribution fees 734,665
Accounting fees and expenses 56,003
Custodian fees and expenses 8,249
Registration fees 61,056
Audit 17,441
Legal 643
Miscellaneous 2,219
Total expenses before 1,946,823
reductions
Expense reductions (2,380) 1,944,443
NET INVESTMENT INCOME 9,331,475
REALIZED AND UNREALIZED GAIN (2,445,237)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,468,505)
Delayed delivery commitments 71,554 (10,396,951)
NET GAIN (LOSS) (12,842,188)
NET INCREASE (DECREASE) IN $ (3,510,713)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,331,475 $ 12,243,044
income
Net realized gain (loss) (2,445,237) 7,666,008
Change in net unrealized (10,396,951) 482,198
appreciation (depreciation)
NET INCREASE (DECREASE) IN (3,510,713) 20,391,250
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,734,784) (12,201,221)
from net investment income
Share transactions - net 52,669,275 141,557,657
increase (decrease)
TOTAL INCREASE (DECREASE) 39,423,778 149,747,686
IN NET ASSETS
NET ASSETS
Beginning of period 335,426,118 185,678,432
End of period (including $ 374,849,896 $ 335,426,118
undistributed net investment
income of $386,585 and
$789,894, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.670 $ 9.490 $ 9.250
period
Income from Investment
Operations
Net investment income D .274 .545 .552 .090
Net realized and unrealized (.355) .368 .187 .241
gain (loss)
Total from investment (.081) .913 .739 .331
operations
Less Distributions
From net investment income (.289) (.563) (.559) (.091)
Net asset value, end of period $ 9.650 $ 10.020 $ 9.670 $ 9.490
TOTAL RETURN B, C (0.82)% 9.74% 8.09% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,122 $ 7,884 $ 1,582 $ 223
(000 omitted)
Ratio of expenses to average .89% A .90% F .90% F .90% A, F
net assets
Ratio of net investment 5.68% A 5.65% 5.98% 6.28% A
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.670 $ 9.490 $ 9.670 $ 8.960
period
Income from Investment
Operations
Net investment income .274 D .546 D .558 D .586 D .594
Net realized and unrealized (.359) .351 .171 (.180) .701
gain (loss)
Total from investment (.085) .897 .729 .406 1.295
operations
Less Distributions
From net investment income (.285) (.547) (.549) (.586) (.585)
From net realized gain - - - - -
In excess of realized gain - - - - -
Total distributions (.285) (.547) (.549) (.586) (.585)
Net asset value, end of $ 9.650 $ 10.020 $ 9.670 $ 9.490 $ 9.670
period
TOTAL RETURN B, C (0.86)% 9.56% 7.97% 4.38% 14.91%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 219,080 $ 212,933 $ 144,948 $ 217,883 $ 208,620
(000 omitted)
Ratio of expenses to average .97% A 1.00% E 1.00% E 1.00% .89% E
net assets
Ratio of expenses to average .96% A, F 1.00% 1.00% .99% F .89%
net assets after expense
reductions
Ratio of net investment 5.62% A 5.59% 5.88% 6.19% 6.34%
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153% 261%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.140
period
Income from Investment
Operations
Net investment income .515
Net realized and unrealized (1.031)
gain (loss)
Total from investment (.516)
operations
Less Distributions
From net investment income (.504)
From net realized gain (.130)
In excess of realized gain (.030)
Total distributions (.664)
Net asset value, end of $ 8.960
period
TOTAL RETURN B, C (5.27)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 114,453
(000 omitted)
Ratio of expenses to average .74% E
net assets
Ratio of expenses to average .74%
net assets after expense
reductions
Ratio of net investment 6.18%
income to average net assets
Portfolio turnover rate 313%
</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 APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.010 $ 9.660 $ 9.490 $ 9.670 $ 8.950
period
Income from Investment
Operations
Net investment income .241 D .475 D .494 D .520 D .542
Net realized and unrealized (.357) .359 .166 (.177) .693
gain (loss)
Total from investment (.116) .834 .660 .343 1.235
operations
Less Distributions
From net investment income (.254) (.484) (.490) (.523) (.515)
Net asset value, end of $ 9.640 $ 10.010 $ 9.660 $ 9.490 $ 9.670
period
TOTAL RETURN B, C (1.17)% 8.87% 7.20% 3.69% 14.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 90,217 $ 74,073 $ 18,782 $ 17,355 $ 11,766
(000 omitted)
Ratio of expenses to average 1.60% A 1.65% F 1.65% F 1.67% F 1.65% F
net assets
Ratio of net investment 4.97% A 4.92% 5.24% 5.51% 5.58%
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153% 261%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31,
1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.100
period
Income from Investment
Operations
Net investment income .144
Net realized and unrealized (.137)
gain (loss)
Total from investment .007
operations
Less Distributions
From net investment income (.157)
Net asset value, end of $ 8.950
period
TOTAL RETURN B, C 0.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,062
(000 omitted)
Ratio of expenses to average 1.70% A, F
net assets
Ratio of net investment 5.22% A
income to average net assets
Portfolio turnover rate 313%
</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 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 OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.640
period
Income from Investment
Operations
Net investment income D .234 .450
Net realized and unrealized (.355) .398
gain (loss)
Total from investment (.121) .848
operations
Less Distributions
From net investment income (.249) (.468)
Net asset value, end of period $ 9.650 $ 10.020
TOTAL RETURN B, C (1.22)% 9.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,518 $ 14,954
(000 omitted)
Ratio of expenses to average 1.70% A 1.75% A, F
net assets
Ratio of net investment 4.85% A 4.74% A
income to average net assets
Portfolio turnover rate 173% A 243%
</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 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 OCTOBER 31, 1998.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.000 $ 9.650 $ 9.480 $ 9.670 $ 9.560
of period
Income from Investment
Operations
Net investment income .286 D .570 D .580 D .604 D .197
Net realized and unrealized (.367) .352 .165 (.180) .108
gain (loss)
Total from investment (.081) .922 .745 .424 .305
operations
Less Distributions
From net investment income (.299) (.572) (.575) (.614) (.195)
Net asset value, end of period $ 9.620 $ 10.000 $ 9.650 $ 9.480 $ 9.670
TOTAL RETURN B, C (0.83)% 9.86% 8.18% 4.58% 3.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 23,913 $ 25,582 $ 20,366 $ 27,660 $ 14,588
(000 omitted)
Ratio of expenses to average .69% A .75% F .75% F .75% F .75% A, F
net assets
Ratio of net investment 5.89% A 5.84% 6.12% 6.43% 6.48% A
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153% 261%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (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. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. 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 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.
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 dividends
and capital gain distributions are declared separately for each class.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
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 long-term U.S. government and government agency
obligations aggregated $336,852,999 and $281,962,335, 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 .43% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 7,645 $ 21
CLASS T 261,806 4,410
CLASS B 357,145 258,642
CLASS C 108,069 102,771
$ 734,665 $ 365,844
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six 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 5% 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains. A portion of the sales charges
paid to FDC are paid to securities dealers, banks and other financial
institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 67,203 $ 21,517
CLASS T 163,519 52,565
CLASS B 143,355 143,355*
CLASS C 12,410 12,410*
$ 386,487 $ 229,847
* 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
(collectively referred to as the transfer agent) for the fund's Class
A, Class T, Class B, Class C and Institutional Class. FIIOC receives
account fees and asset-based fees that vary according to the account
size and type of account of the shareholders of the respective classes
of the fund. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. For the period, the
following amounts were paid to FIIOC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 11,141 .22
CLASS T 199,790 .19
CLASS B 69,733 .18
CLASS C 19,465 .18
INSTITUTIONAL CLASS 20,779 .17
$ 320,908
* ANNUALIZED
ACCOUNTING FEE. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
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 $2,380 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED APRIL OCTOBER 31,
30,1999 1998A
FROM NET INVESTMENT INCOME
Class A $ 294,929 $ 172,525
Class T 6,061,929 8,994,288
Class B 2,039,801 1,420,172
Class C 540,393 168,316
Institutional Class 797,732 1,445,920
Total $ 9,734,784 $ 12,201,221
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
1999 1998A 1999
CLASS A Shares sold 2,133,213 849,297 $ 20,958,369
Reinvestment of distributions 22,976 14,303 224,974
Shares redeemed (1,686,494) (240,354) (16,551,603)
Net increase (decrease) 469,695 623,246 $ 4,631,740
CLASS T Shares sold 9,589,174 15,886,817 $ 94,261,276
Reinvestment of distributions 506,847 761,626 4,970,453
Shares redeemed (8,638,679) (10,390,224) (85,098,108)
Net increase (decrease) 1,457,342 6,258,219 $ 14,133,621
CLASS B Shares sold 4,324,133 6,584,605 $ 42,433,800
Reinvestment of distributions 156,076 109,260 1,529,055
Shares redeemed (2,520,939) (1,239,115) (24,767,663)
Net increase (decrease) 1,959,270 5,454,750 $ 19,195,192
CLASS C Shares sold 2,566,697 1,742,987 $ 25,199,883
Reinvestment of distributions 29,989 13,959 293,262
Shares redeemed (1,029,629) (264,262) (10,114,235)
Net increase (decrease) 1,567,057 1,492,684 $ 15,378,910
INSTITUTIONAL CLASS Shares 451,656 1,251,693 $ 4,420,942
sold
Reinvestment of distributions 66,738 126,775 653,039
Shares redeemed (589,496) (930,969) (5,744,169)
Net increase (decrease) (71,102) 447,499 $ (670,188)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998A
CLASS A Shares sold $ 8,455,738
Reinvestment of distributions 140,529
Shares redeemed (2,383,022)
Net increase (decrease) $ 6,213,245
CLASS T Shares sold $ 156,318,393
Reinvestment of distributions 7,462,535
Shares redeemed (101,764,593)
Net increase (decrease) $ 62,016,335
CLASS B Shares sold $ 65,367,580
Reinvestment of distributions 1,074,687
Shares redeemed (12,195,223)
Net increase (decrease) $ 54,247,044
CLASS C Shares sold $ 17,267,410
Reinvestment of distributions 138,062
Shares redeemed (2,621,407)
Net increase (decrease) $ 14,784,065
INSTITUTIONAL CLASS Shares $ 12,156,145
sold
Reinvestment of distributions 1,238,963
Shares redeemed (9,098,140)
Net increase (decrease) $ 4,296,968
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3,
1997(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of the Fidelity
Advisor Government Investment Fund, the Board of Trustees has
determined not to retain PricewaterhouseCoopers LLP as the fund's
independent auditor and voted to appoint Deloitte & Touche LLP for the
fiscal year ended October 31, 1999. During the two most recent fiscal
years, PricewaterhouseCoopers LLP's audit reports contained no adverse
opinion or disclaimer of opinion; nor were their reports qualified as
to uncertainty, audit scope, or accounting principles. Further, there
were no disagreements between the fund and PricewaterhouseCoopers LLP
on accounting principles, financial statement disclosure or audit
scope, which if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference to
the disagreement in their report.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith, Assistant Vice President
Thomas J. Silvia, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AGOV-SANN-0699 77841
1.703567.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
GOVERNMENT INVESTMENT
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 16 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 25 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR GOVERNMENT INVESTMENT 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. The initial offering of Institutional
Class shares took place on July 3, 1995. Institutional Class shares
are sold to eligible investors without a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T, the original class
of the fund, and reflect Class T shares' 0.25% 12b-1 fee. If Fidelity
had not reimbursed certain class expenses, the past one year, past
five years and past 10 years total returns and dividends would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -0.83% 5.58% 42.16% 111.14%
INST CL
LB Government Bond -0.95% 6.44% 45.25% 130.06%
General US Government Funds -0.61% 5.12% 39.23% 112.27%
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 Government Bond Index - a
market value-weighted index of U.S. government and government agency
securities (other than mortgage securities) with maturities of one
year or more. To measure how Institutional Class' performance stacked
up against its peers, you can compare it to the general U.S.
government funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Inc. The past six
months average represents a peer group of 189 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 5.58% 7.29% 7.76%
INST CL
LB Government Bond 6.44% 7.75% 8.69%
General US Government Funds 5.12% 6.83% 7.80%
Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative
return and show you what would have happened if Institutional Class
shares had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Govt Inv -CL I LB Government Bond
00697 LB003
1989/04/30 10000.00 10000.00
1989/05/31 10195.34 10235.81
1989/06/30 10423.06 10577.33
1989/07/31 10585.35 10800.71
1989/08/31 10477.01 10618.95
1989/09/30 10537.85 10664.63
1989/10/31 10736.81 10940.62
1989/11/30 10818.37 11046.56
1989/12/31 10871.91 11065.22
1990/01/31 10753.61 10908.57
1990/02/28 10789.04 10930.33
1990/03/31 10805.00 10927.94
1990/04/30 10707.93 10831.56
1990/05/31 11021.68 11133.62
1990/06/30 11180.44 11309.88
1990/07/31 11315.96 11454.57
1990/08/31 11243.61 11295.05
1990/09/30 11318.34 11403.39
1990/10/31 11432.05 11589.70
1990/11/30 11631.38 11846.55
1990/12/31 11781.40 12029.75
1991/01/31 11910.67 12158.90
1991/02/28 12009.84 12228.49
1991/03/31 12058.11 12290.68
1991/04/30 12158.31 12425.56
1991/05/31 12222.11 12473.87
1991/06/30 12215.18 12456.17
1991/07/31 12346.12 12603.97
1991/08/31 12537.60 12896.23
1991/09/30 12764.20 13166.72
1991/10/31 12878.23 13281.99
1991/11/30 12952.68 13415.21
1991/12/31 13366.09 13872.24
1992/01/31 13184.79 13656.28
1992/02/29 13245.43 13709.61
1992/03/31 13154.57 13629.49
1992/04/30 13231.66 13715.35
1992/05/31 13474.54 13968.38
1992/06/30 13661.07 14168.56
1992/07/31 13891.74 14525.63
1992/08/31 14011.32 14660.99
1992/09/30 14141.49 14868.34
1992/10/31 13970.99 14653.82
1992/11/30 14006.34 14628.46
1992/12/31 14232.73 14874.80
1993/01/31 14476.49 15190.73
1993/02/28 14748.15 15494.94
1993/03/31 14832.71 15546.84
1993/04/30 14944.45 15666.42
1993/05/31 14968.00 15649.20
1993/06/30 15262.63 15996.46
1993/07/31 15338.22 16094.04
1993/08/31 15588.30 16453.26
1993/09/30 15616.90 16516.16
1993/10/31 15721.64 16578.58
1993/11/30 15481.15 16396.81
1993/12/31 15564.52 16460.19
1994/01/31 15835.89 16685.48
1994/02/28 15469.14 16332.24
1994/03/31 15001.63 15964.89
1994/04/30 14851.95 15839.33
1994/05/31 14867.44 15819.00
1994/06/30 14816.80 15782.65
1994/07/31 15139.84 16072.75
1994/08/31 15131.00 16075.86
1994/09/30 14918.41 15849.38
1994/10/31 14893.18 15837.42
1994/11/30 14864.79 15808.48
1994/12/31 14965.41 15904.62
1995/01/31 15234.06 16200.70
1995/02/28 15566.96 16549.40
1995/03/31 15670.13 16653.19
1995/04/30 15855.71 16870.83
1995/05/31 16472.40 17551.24
1995/06/30 16588.01 17685.89
1995/07/31 16531.04 17620.84
1995/08/31 16722.57 17827.95
1995/09/30 16880.43 17999.67
1995/10/31 17131.46 18273.74
1995/11/30 17380.69 18558.58
1995/12/31 17617.33 18821.66
1996/01/31 17713.06 18937.17
1996/02/29 17354.67 18551.41
1996/03/31 17200.27 18396.43
1996/04/30 17092.80 18279.00
1996/05/31 17059.43 18248.39
1996/06/30 17261.13 18483.96
1996/07/31 17299.51 18529.64
1996/08/31 17262.35 18488.27
1996/09/30 17539.86 18795.11
1996/10/31 17915.32 19208.62
1996/11/30 18216.97 19542.73
1996/12/31 18028.26 19343.27
1997/01/31 18042.65 19364.79
1997/02/28 18050.43 19391.34
1997/03/31 17874.84 19186.14
1997/04/30 18123.25 19463.09
1997/05/31 18257.71 19630.98
1997/06/30 18468.50 19851.24
1997/07/31 18976.59 20414.70
1997/08/31 18792.25 20212.85
1997/09/30 19083.12 20516.82
1997/10/31 19379.98 20871.74
1997/11/30 19453.62 20978.64
1997/12/31 19649.43 21197.95
1998/01/31 19966.91 21515.08
1998/02/28 19890.57 21456.72
1998/03/31 19925.27 21517.47
1998/04/30 19997.86 21614.33
1998/05/31 20198.31 21836.27
1998/06/30 20419.86 22084.52
1998/07/31 20455.54 22118.72
1998/08/31 20867.22 22694.14
1998/09/30 21404.12 23305.91
1998/10/31 21290.12 23226.51
1998/11/30 21302.77 23234.40
1998/12/31 21320.26 23286.30
1999/01/31 21465.81 23421.42
1999/02/28 20933.27 22864.42
1999/03/31 21036.19 22954.18
1999/04/30 21113.89 23006.19
IMATRL PRASUN SHR__CHT 19990430 19990521 152020 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund -
Institutional Class on April 30, 1989. As the chart shows, by April
30, 1999, the value of the investment would have grown to $21,114 - a
111.14% increase on the initial investment. For comparison, look at
how the Lehman Brothers Government Bond Index did over the same
period. With dividends reinvested the same $10,000 would have grown to
$23,006 - a 130.06% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 2.97% 6.23% 6.39% 6.54% 2.08%
Capital returns -3.80% 3.63% 1.79% -1.96% 1.15%
Total returns -0.83% 9.86% 8.18% 4.58% 3.23%
</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.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.56(cents) 29.85(cents) 57.56(cents)
Annualized dividend rate 5.74% 6.14% 5.87%
30-day annualized yield 5.37% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $9.67 over the past one
month, $9.80 over the past six months, and $9.81 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Tom silvia)
NOTE TO SHAREHOLDERS: Tom Silvia became Portfolio Manager of Fidelity
Advisor Government Investment Fund on December 7, 1998.
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 1999, the fund's
Institutional Class shares provided a total return of -0.83%. To get a
sense of how the fund did relative to its competitors, the general
U.S. government funds average returned -0.61% for the same six-month
period, according to Lipper Inc. Additionally, the Lehman Brothers
Government Bond Index - which tracks the types of securities in which
the fund invests - returned -0.95% for the same six-month period. For
the 12-month period that ended April 30, 1999, the fund's
Institutional Class shares had a total return of 5.58%. That return
compared to the general U.S. government funds average's 5.12% return
and the Lehman Brothers index's 6.44% return.
Q. THE BOND MARKET CAME UNDER PRESSURE DURING THE PAST SIX MONTHS,
MAINLY BECAUSE OF A DRAMATIC SHIFT IN INVESTOR SENTIMENT. WHAT WAS
BEHIND INVESTORS' FLAGGING OPTIMISM ABOUT BONDS?
A. Repeated signs that the U.S. economy was growing at a
faster-than-expected pace - despite weaker conditions in many other
parts of the world - doused hopes that the Federal Reserve Board would
continue to cut interest rates. That made investors more bearish about
the short-term prospects of bonds. In fact, many market observers
worried that employment, purchasing and Gross Domestic Product reports
were strong enough to warrant the Fed raising - rather than cutting -
interest rates in order to stifle any brewing inflationary pressures.
In addition, some trouble spots around the globe showed signs of being
on the mend. In response to these two factors, investors pushed bond
yields - which move in the opposite direction of their prices -
significantly higher from November 1998 through April 1999.
Q. HOW DID YOU POSITION THE FUND DURING THE PAST SIX MONTHS?
A. The fund had a much larger weighting - compared to the Lehman
Brothers Government Bond Index - in agency securities and a much
smaller weighting in U.S. Treasuries. In addition, the fund had
between 16% and 24% of its investments in mortgage securities during
the period, which are not contained in the index. Throughout the past
six months, there was fading demand for the relative safety of U.S.
Treasuries and growing demand for higher-yielding bonds, including
agency and mortgage securities. In contrast to their performance last
fall, agency and mortgage securities generally held up better against
rising rates and outpaced their Treasury counterparts over the course
of the reporting period.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. In the first four months of 1999, the agency market experienced
rather heavy supply. As a result, agency securities didn't perform as
well as I would have hoped. But because I believed that agency
securities would perform better once supply normalized, I maintained
my holdings in them.
Q. WHICH MORTGAGE SECURITIES DID YOU EMPHASIZE?
A. The fund was concentrated in what are known as "seasoned" mortgage
securities, made up of home loans that originated between five and 10
years ago. Seasoned mortgages are perceived to be more immunized from
increased prepayment activity that typically occurs when interest
rates fall. While these seasoned securities suffered from
higher-than-expected prepayment activity last fall, they've been among
the mortgage sector's best performers more recently.
Q. WHAT'S YOUR OUTLOOK?
A. There's more evidence each day that the worst of the crisis that
plagued global financial markets last fall is behind us. Given that, I
think we'll enter a more "normal," less volatile market environment
than we experienced in late 1998. Against that backdrop, I believe
that agency and mortgage securities are poised to do better than
Treasuries over the near term. While they had gained some ground on
Treasuries, agency and mortgage securities remained, in my view,
undervalued relative to Treasuries at the end of the period.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a high level of
current income by investing
in U.S. government securities
and instruments related to
U.S. government securities
START DATE: January 7, 1987
SIZE: as of April 30, 1999
more than $374 million
MANAGER: Tom Silvia, since
December 1998; joined
Fidelity in 1993
TOM SILVIA ON HIS INVESTMENT
APPROACH:
"My investment style and
approach are extremely similar to
those of the fund's previous
portfolio manager. As my
predecessor did, I manage the
fund so that its duration - a
measure of its interest-rate
sensitivity - is in line with the
Lehman Brothers Government
Bond Index. By doing so, I hope to
avoid the problems that can occur
if the fund's duration is too long
when interest rates are on the
rise, or too short when rates are
falling. In addition, I focus my
efforts on other areas where
Fidelity's research efforts can add
value. Those areas include asset
allocation - how the fund is
divided among various sectors of
the bond market - and individual
security selection."
(solid bullet) During the past six months, the
manager emphasized non-callable
securities - those that can't be
redeemed by their issuers before
maturity. Bonds typically are called
when interest rates fall enough so
that issuers can save money by
issuing new bonds at lower rates.
A call is usually positive for
issuers because it cuts their
borrowing costs, but bondholders
don't share that enthusiasm.
When a bond is called, a bondholder
is left to reinvest the proceeds,
often at lower interest rates.
Non-callable bonds generally
perform better than callable
securities when interest rates fall.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Zero coupon bonds 1.0 -
5 - 5.99% 11.9 11.6
6 - 6.99% 43.0 23.8
7 - 7.99% 9.9 8.4
8 - 8.99% 16.7 28.7
9 - 9.99% 9.6 13.0
10% and over 2.5 1.6
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 9.0 8.2
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 APRIL 30, 1999
6 MONTHS AGO
Years 5.2 5.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999
Mortgage
securities 24.2%
U.S. Treasury
obligations 26.5%
U.S. government
agency obligations 43.9%
Short-term
investments 5.4%
Row: 1, Col: 1, Value: 24.2
Row: 1, Col: 2, Value: 26.5
Row: 1, Col: 3, Value: 43.9
Row: 1, Col: 4, Value: 5.4
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
AS OF OCTOBER 31, 1998
Mortgage
securities 16.2%
U.S. Treasury
obligations 25.5%
U.S. government
agency obligations 45.4%
Short-term
investments 12.9%
Row: 1, Col: 1, Value: 16.2
Row: 1, Col: 2, Value: 25.5
Row: 1, Col: 3, Value: 45.4
Row: 1, Col: 4, Value: 12.9
Row: 1, Col: 5, Value: 0.0
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 70.4%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 43.9%
Fannie Mae:
6.16% 8/7/28 $ 8,300,000 $ 8,340,172
6.5% 7/16/07 6,000,000 6,207,180
6.59% 9/17/07 13,000,000 13,532,220
Federal Farm Credit Bank:
5.7% 1/18/05 3,460,000 3,404,778
5.95% 5/18/05 2,000,000 2,019,380
Federal Home Loan Bank:
5.125% 4/17/01 7,725,000 7,696,031
5.83% 8/25/05 8,670,000 8,705,200
Financing Corp. stripped 4,500,000 4,031,010
principal 0% 4/6/01
Freddie Mac:
5% 2/15/01 5,000,000 4,974,650
5.85% 2/21/06 1,000,000 1,004,370
6.33% 9/21/05 2,800,000 2,886,632
Government Loan Trusts 992,439 1,087,624
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
Government Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9.25% 11/15/01 4,641,718 4,868,373
Class 2-E 9.4% 5/15/02 713,488 742,242
Class T-3, 9.625% 5/15/02 392,763 408,316
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1993 C, 5.2% 10/15/04 233,689 231,039
Series 1993 D, 5.23% 5/15/05 260,638 257,389
Series 1994 A, 7.12% 4/15/06 11,136,969 11,547,923
Series 1994 C, 6.61% 9/15/99 12,255 12,292
Series 1994 F, 8.187% 12/15/04 4,806,795 5,075,682
Series 1995 A, 6.28% 6/15/04 2,271,176 2,305,380
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 A, 7.39% 6/26/06 5,625,000 5,880,938
Series 1994 B, 7.5% 1/26/06 213,043 225,785
Series 1997 A, 6.104% 7/15/03 3,000,000 3,025,800
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Israel Export Trust $ 249,412 $ 255,024
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 1, 6.88% 1/26/03
Overseas Private Investment
Corp. U.S. Government
guaranteed participation
certificate:
Series 1994 195, 6.08% 1,757,875 1,786,493
8/15/04 (callable)
Series 1996 A1, 6.726% 2,000,000 2,048,260
9/15/10 (callable)
Private Export Funding Corp.:
secured:
5.65% 3/15/03 686,000 686,240
5.82% 6/15/03 (a) 8,600,000 8,535,500
6.31% 9/30/04 19,500,000 19,949,280
6.86% 4/30/04 1,007,500 1,141,153
6.9% 1/31/03 13,830,000 14,417,775
7.3% 1/31/02 1,500,000 1,567,260
8.35% 1/31/01 4,000,000 4,195,000
5.31% 11/15/03 (a) 1,700,000 1,653,386
State of Israel (guaranteed 8,000,000 8,263,360
by U.S. Government through
Agency for International
Development) 6.6% 2/15/08
Tennessee Valley Authority 6% 1,000,000 1,010,780
11/1/00
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates
Series 99-A:
5.67% 8/1/05 2,100,000 2,081,730
5.96% 8/1/09 1,800,000 1,773,126
U.S. Trade Trust Certificates 480,000 514,608
(assets of Trust guaranteed
by U.S. government through
Export-Import Bank) 8.17%
1/15/07
168,349,381
U.S. TREASURY OBLIGATIONS -
26.5%
U.S. Treasury Bonds:
6.375% 8/15/27 11,065,000 11,817,088
6.5% 11/15/26 3,000,000 3,246,570
8.875% 8/15/17 35,905,000 47,647,012
9% 11/15/18 16,605,000 22,481,676
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds: -
continued
14% 11/15/11 $ 3,500,000 $ 5,295,920
U.S. Treasury Notes 6.25% 10,900,000 11,043,008
5/31/00
101,531,274
TOTAL U.S. GOVERNMENT AND 269,880,655
GOVERNMENT AGENCY OBLIGATIONS
(Cost $272,948,077)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 21.8%
FANNIE MAE - 14.5%
5.5% 7/1/09 2,304,960 2,252,200
6% 9/1/08 to 11/1/09 11,295,005 11,238,996
6.5% 6/1/07 to 4/1/29 22,059,454 21,933,720
6.5% 5/1/29 4,000,000 3,977,500
7% 4/1/26 to 11/1/28 11,895,420 12,054,663
8.25% 12/1/01 667,690 695,198
8.5% 9/1/16 to 1/1/17 90,325 95,242
9% 11/1/11 394,015 414,555
9.25% 9/1/16 102,696 109,613
9.5% 11/1/06 to 5/1/20 2,032,759 2,153,190
11.5% 6/1/19 370,448 418,355
12.5% 8/1/15 16,746 19,295
55,362,527
FREDDIE MAC - 3.5%
6.5% 5/1/08 237,185 239,542
6.775% 11/15/03 4,683,463 4,774,937
8.5% 8/1/09 to 4/1/27 4,903,318 5,150,895
9% 10/1/08 to 10/1/20 960,421 1,015,704
9.5% 5/1/21 to 7/1/21 610,969 657,451
10.5% 1/1/16 to 12/1/20 453,303 496,607
11% 7/1/13 to 5/1/14 448,829 492,770
12.5% 2/1/10 to 6/1/19 418,160 478,992
13,306,898
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.8%
6.5% 5/15/29 8,600,000 8,551,625
7.5% 9/15/06 to 1/15/08 1,931,306 1,995,722
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
9% 5/15/01 to 12/15/09 $ 380,944 $ 391,486
9.5% 11/15/09 to 11/15/20 1,019,615 1,094,159
10.5% 8/15/16 to 1/20/18 579,698 635,542
11% 12/15/15 to 7/15/19 428,481 479,808
11.5% 3/15/10 to 8/15/20 1,365,761 1,536,611
13.5% 7/15/11 48,801 56,907
14,741,860
TOTAL U.S. GOVERNMENT AGENCY 83,411,285
- - MORTGAGE SECURITIES
(Cost $83,441,462)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.7%
U.S. GOVERNMENT AGENCY - 1.7%
Fannie Mae planned 2,730,000 2,761,566
amortization class Series
1993-134 Class GA, 6.5%
2/25/07
Freddie Mac:
Series 1141 Class G, 9% 2,000,000 2,123,740
9/15/21
Series 1535 Class PM, 7% 1,852,616 1,860,455
6/15/01
TOTAL COLLATERALIZED MORTGAGE 6,745,761
OBLIGATIONS
(Cost $6,673,237)
COMMERCIAL MORTGAGE
SECURITIES - 0.7%
Fannie Mae ACES REMIC 2,500,721 2,559,331
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,522,752)
CASH EQUIVALENTS - 5.4%
MATURITY AMOUNT
Investments in repurchase $ 20,569,481 20,561,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $20,561,000)
TOTAL INVESTMENT IN $ 383,158,032
SECURITIES - 100%
(Cost $386,146,528)
</TABLE>
LEGEND
(a) 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 $10,188,886 or 2.7% of net assets.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $386,220,036. Net unrealized depreciation
aggregated $3,062,004, of which $1,284,606 related to appreciated
investment securities and $4,346,610 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 383,158,032
value (including repurchase
agreements of $20,561,000)
(cost $386,146,528) - See
accompanying schedule
Commitment to sell securities $ (12,628,563)
on a delayed delivery basis
Receivable for securities 12,700,117 71,554
sold on a delayed delivery
basis
Receivable for investments 61,770
sold, regular delivery
Cash 101,007
Receivable for fund shares 1,334,050
sold
Interest receivable 4,781,388
TOTAL ASSETS 389,507,801
LIABILITIES
Payable for investments 3,999,055
purchased Regular delivery
Delayed delivery 8,635,714
Payable for fund shares 1,328,350
redeemed
Distributions payable 325,954
Accrued management fee 133,438
Distribution fees payable 137,896
Other payables and accrued 97,498
expenses
TOTAL LIABILITIES 14,657,905
NET ASSETS $ 374,849,896
Net Assets consist of:
Paid in capital $ 379,899,000
Undistributed net investment 386,585
income
Accumulated undistributed net (2,518,747)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (2,916,942)
(depreciation) on investments
NET ASSETS $ 374,849,896
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $9.65
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($12,122,355 (divided by)
1,256,572 shares)
Maximum offering price per $10.13
share (100/95.25 of $9.65)
CLASS T: NET ASSET VALUE and $9.65
redemption price per share
($219,080,359 (divided by)
22,710,349 shares)
Maximum offering price per $10.00
share (100/96.50 of $9.65)
CLASS B: NET ASSET VALUE and $9.64
offering price per share
($90,216,609 (divided by)
9,358,317 shares) A
CLASS C: NET ASSET VALUE and $9.65
offering price per share
($29,517,632 (divided by)
3,059,741 shares) A
INSTITUTIONAL CLASS: NET $9.62
ASSET VALUE, offering price
and redemption price per
share ($23,912,941 (divided
by) 2,486,870 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 11,275,918
Interest
EXPENSES
Management fee $ 745,639
Transfer agent fees 320,908
Distribution fees 734,665
Accounting fees and expenses 56,003
Custodian fees and expenses 8,249
Registration fees 61,056
Audit 17,441
Legal 643
Miscellaneous 2,219
Total expenses before 1,946,823
reductions
Expense reductions (2,380) 1,944,443
NET INVESTMENT INCOME 9,331,475
REALIZED AND UNREALIZED GAIN (2,445,237)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,468,505)
Delayed delivery commitments 71,554 (10,396,951)
NET GAIN (LOSS) (12,842,188)
NET INCREASE (DECREASE) IN $ (3,510,713)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,331,475 $ 12,243,044
income
Net realized gain (loss) (2,445,237) 7,666,008
Change in net unrealized (10,396,951) 482,198
appreciation (depreciation)
NET INCREASE (DECREASE) IN (3,510,713) 20,391,250
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,734,784) (12,201,221)
from net investment income
Share transactions - net 52,669,275 141,557,657
increase (decrease)
TOTAL INCREASE (DECREASE) 39,423,778 149,747,686
IN NET ASSETS
NET ASSETS
Beginning of period 335,426,118 185,678,432
End of period (including $ 374,849,896 $ 335,426,118
undistributed net investment
income of $386,585 and
$789,894, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.670 $ 9.490 $ 9.250
period
Income from Investment
Operations
Net investment income D .274 .545 .552 .090
Net realized and unrealized (.355) .368 .187 .241
gain (loss)
Total from investment (.081) .913 .739 .331
operations
Less Distributions
From net investment income (.289) (.563) (.559) (.091)
Net asset value, end of period $ 9.650 $ 10.020 $ 9.670 $ 9.490
TOTAL RETURN B, C (0.82)% 9.74% 8.09% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,122 $ 7,884 $ 1,582 $ 223
(000 omitted)
Ratio of expenses to average .89% A .90% F .90% F .90% A, F
net assets
Ratio of net investment 5.68% A 5.65% 5.98% 6.28% A
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.670 $ 9.490 $ 9.670 $ 8.960
period
Income from Investment
Operations
Net investment income .274 D .546 D .558 D .586 D .594
Net realized and unrealized (.359) .351 .171 (.180) .701
gain (loss)
Total from investment (.085) .897 .729 .406 1.295
operations
Less Distributions
From net investment income (.285) (.547) (.549) (.586) (.585)
From net realized gain - - - - -
In excess of realized gain - - - - -
Total distributions (.285) (.547) (.549) (.586) (.585)
Net asset value, end of $ 9.650 $ 10.020 $ 9.670 $ 9.490 $ 9.670
period
TOTAL RETURN B, C (0.86)% 9.56% 7.97% 4.38% 14.91%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 219,080 $ 212,933 $ 144,948 $ 217,883 $ 208,620
(000 omitted)
Ratio of expenses to average .97% A 1.00% E 1.00% E 1.00% .89% E
net assets
Ratio of expenses to average .96% A, F 1.00% 1.00% .99% F .89%
net assets after expense
reductions
Ratio of net investment 5.62% A 5.59% 5.88% 6.19% 6.34%
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153% 261%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.140
period
Income from Investment
Operations
Net investment income .515
Net realized and unrealized (1.031)
gain (loss)
Total from investment (.516)
operations
Less Distributions
From net investment income (.504)
From net realized gain (.130)
In excess of realized gain (.030)
Total distributions (.664)
Net asset value, end of $ 8.960
period
TOTAL RETURN B, C (5.27)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 114,453
(000 omitted)
Ratio of expenses to average .74% E
net assets
Ratio of expenses to average .74%
net assets after expense
reductions
Ratio of net investment 6.18%
income to average net assets
Portfolio turnover rate 313%
</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 APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.010 $ 9.660 $ 9.490 $ 9.670 $ 8.950
period
Income from Investment
Operations
Net investment income .241 D .475 D .494 D .520 D .542
Net realized and unrealized (.357) .359 .166 (.177) .693
gain (loss)
Total from investment (.116) .834 .660 .343 1.235
operations
Less Distributions
From net investment income (.254) (.484) (.490) (.523) (.515)
Net asset value, end of $ 9.640 $ 10.010 $ 9.660 $ 9.490 $ 9.670
period
TOTAL RETURN B, C (1.17)% 8.87% 7.20% 3.69% 14.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 90,217 $ 74,073 $ 18,782 $ 17,355 $ 11,766
(000 omitted)
Ratio of expenses to average 1.60% A 1.65% F 1.65% F 1.67% F 1.65% F
net assets
Ratio of net investment 4.97% A 4.92% 5.24% 5.51% 5.58%
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153% 261%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31,
1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.100
period
Income from Investment
Operations
Net investment income .144
Net realized and unrealized (.137)
gain (loss)
Total from investment .007
operations
Less Distributions
From net investment income (.157)
Net asset value, end of $ 8.950
period
TOTAL RETURN B, C 0.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,062
(000 omitted)
Ratio of expenses to average 1.70% A, F
net assets
Ratio of net investment 5.22% A
income to average net assets
Portfolio turnover rate 313%
</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 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 OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.640
period
Income from Investment
Operations
Net investment income D .234 .450
Net realized and unrealized (.355) .398
gain (loss)
Total from investment (.121) .848
operations
Less Distributions
From net investment income (.249) (.468)
Net asset value, end of period $ 9.650 $ 10.020
TOTAL RETURN B, C (1.22)% 9.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,518 $ 14,954
(000 omitted)
Ratio of expenses to average 1.70% A 1.75% A, F
net assets
Ratio of net investment 4.85% A 4.74% A
income to average net assets
Portfolio turnover rate 173% A 243%
</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 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 OCTOBER 31, 1998.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.000 $ 9.650 $ 9.480 $ 9.670 $ 9.560
of period
Income from Investment
Operations
Net investment income .286 D .570 D .580 D .604 D .197
Net realized and unrealized (.367) .352 .165 (.180) .108
gain (loss)
Total from investment (.081) .922 .745 .424 .305
operations
Less Distributions
From net investment income (.299) (.572) (.575) (.614) (.195)
Net asset value, end of period $ 9.620 $ 10.000 $ 9.650 $ 9.480 $ 9.670
TOTAL RETURN B, C (0.83)% 9.86% 8.18% 4.58% 3.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 23,913 $ 25,582 $ 20,366 $ 27,660 $ 14,588
(000 omitted)
Ratio of expenses to average .69% A .75% F .75% F .75% F .75% A, F
net assets
Ratio of net investment 5.89% A 5.84% 6.12% 6.43% 6.48% A
income to average net assets
Portfolio turnover rate 173% A 243% 136% 153% 261%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (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. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. 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 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.
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 dividends
and capital gain distributions are declared separately for each class.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
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 long-term U.S. government and government agency
obligations aggregated $336,852,999 and $281,962,335, 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 .43% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 7,645 $ 21
CLASS T 261,806 4,410
CLASS B 357,145 258,642
CLASS C 108,069 102,771
$ 734,665 $ 365,844
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six 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 5% 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains. A portion of the sales charges
paid to FDC are paid to securities dealers, banks and other financial
institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 67,203 $ 21,517
CLASS T 163,519 52,565
CLASS B 143,355 143,355*
CLASS C 12,410 12,410*
$ 386,487 $ 229,847
* 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
(collectively referred to as the transfer agent) for the fund's Class
A, Class T, Class B, Class C and Institutional Class. FIIOC receives
account fees and asset-based fees that vary according to the account
size and type of account of the shareholders of the respective classes
of the fund. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements. For the period, the
following amounts were paid to FIIOC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 11,141 .22
CLASS T 199,790 .19
CLASS B 69,733 .18
CLASS C 19,465 .18
INSTITUTIONAL CLASS 20,779 .17
$ 320,908
* ANNUALIZED
ACCOUNTING FEE. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
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 $2,380 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS YEAR ENDED
ENDED APRIL OCTOBER 31,
30,1999 1998A
FROM NET INVESTMENT INCOME
Class A $ 294,929 $ 172,525
Class T 6,061,929 8,994,288
Class B 2,039,801 1,420,172
Class C 540,393 168,316
Institutional Class 797,732 1,445,920
Total $ 9,734,784 $ 12,201,221
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
1999 1998A 1999
CLASS A Shares sold 2,133,213 849,297 $ 20,958,369
Reinvestment of distributions 22,976 14,303 224,974
Shares redeemed (1,686,494) (240,354) (16,551,603)
Net increase (decrease) 469,695 623,246 $ 4,631,740
CLASS T Shares sold 9,589,174 15,886,817 $ 94,261,276
Reinvestment of distributions 506,847 761,626 4,970,453
Shares redeemed (8,638,679) (10,390,224) (85,098,108)
Net increase (decrease) 1,457,342 6,258,219 $ 14,133,621
CLASS B Shares sold 4,324,133 6,584,605 $ 42,433,800
Reinvestment of distributions 156,076 109,260 1,529,055
Shares redeemed (2,520,939) (1,239,115) (24,767,663)
Net increase (decrease) 1,959,270 5,454,750 $ 19,195,192
CLASS C Shares sold 2,566,697 1,742,987 $ 25,199,883
Reinvestment of distributions 29,989 13,959 293,262
Shares redeemed (1,029,629) (264,262) (10,114,235)
Net increase (decrease) 1,567,057 1,492,684 $ 15,378,910
INSTITUTIONAL CLASS Shares 451,656 1,251,693 $ 4,420,942
sold
Reinvestment of distributions 66,738 126,775 653,039
Shares redeemed (589,496) (930,969) (5,744,169)
Net increase (decrease) (71,102) 447,499 $ (670,188)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998A
CLASS A Shares sold $ 8,455,738
Reinvestment of distributions 140,529
Shares redeemed (2,383,022)
Net increase (decrease) $ 6,213,245
CLASS T Shares sold $ 156,318,393
Reinvestment of distributions 7,462,535
Shares redeemed (101,764,593)
Net increase (decrease) $ 62,016,335
CLASS B Shares sold $ 65,367,580
Reinvestment of distributions 1,074,687
Shares redeemed (12,195,223)
Net increase (decrease) $ 54,247,044
CLASS C Shares sold $ 17,267,410
Reinvestment of distributions 138,062
Shares redeemed (2,621,407)
Net increase (decrease) $ 14,784,065
INSTITUTIONAL CLASS Shares $ 12,156,145
sold
Reinvestment of distributions 1,238,963
Shares redeemed (9,098,140)
Net increase (decrease) $ 4,296,968
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3,
1997(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of the Fidelity
Advisor Government Investment Fund, the Board of Trustees has
determined not to retain PricewaterhouseCoopers LLP as the fund's
independent auditor and voted to appoint Deloitte & Touche LLP for the
fiscal year ended October 31, 1999. During the two most recent fiscal
years, PricewaterhouseCoopers LLP's audit reports contained no adverse
opinion or disclaimer of opinion; nor were their reports qualified as
to uncertainty, audit scope, or accounting principles. Further, there
were no disagreements between the fund and PricewaterhouseCoopers LLP
on accounting principles, financial statement disclosure or audit
scope, which if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference to
the disagreement in their report.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith, Assistant Vice President
Thomas J. Silvia, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AGOVI-SANN-0699 77842
1.703567.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
MORTGAGE SECURITIES
FUND - CLASS A, CLASS T AND CLASS B
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 15 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 18 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 19 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 32 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR MORTGAGE SECURITIES 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 March 3, 1997. Class A shares bear a 0.15% 12b-1 fee.
Returns prior to March 3, 1997 are those of Initial Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
A shares' 12b-1 fee been reflected, returns prior to March 3, 1997
would have been lower. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.41% 4.91% 48.31% 127.36%
SECURITIES - CL A
FIDELITY ADV MORTGAGE -2.45% -0.07% 41.26% 116.56%
SECURITIES - CL A (INCL.
4.75% SALES CHARGE)
LB Mortgage 2.39% 6.16% 48.36% 135.23%
US Mortgage Funds Average 1.55% 5.13% 40.56% 114.26%
</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 the performance
of the Lehman Brothers Mortgage-Backed Securities Index - a market
value-weighted index of fixed-rate securities that represent interests
in pools of mortgage loans with original terms of 15 and 30 years that
are issued by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), and the Federal Home
Loan Mortgage Corp. (FHLMC), and balloon mortgages with fixed-rate
coupons. To measure how Class A's performance stacked up against its
peers, you can compare it to the U.S. mortgage funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 67 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 4.91% 8.20% 8.56%
SECURITIES - CL A
FIDELITY ADV MORTGAGE -0.07% 7.15% 8.03%
SECURITIES - CL A (INCL.
4.75% SALES CHARGE)
LB Mortgage 6.16% 8.21% 8.93%
US Mortgage Funds Average 5.13% 7.04% 7.91%
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' 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 Mortgage Sec -CL A LB Mortgage Backed Secs
00237 LB006
1989/04/30 9525.00 10000.00
1989/05/31 9750.43 10309.65
1989/06/30 9986.41 10563.02
1989/07/31 10165.21 10802.12
1989/08/31 10057.85 10662.11
1989/09/30 10101.76 10737.77
1989/10/31 10302.12 10983.06
1989/11/30 10401.39 11102.08
1989/12/31 10473.09 11167.78
1990/01/31 10376.60 11089.69
1990/02/28 10445.72 11154.85
1990/03/31 10453.93 11182.32
1990/04/30 10363.50 11081.88
1990/05/31 10664.79 11425.72
1990/06/30 10819.40 11606.40
1990/07/31 10976.64 11807.80
1990/08/31 10947.61 11682.33
1990/09/30 11006.05 11778.18
1990/10/31 11118.79 11911.74
1990/11/30 11362.09 12161.34
1990/12/31 11558.08 12365.17
1991/01/31 11678.01 12553.11
1991/02/28 11752.78 12658.93
1991/03/31 11831.83 12745.09
1991/04/30 11959.91 12862.49
1991/05/31 12022.09 12975.58
1991/06/30 12052.15 12987.16
1991/07/31 12225.26 13206.87
1991/08/31 12458.89 13447.05
1991/09/30 12653.39 13699.08
1991/10/31 12802.95 13926.06
1991/11/30 12881.22 14027.03
1991/12/31 13131.45 14308.95
1992/01/31 13068.28 14143.62
1992/02/29 13198.32 14277.44
1992/03/31 13107.11 14186.43
1992/04/30 13229.99 14325.91
1992/05/31 13448.35 14584.13
1992/06/30 13590.84 14756.19
1992/07/31 13567.52 14885.16
1992/08/31 13655.28 15079.03
1992/09/30 13741.00 15196.42
1992/10/31 13604.36 15063.14
1992/11/30 13670.12 15110.26
1992/12/31 13847.52 15305.47
1993/01/31 13973.85 15506.61
1993/02/28 14093.53 15663.86
1993/03/31 14185.57 15758.91
1993/04/30 14284.60 15840.22
1993/05/31 14326.90 15930.42
1993/06/30 14501.67 16052.40
1993/07/31 14581.38 16116.48
1993/08/31 14608.54 16192.41
1993/09/30 14640.45 16206.41
1993/10/31 14666.49 16253.26
1993/11/30 14635.83 16221.49
1993/12/31 14777.09 16352.89
1994/01/31 14913.18 16514.98
1994/02/28 14834.54 16399.74
1994/03/31 14666.42 15972.70
1994/04/30 14602.17 15855.03
1994/05/31 14726.48 15917.77
1994/06/30 14801.85 15883.30
1994/07/31 15038.47 16201.30
1994/08/31 15105.85 16252.46
1994/09/30 14942.11 16021.16
1994/10/31 14972.46 16012.01
1994/11/30 14957.52 15961.93
1994/12/31 15064.01 16089.29
1995/01/31 15348.81 16433.67
1995/02/28 15692.43 16853.17
1995/03/31 15759.02 16932.60
1995/04/30 16007.48 17173.32
1995/05/31 16511.14 17714.80
1995/06/30 16637.10 17815.50
1995/07/31 16674.88 17846.20
1995/08/31 16880.64 18030.91
1995/09/30 17055.14 18189.50
1995/10/31 17244.86 18351.33
1995/11/30 17435.80 18561.08
1995/12/31 17627.89 18792.91
1996/01/31 17772.21 18934.54
1996/02/29 17658.97 18777.30
1996/03/31 17594.91 18709.44
1996/04/30 17558.23 18656.67
1996/05/31 17490.25 18602.28
1996/06/30 17731.62 18858.34
1996/07/31 17794.94 18927.54
1996/08/31 17791.01 18927.27
1996/09/30 18072.58 19244.19
1996/10/31 18406.98 19621.69
1996/11/30 18691.36 19902.53
1996/12/31 18585.96 19798.33
1997/01/31 18702.28 19945.34
1997/02/28 18763.25 20011.85
1997/03/31 18584.27 19823.37
1997/04/30 18872.26 20139.48
1997/05/31 19055.97 20336.57
1997/06/30 19276.17 20573.79
1997/07/31 19621.75 20961.52
1997/08/31 19578.96 20911.71
1997/09/30 19806.35 21176.93
1997/10/31 20014.86 21411.72
1997/11/30 20078.76 21482.00
1997/12/31 20233.63 21677.75
1998/01/31 20437.50 21893.43
1998/02/28 20459.71 21939.74
1998/03/31 20523.60 22032.63
1998/04/30 20642.43 22157.30
1998/05/31 20778.63 22304.59
1998/06/30 20878.14 22410.94
1998/07/31 20958.08 22524.57
1998/08/31 21134.73 22728.94
1998/09/30 21330.98 23003.31
1998/10/31 21145.54 22973.69
1998/11/30 21302.17 23088.13
1998/12/31 21369.91 23186.14
1999/01/31 21486.15 23351.19
1999/02/28 21423.79 23258.84
1999/03/31 21580.55 23415.03
1999/04/30 21656.16 23523.08
IMATRL PRASUN SHR__CHT 19990430 19990518 103845 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class A on
April 30, 1989, and the current 4.75% sales charge was paid. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $21,656 - a 116.56% increase on the initial investment. For
comparison, look at how the Lehman Brothers Mortgage-Backed Securities
Index did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 would have grown to $23,523 - a
135.23% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS A SHARES)
TO OCTOBER 31,
1999 1998 1997
Dividend returns 3.06% 5.92% 4.18%
Capital returns -0.65% -0.27% 2.53%
Total returns 2.41% 5.65% 6.71%
</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 paid
by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.77(cents) 32.91(cents) 64.58(cents)
Annualized dividend rate 5.39% 6.14% 5.91%
30-day annualized yield n/a - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.77 over the past one month, $10.81 over the past six months,
and $10.93 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. Yield information will be reported once Class A has a longer,
more stable operating history.
FIDELITY ADVISOR MORTGAGE SECURITIES 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 March 3, 1997. Class T shares bear a 0.25% 12b-1 fee.
Returns prior to March 3, 1997 are those of Initial Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
T shares' 12b-1 fee been reflected, returns prior to March 3, 1997
would have been lower. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.46% 4.90% 48.21% 127.21%
SECURITIES - CL T
FIDELITY ADV MORTGAGE -1.13% 1.23% 43.02% 119.25%
SECURITIES - CL T (INCL.
3.50% SALES CHARGE)
LB Mortgage 2.39% 6.16% 48.36% 135.23%
US Mortgage Funds Average 1.55% 5.13% 40.56% 114.26%
</TABLE>
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 the performance
of the Lehman Brothers Mortgage-Backed Securities Index - a market
value-weighted index of fixed-rate securities that represent interests
in pools of mortgage loans with original terms of 15 and 30 years that
are issued by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), and the Federal Home
Loan Mortgage Corp. (FHLMC), and balloon mortgages with fixed-rate
coupons. To measure how Class T's performance stacked up against its
peers, you can compare it to the U.S. mortgage funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 67 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 4.90% 8.19% 8.55%
SECURITIES - CL T
FIDELITY ADV MORTGAGE 1.23% 7.42% 8.17%
SECURITIES - CL T (INCL.
3.50% SALES CHARGE)
LB Mortgage 6.16% 8.21% 8.93%
US Mortgage Funds Average 5.13% 7.04% 7.91%
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' 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 Mortgage Sec -CL T LB Mortgage Backed Secs
00239 LB006
1989/04/30 9650.00 10000.00
1989/05/31 9878.39 10309.65
1989/06/30 10117.46 10563.02
1989/07/31 10298.61 10802.12
1989/08/31 10189.84 10662.11
1989/09/30 10234.33 10737.77
1989/10/31 10437.32 10983.06
1989/11/30 10537.89 11102.08
1989/12/31 10610.53 11167.78
1990/01/31 10512.78 11089.69
1990/02/28 10582.80 11154.85
1990/03/31 10591.12 11182.32
1990/04/30 10499.51 11081.88
1990/05/31 10804.75 11425.72
1990/06/30 10961.39 11606.40
1990/07/31 11120.69 11807.80
1990/08/31 11091.27 11682.33
1990/09/30 11150.48 11778.18
1990/10/31 11264.71 11911.74
1990/11/30 11511.20 12161.34
1990/12/31 11709.76 12365.17
1991/01/31 11831.27 12553.11
1991/02/28 11907.02 12658.93
1991/03/31 11987.10 12745.09
1991/04/30 12116.86 12862.49
1991/05/31 12179.86 12975.58
1991/06/30 12210.32 12987.16
1991/07/31 12385.70 13206.87
1991/08/31 12622.39 13447.05
1991/09/30 12819.44 13699.08
1991/10/31 12970.97 13926.06
1991/11/30 13050.27 14027.03
1991/12/31 13303.78 14308.95
1992/01/31 13239.78 14143.62
1992/02/29 13371.53 14277.44
1992/03/31 13279.12 14186.43
1992/04/30 13403.61 14325.91
1992/05/31 13624.84 14584.13
1992/06/30 13769.20 14756.19
1992/07/31 13745.57 14885.16
1992/08/31 13834.48 15079.03
1992/09/30 13921.33 15196.42
1992/10/31 13782.90 15063.14
1992/11/30 13849.52 15110.26
1992/12/31 14029.24 15305.47
1993/01/31 14157.24 15506.61
1993/02/28 14278.49 15663.86
1993/03/31 14371.73 15758.91
1993/04/30 14472.06 15840.22
1993/05/31 14514.91 15930.42
1993/06/30 14691.98 16052.40
1993/07/31 14772.74 16116.48
1993/08/31 14800.25 16192.41
1993/09/30 14832.58 16206.41
1993/10/31 14858.97 16253.26
1993/11/30 14827.91 16221.49
1993/12/31 14971.02 16352.89
1994/01/31 15108.89 16514.98
1994/02/28 15029.22 16399.74
1994/03/31 14858.89 15972.70
1994/04/30 14793.80 15855.03
1994/05/31 14919.74 15917.77
1994/06/30 14996.10 15883.30
1994/07/31 15235.82 16201.30
1994/08/31 15304.09 16252.46
1994/09/30 15138.21 16021.16
1994/10/31 15168.95 16012.01
1994/11/30 15153.81 15961.93
1994/12/31 15261.70 16089.29
1995/01/31 15550.24 16433.67
1995/02/28 15898.37 16853.17
1995/03/31 15965.84 16932.60
1995/04/30 16217.55 17173.32
1995/05/31 16727.82 17714.80
1995/06/30 16855.43 17815.50
1995/07/31 16893.71 17846.20
1995/08/31 17102.17 18030.91
1995/09/30 17278.96 18189.50
1995/10/31 17471.17 18351.33
1995/11/30 17664.62 18561.08
1995/12/31 17859.23 18792.91
1996/01/31 18005.44 18934.54
1996/02/29 17890.71 18777.30
1996/03/31 17825.81 18709.44
1996/04/30 17788.65 18656.67
1996/05/31 17719.78 18602.28
1996/06/30 17964.32 18858.34
1996/07/31 18028.47 18927.54
1996/08/31 18024.49 18927.27
1996/09/30 18309.75 19244.19
1996/10/31 18648.54 19621.69
1996/11/30 18936.65 19902.53
1996/12/31 18829.87 19798.33
1997/01/31 18947.72 19945.34
1997/02/28 19009.48 20011.85
1997/03/31 18826.75 19823.37
1997/04/30 19116.44 20139.48
1997/05/31 19300.81 20336.57
1997/06/30 19522.64 20573.79
1997/07/31 19871.68 20961.52
1997/08/31 19845.57 20911.71
1997/09/30 20056.06 21176.93
1997/10/31 20265.60 21411.72
1997/11/30 20328.62 21482.00
1997/12/31 20502.62 21677.75
1998/01/31 20694.34 21893.43
1998/02/28 20718.00 21939.74
1998/03/31 20800.71 22032.63
1998/04/30 20900.47 22157.30
1998/05/31 21036.72 22304.59
1998/06/30 21135.74 22410.94
1998/07/31 21215.03 22524.57
1998/08/31 21392.00 22728.94
1998/09/30 21588.88 23003.31
1998/10/31 21399.58 22973.69
1998/11/30 21573.68 23088.13
1998/12/31 21642.27 23186.14
1999/01/31 21758.40 23351.19
1999/02/28 21693.73 23258.84
1999/03/31 21830.34 23415.03
1999/04/30 21925.30 23523.08
IMATRL PRASUN SHR__CHT 19990430 19990518 111958 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class T on
April 30, 1989, and the current 3.50% sales charge was paid. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $21,925 - a 119.25% increase on the initial investment. For
comparison, look at how the Lehman Brothers Mortgage-Backed Securities
Index did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 would have grown to $23,523 - a
135.23% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS T SHARES)
TO OCTOBER 31,
1999 1998 1997
Dividend returns 3.01% 5.87% 4.12%
Capital returns -0.55% -0.27% 2.53%
Total returns 2.46% 5.60% 6.65%
</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 paid
by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.68(cents) 32.37(cents) 63.51(cents)
Annualized dividend rate 5.29% 6.03% 5.81%
30-day annualized yield 5.16% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.77 over the past one month, $10.82 over the past six months,
and $10.93 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class T's current 3.50% sales charge. If
Fidelity had not reimbursed certain class expenses, the yield would
have been 5.15%.
FIDELITY ADVISOR MORTGAGE SECURITIES 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 March 3, 1997. Class B shares bear a .90% 12b-1 fee.
Returns prior to March 3, 1997 are those of Initial Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
B shares' 12b-1 fee been reflected, returns prior to March 3, 1997
would have been lower. Class B's contingent deferred sales charges
included in the past six months, past one year, past five years and
past 10 years total return figures are 5%, 5%, 2% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.14% 4.14% 46.01% 123.84%
SECURITIES - CL B
FIDELITY ADV MORTGAGE -2.77% -0.74% 44.01% 123.84%
SECURITIES - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB Mortgage 2.39% 6.16% 48.36% 135.23%
US Mortgage Funds Average 1.55% 5.13% 40.56% 114.26%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to the performance
of the Lehman Brothers Mortgage-Backed Securities Index - a market
value-weighted index of fixed-rate securities that represent interests
in pools of mortgage loans with original terms of 15 and 30 years that
are issued by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), and the Federal Home
Loan Mortgage Corp. (FHLMC), and balloon mortgages with fixed-rate
coupons. To measure how Class B's performance stacked up against its
peers, you can compare it to the U.S. mortgage funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 67 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 4.14% 7.86% 8.39%
SECURITIES - CL B
FIDELITY ADV MORTGAGE -0.74% 7.57% 8.39%
SECURITIES - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB Mortgage 6.16% 8.21% 8.93%
US Mortgage Funds Average 5.13% 7.04% 7.91%
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' 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 Mortgage Sec -CL B LB Mortgage Backed Secs
00238 LB006
1989/04/30 10000.00 10000.00
1989/05/31 10236.68 10309.65
1989/06/30 10484.42 10563.02
1989/07/31 10672.14 10802.12
1989/08/31 10559.42 10662.11
1989/09/30 10605.52 10737.77
1989/10/31 10815.87 10983.06
1989/11/30 10920.10 11102.08
1989/12/31 10995.37 11167.78
1990/01/31 10894.07 11089.69
1990/02/28 10966.64 11154.85
1990/03/31 10975.25 11182.32
1990/04/30 10880.32 11081.88
1990/05/31 11196.63 11425.72
1990/06/30 11358.95 11606.40
1990/07/31 11524.03 11807.80
1990/08/31 11493.55 11682.33
1990/09/30 11554.90 11778.18
1990/10/31 11673.27 11911.74
1990/11/30 11928.70 12161.34
1990/12/31 12134.47 12365.17
1991/01/31 12260.38 12553.11
1991/02/28 12338.88 12658.93
1991/03/31 12421.87 12745.09
1991/04/30 12556.34 12862.49
1991/05/31 12621.61 12975.58
1991/06/30 12653.18 12987.16
1991/07/31 12834.92 13206.87
1991/08/31 13080.20 13447.05
1991/09/30 13284.39 13699.08
1991/10/31 13441.42 13926.06
1991/11/30 13523.59 14027.03
1991/12/31 13786.30 14308.95
1992/01/31 13719.98 14143.62
1992/02/29 13856.50 14277.44
1992/03/31 13760.74 14186.43
1992/04/30 13889.75 14325.91
1992/05/31 14119.01 14584.13
1992/06/30 14268.60 14756.19
1992/07/31 14244.11 14885.16
1992/08/31 14336.25 15079.03
1992/09/30 14426.25 15196.42
1992/10/31 14282.80 15063.14
1992/11/30 14351.83 15110.26
1992/12/31 14538.07 15305.47
1993/01/31 14670.71 15506.61
1993/02/28 14796.36 15663.86
1993/03/31 14892.98 15758.91
1993/04/30 14996.96 15840.22
1993/05/31 15041.36 15930.42
1993/06/30 15224.85 16052.40
1993/07/31 15308.54 16116.48
1993/08/31 15337.05 16192.41
1993/09/30 15370.55 16206.41
1993/10/31 15397.89 16253.26
1993/11/30 15365.71 16221.49
1993/12/31 15514.01 16352.89
1994/01/31 15656.88 16514.98
1994/02/28 15574.32 16399.74
1994/03/31 15397.82 15972.70
1994/04/30 15330.36 15855.03
1994/05/31 15460.87 15917.77
1994/06/30 15540.00 15883.30
1994/07/31 15788.42 16201.30
1994/08/31 15859.16 16252.46
1994/09/30 15687.26 16021.16
1994/10/31 15719.12 16012.01
1994/11/30 15703.43 15961.93
1994/12/31 15815.23 16089.29
1995/01/31 16114.24 16433.67
1995/02/28 16474.99 16853.17
1995/03/31 16544.91 16932.60
1995/04/30 16805.75 17173.32
1995/05/31 17334.53 17714.80
1995/06/30 17466.77 17815.50
1995/07/31 17506.44 17846.20
1995/08/31 17722.46 18030.91
1995/09/30 17905.66 18189.50
1995/10/31 18104.84 18351.33
1995/11/30 18305.30 18561.08
1995/12/31 18506.97 18792.91
1996/01/31 18658.49 18934.54
1996/02/29 18539.60 18777.30
1996/03/31 18472.34 18709.44
1996/04/30 18433.84 18656.67
1996/05/31 18362.46 18602.28
1996/06/30 18615.87 18858.34
1996/07/31 18682.35 18927.54
1996/08/31 18678.23 18927.27
1996/09/30 18973.84 19244.19
1996/10/31 19324.91 19621.69
1996/11/30 19623.47 19902.53
1996/12/31 19512.82 19798.33
1997/01/31 19634.94 19945.34
1997/02/28 19698.95 20011.85
1997/03/31 19499.13 19823.37
1997/04/30 19790.37 20139.48
1997/05/31 19950.63 20336.57
1997/06/30 20187.38 20573.79
1997/07/31 20517.93 20961.52
1997/08/31 20478.69 20911.71
1997/09/30 20685.07 21176.93
1997/10/31 20908.76 21411.72
1997/11/30 20943.65 21482.00
1997/12/31 21111.56 21677.75
1998/01/31 21316.80 21893.43
1998/02/28 21330.60 21939.74
1998/03/31 21384.47 22032.63
1998/04/30 21494.74 22157.30
1998/05/31 21623.01 22304.59
1998/06/30 21693.55 22410.94
1998/07/31 21782.37 22524.57
1998/08/31 21951.91 22728.94
1998/09/30 22142.09 23003.31
1998/10/31 21915.62 22973.69
1998/11/30 22083.94 23088.13
1998/12/31 22141.48 23186.14
1999/01/31 22248.11 23351.19
1999/02/28 22169.70 23258.84
1999/03/31 22298.16 23415.03
1999/04/30 22384.01 23523.08
IMATRL PRASUN SHR__CHT 19990430 19990518 105716 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class B on
April 30, 1989. As the chart shows, by April 30, 1999, the value of
the investment would have grown to $22,384 - a 123.84% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Mortgage-Backed Securities Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $23,523 a 135.23% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997
Dividend returns 2.70% 5.19% 3.66%
Capital returns -0.56% -0.37% 2.52%
Total returns 2.14% 4.82% 6.18%
</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 paid
by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.13(cents) 28.97(cents) 56.45(cents)
Annualized dividend rate 4.67% 5.40% 5.17%
30-day annualized yield 4.72% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.76 over the past one month, $10.81 over the past six months,
and $10.92 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
excludes the effect of Class B's contingent deferred sales charge.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Mortgage Securities Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 1999, the fund's
Class A, Class T and Class B shares provided total returns of 2.41%,
2.46% and 2.14%, respectively. To get a sense of how the fund did
relative to its competitors, the U.S. mortgage funds average returned
1.55% for the same six-month period, according to Lipper Inc.
Additionally, the Lehman Brothers Mortgage Securities Index - which
tracks the types of securities in which the fund invests - returned
2.39% for the same six-month period. For the 12-month period that
ended April 30, 1999, the fund's Class A, Class T and Class B shares
had total returns of 4.91%, 4.90% and 4.14%, respectively. Those
returns compared to the U.S. mortgage funds average's 5.13% return and
the Lehman Brothers index's 6.16% return.
Q. WHAT FACTORS INFLUENCED THE PERFORMANCE OF THE MORTGAGE MARKET
DURING THE PAST SIX MONTHS?
A. There were two factors: a flight from quality and a slowdown in
prepayment activity. Amid a more upbeat global economic view, the
demand for U.S. Treasuries began to fade. Rather than flocking to the
relative safety and liquidity of Treasuries, investors increasingly
favored fixed-income securities that offered higher yields. In
addition, rising interest rates calmed fears of prepayments.
Q. WHY DID THE FUND OUTPACE ITS PEERS DURING THE PAST SIX MONTHS?
A. The fund's larger-than-average stake in commercial mortgage
securities (CMS) performed quite well and was the largest contributor
to the fund's outperformance during the past six months. Commercial
mortgage securities are bonds that are collateralized by mortgage
loans on commercial real estate - such as office buildings, shopping
malls, hotels and apartment buildings. Last fall, the CMS market was
hurt by credit concerns and a lack of liquidity. But when optimism and
liquidity returned in 1999, CMS securities snapped back.
Q. WHICH MORTGAGE SECURITIES DID YOU EMPHASIZE?
A. The fund was concentrated in relatively newly issued loans and
those known as "seasoned" securities, made up of home loans that
originated between five and 10 years ago. Brand new mortgages carry
less refinancing risk since homeowners aren't very likely to turn
around and refinance right after taking out a home loan. Surprisingly,
perhaps, fewer homeowners with seasoned loans chose to refinance their
mortgages even after being presented with several attractive
opportunities to cut their mortgage rates. Because of this reluctance
to refinance, seasoned mortgages are perceived to be more immunized
from increased prepayment activity that typically occurs when interest
rates fall. That wasn't necessarily the case early on in the period
when seasoned securities suffered from higher-than-expected prepayment
activity last fall. More recently, however, they've enjoyed a
significant turnaround and have been among the mortgage sector's best
performers.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. The fund had a relatively small exposure to mortgage securities
issued in 1992 and 1993. These moderately seasoned mortgages - which
had suffered more than older securities last fall - also bounded back
better in 1999.
Q. WHAT'S YOUR OUTLOOK?
A. There's more evidence each day that the worst of the crisis that
plagued global financial markets last fall is behind us. Given that, I
think we'll enter a more "normal," less volatile market environment
than we experienced in late 1998. Against that backdrop, I believe
that mortgage securities are poised to do better than Treasuries over
the near term. While they had gained some ground on Treasuries,
mortgage securities remained undervalued relative to them at the end
of the period. To the extent that investors look for attractively
priced, higher-yielding alternatives to Treasuries, mortgage
securities may benefit.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income by
investing in investment-grade
mortgage-related securities of
all kinds
START DATE: December 31, 1984
SIZE: as of April 30, 1999
more than $497 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MANAGING THE
FUND'S DURATION:
"My overall objective in managing
the fund is to limit relative
prepayment risk. One way I do that
is through the use of commercial
mortgage securities, which typically
have a much longer average life
than other mortgage securities.
The loans underlying commercial
mortgage securities usually have
prepayment restrictions built into
their structure, so they can help
reduce a fund's prepayment risk
when interest rates are falling.
However, fixed-rate commercial
mortgage securities tend to lengthen
the fund's duration - which
measures its sensitivity to
interest-rate changes. The longer
the fund's duration, the more its
share price will fall when rates
rise and vice versa. Since I
manage the fund so that its
duration is in line with the Lehman
Brothers Mortgage Securities
Index, I generally need to offset
longer-duration commercial
mortgage securities with
shorter-duration securities. Putting
some money into cash is one
option, although it doesn't provide
the fund with any additional yield.
That's why I generally prefer
higher-yielding alternatives
known as `floaters.' These
securities are backed by
commercial mortgages, but their
interest rates adjust, or float, each
month."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 3.1 3.3
6 - 6.99% 45.7 21.3
7 - 7.99% 23.3 47.6
8 - 8.99% 8.4 17.1
9 - 9.99% 5.1 6.5
10% and over 3.0 4.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 5.2 4.3
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 APRIL 30, 1999
6 MONTHS AGO
Years 3.5 2.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999
Mortgage
securities 73.7%
CMOs and other
mortgage related
securities 14.9%
Short-term
investments 11.4%
Row: 1, Col: 1, Value: 73.7
Row: 1, Col: 2, Value: 14.9
Row: 1, Col: 3, Value: 11.4
AS OF OCTOBER 31, 1998
Mortgage
securities 83.9%
CMOs and other
mortgage related
securities 15.9%
Short-term
investments 0.2%
Row: 1, Col: 1, Value: 83.90000000000001
Row: 1, Col: 2, Value: 15.9
Row: 1, Col: 1, Value: 0.2
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 73.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 40.7%
6% 10/1/28 to 4/1/29 $ 35,796,473 $ 34,688,930
6.5% 9/1/10 to 4/1/29 (c) 95,997,930 95,418,133
6.5% 5/1/29 (b) 35,000,000 34,803,125
7% 12/1/20 to 4/1/29 47,951,361 48,587,278
7% 5/1/29 (b) 450,000 456,188
7.5% 3/1/22 to 12/1/28 5,762,326 5,926,492
7.5% 5/1/29 (b) 325,000 334,141
7.5% 5/1/29 (b) 1,460,000 1,501,063
8% 1/1/07 to 7/1/08 67,113 68,514
8.25% 1/1/13 91,203 95,329
8.5% 11/1/03 to 12/1/26 10,403,665 10,924,486
8.75% 11/1/08 to 7/1/09 172,545 179,672
9% 1/1/08 to 2/1/13 635,347 666,912
9.5% 5/1/03 to 8/1/22 6,185,524 6,481,948
11% 12/1/02 to 8/1/10 1,578,198 1,712,737
12.25% 5/1/13 to 6/1/15 292,988 334,217
12.5% 11/1/14 to 3/1/16 422,826 485,287
12.75% 6/1/13 to 6/1/15 75,411 86,184
13.5% 9/1/13 to 12/1/14 154,298 182,698
14% 11/1/14 42,116 50,289
242,983,623
FREDDIE MAC - 12.3%
5% 7/1/10 3,058,514 2,926,615
6.5% 1/1/24 to 9/1/24 23,963,117 23,878,609
7% 5/1/99 to 7/1/01 289,478 290,577
7% 5/1/29 (b) 13,000,000 13,195,000
7.5% 1/1/28 to 3/1/28 3,442,987 3,538,737
8% 10/1/07 to 4/1/21 823,193 860,630
8.5% 11/1/03 to 12/1/25 13,412,085 14,084,411
9% 9/1/08 to 5/1/21 8,558,054 9,075,001
10% 1/1/09 to 5/1/19 1,419,436 1,519,576
10.5% 8/1/10 to 12/1/20 (d) 1,539,370 1,683,872
11.5% 4/1/12 74,801 83,099
11.75% 6/1/11 33,663 37,568
12.25% 6/1/14 to 7/1/15 164,411 186,734
12.5% 5/1/12 to 12/1/14 727,300 826,001
12.75% 6/1/05 to 3/1/15 133,337 147,952
13% 1/1/11 to 6/1/15 1,181,465 1,358,266
73,692,648
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 20.7%
6.5% 4/15/29 $ 1,999,800 $ 1,986,661
6.5% 5/15/29 (b) 51,600,000 51,309,750
7% 5/15/23 to 10/15/28 6,775,449 6,877,133
7.5% 7/15/05 to 9/15/27 16,553,168 17,090,179
8% 4/15/02 to 12/15/27 21,435,544 22,331,547
8.5% 7/15/16 to 6/15/18 2,303,204 2,445,072
9% 10/15/04 to 4/20/18 7,042,519 7,529,003
9.5% 6/15/09 to 12/15/24 3,857,144 4,121,620
10% 12/15/17 to 1/15/26 6,338,261 6,880,798
10.5% 8/15/00 to 2/20/18 823,457 897,314
11% 1/15/10 to 9/15/19 1,525,920 1,709,025
11.5% 10/15/10 29,732 33,283
13% 10/15/13 87,819 102,419
13.5% 7/15/11 to 10/15/14 70,278 82,250
123,396,054
TOTAL U.S. GOVERNMENT AGENCY 440,072,325
- - MORTGAGE SECURITIES
(Cost $439,209,357)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.4%
U.S. GOVERNMENT AGENCY - 0.4%
Freddie Mac planned 2,268,516 2,389,723
amortization class Series 70
Class C, 9% 9/15/20 (Cost
$2,382,296)
COMMERCIAL MORTGAGE
SECURITIES - 14.5%
ACP Mortgage LP Series 1 2,322,961 2,168,251
Class E, 6.9509% 2/28/28
(a)(e)
Bankers Trust II Series 5,000,000 4,999,219
1999-S1A, 7.0925% 2/28/14
(a)(e)
Bankers Trust REMIC Trust 3,890,000 3,899,117
1988-1 floater Series
1998-S1A Class D, 5.7869%
11/28/02 (a)(e)
CBM Funding Corp. sequential 2,300,000 2,347,797
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,850,625
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,521,063
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Federal Deposit Insurance $ 4,698,057 $ 4,723,015
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, 1,600,000 1,427,072
6.9707% 4/13/31 (a)(e)
Series 1999-GSFL II Class F, 4,500,000 4,431,150
7.6634% 11/13/13 (a)(e)
Nomura Asset Securities Corp. 15,000,000 14,076,563
Series 1998-D6 Class A-4,
7.5963% 3/17/28 (e)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 5.8263% 2/15/34 7,900,000 7,277,258
(a)(e)
Class A-5, 6.1763% 2/15/34 5,278,196 4,753,263
(a)(e)
Structured Asset Securities
Corp.:
floater Series 1997-C1 Class 4,228,479 4,223,193
C, 5.3869% 6/25/15 (a)(e)
Series 1992-M1 Class C, 7.05% 3,192,522 2,910,682
11/25/02
Thirteen Affiliates of 18,200,000 17,618,510
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 86,226,778
SECURITIES
(Cost $89,192,800)
COMMERCIAL PAPER - 8.3%
Lehman Brothers Holdings, 24,800,000 24,624,498
Inc. 5.15% 6/16/99
MCI WorldCom, Inc. 5.08% 24,800,000 24,753,512
5/17/99
TOTAL COMMERCIAL PAPER 49,378,010
(Cost $49,373,762)
CASH EQUIVALENTS - 3.1%
MATURITY AMOUNT
Investments in repurchase $ 18,789,748 18,782,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $18,782,000)
TOTAL INVESTMENT IN $ 596,848,836
SECURITIES - 100%
(Cost $598,940,215)
</TABLE>
<TABLE>
<CAPTION>
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FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT UNREALIZED GAIN/(LOSS)
SOLD
90 U.S. Treasury Note Contracts Jun. 1999 $ 10,002,657 $ (24,447)
The face value of futures sold as a percentage of investment in
securities - 1.7%
</TABLE>
LEGEND
(a) 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 $50,797,033 or 10.2% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) A portion of these securities were sold on a delayed delivery or
when-issued basis.
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $120,573.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $599,005,337. Net unrealized depreciation
aggregated $2,156,501, of which $3,365,543 related to appreciated
investment securities and $5,522,044 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 596,848,836
value (including repurchase
agreements of $18,782,000)
(cost $598,940,215) - See
accompanying schedule
Commitment to sell securities $ (59,662,500)
on a delayed delivery basis
Receivable for securities 60,007,031 344,531
sold on a delayed delivery
basis
Receivable for investments 653,925
sold, regular delivery
Cash 387
Receivable for fund shares 1,283,733
sold
Interest receivable 2,551,514
Receivable for daily 66,093
variation on futures
contracts
TOTAL ASSETS 601,749,019
LIABILITIES
Payable for investments 102,454,570
purchased on a delayed
delivery basis
Payable for fund shares 719,992
redeemed
Distributions payable 368,736
Accrued management fee 176,425
Distribution fees payable 15,949
Other payables and accrued 151,373
expenses
TOTAL LIABILITIES 103,887,045
NET ASSETS $ 497,861,974
Net Assets consist of:
Paid in capital $ 498,789,591
Undistributed net investment 1,626,403
income
Accumulated undistributed net (782,725)
realized gain (loss) on
investments
Net unrealized appreciation (1,771,295)
(depreciation) on investments
NET ASSETS $ 497,861,974
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.74
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,811,913 (divided by)
261,701 shares)
Maximum offering price per $11.28
share (100/95.25 of $10.74)
CLASS T: NET ASSET VALUE and $10.75
redemption price per share
($26,236,920 (divided by)
2,440,770 shares)
Maximum offering price per $11.14
share (100/96.50 of $10.75)
CLASS B: NET ASSET VALUE and $10.74
offering price per share
($14,371,823 (divided by)
1,338,060 shares) A
INITIAL CLASS: NET ASSET $10.75
VALUE, offering price and
redemption price per share
($436,083,451 (divided by)
40,554,323 shares)
INSTITUTIONAL CLASS: NET $10.73
ASSET VALUE, offering price
and redemption price per
share ($18,357,867 (divided
by) 1,710,136 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 17,376,672
Interest
EXPENSES
Management fee $ 1,079,205
Transfer agent fees 477,237
Distribution fees 77,353
Accounting fees and expenses 80,220
Non-interested trustees' 1,014
compensation
Custodian fees and expenses 44,364
Registration fees 64,930
Audit 27,033
Legal 7,312
Total expenses before 1,858,668
reductions
Expense reductions (16,651) 1,842,017
NET INVESTMENT INCOME 15,534,655
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (1,272,999)
Futures contracts 294,559 (978,440)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,185,674)
Futures contracts 91,406
Delayed delivery commitments 161,219 (1,933,049)
NET GAIN (LOSS) (2,911,489)
NET INCREASE (DECREASE) IN $ 12,623,166
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 15,534,655 $ 32,333,262
income
Net realized gain (loss) (978,440) 8,605,529
Change in net unrealized (1,933,049) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 12,623,166 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (15,607,628) (30,575,427)
From net investment income
From net realized gain (6,924,551) (1,430,037)
TOTAL DISTRIBUTIONS (22,532,179) (32,005,464)
Share transactions - net (2,286,702) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (12,195,715) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 497,861,974 $ 510,057,689
undistributed net investment
income of $1,626,403 and
$1,699,376, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.960 $ 11.020 $ 11.050 $ 10.830
period
Income from Investment
Operations
Net investment incomeD .324 .669 .170 .268
Net realized and unrealized (.065) (.061) .048 .224
gain (loss)
Total from investment .259 .608 .218 .492
operations
Less Distributions
From net investment income (.329) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.479) (.668) (.248) (.272)
Net asset value, end of period $ 10.740 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.41% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,812 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% A, F .90% F .90% A, F .90% A, F
net assets
Ratio of net investment 6.07% A 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.960 $ 11.020 $ 11.050 $ 10.830
period
Income from Investment
Operations
Net investment income D .320 .665 .167 .255
Net realized and unrealized (.056) (.063) .048 .233
gain (loss)
Total from investment .264 .602 .215 .488
operations
Less Distributions
From net investment income (.324) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.474) (.662) (.245) (.268)
Net asset value, end of period $ 10.750 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.46% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 26,237 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% A, F 1.00% F 1.00% A, F 1.00% A, F
net assets
Ratio of net investment 5.99% A 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.950 $ 11.020 $ 11.040 $ 10.830
period
Income from Investment
Operations
Net investment income D .283 .584 .142 .234
Net realized and unrealized (.053) (.064) .065 .214
gain (loss)
Total from investment .230 .520 .207 .448
operations
Less Distributions
From net investment income (.290) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.440) (.590) (.227) (.238)
Net asset value, end of period $ 10.740 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.14% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,372 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.65% A, F 1.65% F 1.65% A, F 1.65% A, F
net assets
Ratio of net investment 5.32% A 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 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 MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
INITIAL CLASS
(UNAUDITED) 1998 1997 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
Income from Investment
Operations
Net investment income .338 D .700 D .176 D .678 D .729
Net realized and unrealized (.068) (.056) .047 .391 (.015)
gain (loss)
Total from investment .270 .644 .223 1.069 .714
operations
Less Distributions
From net investment income (.340) (.664) (.173) (.689) (.724)
From net realized gain (.150) (.030) (.080) (.110) (.100)
In excess of net realized gain - - - - -
Total distributions (.490) (.694) (.253) (.799) (.824)
Net asset value, end of period $ 10.750 $ 10.970 $ 11.020 $ 11.050 $ 10.780
TOTAL RETURN B, C 2.51% 5.99% 2.05% 10.34% 6.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 436,083 $ 459,212 $ 494,304 $ 506,113 $ 488,162
(000 omitted)
Ratio of expenses to average .71% A .71% .72% A .73% .74%
net assets
Ratio of expenses to average .71% A .71% .72% A .73% .73% E
net assets after expense
reductions
Ratio of net investment 6.30% A 6.34% 6.36% A 6.26% 6.75%
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149% 221%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INITIAL CLASS
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.580 $ 10.910
period
Income from Investment
Operations
Net investment income .772 .570
Net realized and unrealized .325 (.242)
gain (loss)
Total from investment 1.097 .328
operations
Less Distributions
From net investment income (.737) (.588)
From net realized gain - (.040)
In excess of net realized gain (.050) (.030)
Total distributions (.787) (.658)
Net asset value, end of period $ 10.890 $ 10.580
TOTAL RETURN B, C 10.88% 3.13%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 416,241 $ 365,801
(000 omitted)
Ratio of expenses to average .77% .79%
net assets
Ratio of expenses to average .77% .79%
net assets after expense
reductions
Ratio of net investment 7.37% 6.73%
income to average net assets
Portfolio turnover rate 329% 563%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
G FOR THE YEAR ENDED JULY 31.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 H 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.950 $ 11.010 $ 11.040 $ 10.830
period
Income from Investment
Operations
Net investment income D .337 .693 .172 .263
Net realized and unrealized (.070) (.063) .050 .226
gain (loss)
Total from investment .267 .630 .222 .489
operations
Less Distributions
From net investment income (.337) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.487) (.690) (.252) (.279)
Net asset value, end of period $ 10.730 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 2.49% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,358 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% A, F .75% F .75% A, F .75% A, F
net assets
Ratio of expenses to average .75% A .75% .75% A .70% A, G
net assets after expense
reductions
Ratio of net investment 6.26% A 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
H FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Mortgage Securities Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) (formerly a fund of Fidelity
Income Fund 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, Initial Class, 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. Class B shares will
automatically convert to Class A shares after a holding period of
seven years from the initial date of purchase. Interest income,
realized and unrealized capital gains and losses, the common expenses
of the fund, and certain fund-level expense reductions, if any, are
allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the fund. Each class
of shares differs in its respective distribution, transfer agent, and
certain other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, futures
transactions, and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
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 long-term U.S. government and government agency
obligations aggregated $581,641,197 and $655,867,063, respectively.
The market value of futures contracts opened and closed during the
period amounted to $20,271,420 and $20,200,455, 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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 .43% of average net assets .
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,706 $ 94
CLASS T 27,499 3,455
CLASS B 48,148 34,821
$ 77,353 $ 38,370
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six years of
purchase. The Class B charge is based on declining rates ranging from
5% to 1% of the lesser of the cost of shares at the initial date of
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains. In addition, purchases of
Class A and Class T shares that were subject to a finder's fee bear a
contingent deferred
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
sales charge on assets that do not remain in the fund for at least one
year. The Class A and Class T contingent deferred sales charge is
based on 0.25% of the lesser of the cost of shares at the initial date
of purchase or the net asset value of the redeemed shares, excluding
any reinvested dividends and capital gains. A portion of the sales
charges paid to FDC are paid to securities dealers, banks and other
financial institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 16,306 $ 6,809
CLASS T 36,127 14,503
CLASS B 25,655 25,655*
$ 78,088 $ 46,967
* WHEN CLASS B 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 (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, and
Institutional Class. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the transfer agent for the Initial Class. FIIOC
and FSC receive account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy
statements. For the period, the following amounts were paid to FIIOC
or FSC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 3,825 .34
CLASS T 34,734 .32
CLASS B 11,668 .22
INITIAL CLASS 403,941 .18
INSTITUTIONAL CLASS 23,069 .24
$ 477,237
* ANNUALIZED
ACCOUNTING FEES. FSC 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A .90% $ 1,298
CLASS T 1.00% 10,534
CLASS B 1.65% 145
INSTITUTIONAL CLASS .75% 1,214
$ 13,191
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 $3,460 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 68,239 $ 47,643
Class T 652,044 835,552
Class B 281,323 198,305
Initial Class 13,988,979 28,222,031
Institutional Class 617,043 1,271,896
Total $ 15,607,628 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,685 41,653
Class B 132,054 4,898
Initial Class 6,182,268 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,551 $ 1,430,037
Total $ 22,532,179 $ 32,005,464
</TABLE>
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
1999 1998 1999
CLASS A Shares sold 191,569 $ 1,461,292
135,530
Reinvestment of distributions 5,986 3,475 64,682
Shares redeemed (50,005) (174,371) (539,601)
Net increase (decrease) 91,511 20,673 $ 986,373
CLASS T Shares sold 1,163,924 1,214,468 $ 12,566,656
Reinvestment of distributions 79,376 72,903 858,202
Shares redeemed (545,037) (874,013) (5,890,400)
Net increase (decrease) 698,263 413,358 $ 7,534,458
CLASS B Shares sold 725,826 623,528 $ 7,844,982
Reinvestment of distributions 30,892 14,736 333,770
Shares redeemed (134,355) (66,613) (1,454,560)
Net increase (decrease) 622,363 571,651 $ 6,724,192
INITIAL CLASS Shares sold 2,493,970 5,885,198 $ 26,989,885
Reinvestment of distributions 1,532,847 2,196,325 16,587,600
Shares redeemed (5,344,146) (11,046,014) (57,853,505)
Net increase (decrease) (1,317,329) (2,964,491) $ (14,276,020)
INSTITUTIONAL CLASS Shares 433,680 1,131,767 $ 4,683,244
sold
Reinvestment of distributions 46,361 61,639 500,952
Shares redeemed (782,736) (971,330) (8,439,901)
Net increase (decrease) (302,695) 222,076 $ (3,255,705)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998
CLASS A Shares sold $ 2,113,314
Reinvestment of distributions 38,300
Shares redeemed (1,919,263)
Net increase (decrease) $ 232,351
CLASS T Shares sold $ 13,402,368
Reinvestment of distributions 803,861
Shares redeemed (9,643,136)
Net increase (decrease) $ 4,563,093
CLASS B Shares sold $ 6,874,797
Reinvestment of distributions 162,453
Shares redeemed (734,102)
Net increase (decrease) $ 6,303,148
INITIAL CLASS Shares sold $ 64,970,201
Reinvestment of distributions 24,230,109
Shares redeemed (121,871,170)
Net increase (decrease) $ (32,670,860)
INSTITUTIONAL CLASS Shares $ 12,463,547
sold
Reinvestment of distributions 679,028
Shares redeemed (10,710,195)
Net increase (decrease) $ 2,432,380
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investment Money
Management (FIMM) Inc., Merrimack, NH
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
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AMOR-SANN-0699 78322
1.703540.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY
MORTGAGE SECURITIES FUND
(INITIAL CLASS OF FIDELITY ADVISOR MORTGAGE
SECURITIES FUND)
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 15 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY MORTGAGE SECURITIES FUND - INITIAL 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY MORTGAGE SECURITIES 2.51% 5.12% 49.10% 128.58%
- - INITIAL CL
LB Mortgage 2.39% 6.16% 48.36% 135.23%
US Mortgage Funds Average 1.55% 5.13% 40.56% 114.26%
</TABLE>
CUMULATIVE TOTAL RETURNS show Initial 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 Initial Class' returns to the
performance of the Lehman Brothers Mortgage-Backed Securities Index -
a market value-weighted index of fixed-rate securities that represent
interests in pools of mortgage loans with original terms of 15 and 30
years that are issued by the Government National Mortgage Association
(GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corp. (FHLMC), and balloon mortgages with
fixed-rate coupons. To measure how Initial Class' performance stacked
up against its peers, you can compare it to the U.S. mortgage funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 67 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY MORTGAGE SECURITIES 5.12% 8.32% 8.62%
- - INITIAL CL
LB Mortgage 6.16% 8.21% 8.93%
US Mortgage Funds Average 5.13% 7.04% 7.91%
AVERAGE ANNUAL TOTAL RETURNS take Initial Class' cumulative return and
show you what would have happened if Initial Class had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Mortgage Secs -Initial Cl LB Mortgage Backed Secs
00040 LB006
1989/04/30 10000.00 10000.00
1989/05/31 10236.68 10309.65
1989/06/30 10484.42 10563.02
1989/07/31 10672.14 10802.12
1989/08/31 10559.42 10662.11
1989/09/30 10605.52 10737.77
1989/10/31 10815.87 10983.06
1989/11/30 10920.10 11102.08
1989/12/31 10995.37 11167.78
1990/01/31 10894.07 11089.69
1990/02/28 10966.64 11154.85
1990/03/31 10975.25 11182.32
1990/04/30 10880.32 11081.88
1990/05/31 11196.63 11425.72
1990/06/30 11358.95 11606.40
1990/07/31 11524.03 11807.80
1990/08/31 11493.55 11682.33
1990/09/30 11554.90 11778.18
1990/10/31 11673.27 11911.74
1990/11/30 11928.70 12161.34
1990/12/31 12134.47 12365.17
1991/01/31 12260.38 12553.11
1991/02/28 12338.88 12658.93
1991/03/31 12421.87 12745.09
1991/04/30 12556.34 12862.49
1991/05/31 12621.61 12975.58
1991/06/30 12653.18 12987.16
1991/07/31 12834.92 13206.87
1991/08/31 13080.20 13447.05
1991/09/30 13284.39 13699.08
1991/10/31 13441.42 13926.06
1991/11/30 13523.59 14027.03
1991/12/31 13786.30 14308.95
1992/01/31 13719.98 14143.62
1992/02/29 13856.50 14277.44
1992/03/31 13760.74 14186.43
1992/04/30 13889.75 14325.91
1992/05/31 14119.01 14584.13
1992/06/30 14268.60 14756.19
1992/07/31 14244.11 14885.16
1992/08/31 14336.25 15079.03
1992/09/30 14426.25 15196.42
1992/10/31 14282.80 15063.14
1992/11/30 14351.83 15110.26
1992/12/31 14538.07 15305.47
1993/01/31 14670.71 15506.61
1993/02/28 14796.36 15663.86
1993/03/31 14892.98 15758.91
1993/04/30 14996.96 15840.22
1993/05/31 15041.36 15930.42
1993/06/30 15224.85 16052.40
1993/07/31 15308.54 16116.48
1993/08/31 15337.05 16192.41
1993/09/30 15370.55 16206.41
1993/10/31 15397.89 16253.26
1993/11/30 15365.71 16221.49
1993/12/31 15514.01 16352.89
1994/01/31 15656.88 16514.98
1994/02/28 15574.32 16399.74
1994/03/31 15397.82 15972.70
1994/04/30 15330.36 15855.03
1994/05/31 15460.87 15917.77
1994/06/30 15540.00 15883.30
1994/07/31 15788.42 16201.30
1994/08/31 15859.16 16252.46
1994/09/30 15687.26 16021.16
1994/10/31 15719.12 16012.01
1994/11/30 15703.43 15961.93
1994/12/31 15815.23 16089.29
1995/01/31 16114.24 16433.67
1995/02/28 16474.99 16853.17
1995/03/31 16544.91 16932.60
1995/04/30 16805.75 17173.32
1995/05/31 17334.53 17714.80
1995/06/30 17466.77 17815.50
1995/07/31 17506.44 17846.20
1995/08/31 17722.46 18030.91
1995/09/30 17905.66 18189.50
1995/10/31 18104.84 18351.33
1995/11/30 18305.30 18561.08
1995/12/31 18506.97 18792.91
1996/01/31 18658.49 18934.54
1996/02/29 18539.60 18777.30
1996/03/31 18472.34 18709.44
1996/04/30 18433.84 18656.67
1996/05/31 18362.46 18602.28
1996/06/30 18615.87 18858.34
1996/07/31 18682.35 18927.54
1996/08/31 18678.23 18927.27
1996/09/30 18973.84 19244.19
1996/10/31 19324.91 19621.69
1996/11/30 19623.47 19902.53
1996/12/31 19512.82 19798.33
1997/01/31 19634.94 19945.34
1997/02/28 19698.95 20011.85
1997/03/31 19514.24 19823.37
1997/04/30 19818.47 20139.48
1997/05/31 20013.97 20336.57
1997/06/30 20248.37 20573.79
1997/07/31 20614.59 20961.52
1997/08/31 20591.81 20911.71
1997/09/30 20815.23 21176.93
1997/10/31 21037.38 21411.72
1997/11/30 21106.70 21482.00
1997/12/31 21292.54 21677.75
1998/01/31 21497.37 21893.43
1998/02/28 21545.71 21939.74
1998/03/31 21618.17 22032.63
1998/04/30 21745.66 22157.30
1998/05/31 21891.86 22304.59
1998/06/30 22001.14 22410.94
1998/07/31 22088.42 22524.57
1998/08/31 22278.01 22728.94
1998/09/30 22489.07 23003.31
1998/10/31 22297.98 22973.69
1998/11/30 22464.66 23088.13
1998/12/31 22540.86 23186.14
1999/01/31 22667.59 23351.19
1999/02/28 22605.21 23258.84
1999/03/31 22774.71 23415.03
1999/04/30 22857.96 23523.08
IMATRL PRASUN SHR__CHT 19990430 19990518 105955 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Mortgage Securities Fund - Initial Class on April
30, 1989. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $22,858 - a 128.58% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Mortgage-Backed Securities Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $23,523 - a 135.23% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 3.16% 6.17% 6.60% 6.66% 7.86% 5.61%
Capital returns -0.65% -0.18% 2.26% 0.08% 7.32% -3.52%
Total returns 2.51% 5.99% 8.86% 6.74% 15.18% 2.09%
</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 paid
by the class are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.93(cents) 33.95(cents) 66.76(cents)
Annualized dividend rate 5.57% 6.33% 6.11%
30-day annualized yield 5.63% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.77 over the past one month, $10.82 over the past six months and
$10.93 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Mortgage Securities Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 1999, the fund's
Initial Class shares provided a total return of 2.51%. To get a sense
of how the fund did relative to its competitors, the U.S. mortgage
funds average returned 1.55% for the same six-month period, according
to Lipper Inc. Additionally, the Lehman Brothers Mortgage Securities
Index - which tracks the types of securities in which the fund invests
- - returned 2.39% for the same six-month period. For the 12-month
period that ended April 30, 1999, the fund's Initial Class shares had
a total return of 5.12%. That return compared to the U.S. mortgage
funds average's 5.13% return and the Lehman Brothers index's 6.16%
return.
Q. WHAT FACTORS INFLUENCED THE PERFORMANCE OF THE MORTGAGE MARKET
DURING THE PAST SIX MONTHS?
A. There were two factors: a flight from quality and a slowdown in
prepayment activity. Amid a more upbeat global economic view, the
demand for U.S. Treasuries began to fade. Rather than flocking to the
relative safety and liquidity of Treasuries, investors increasingly
favored fixed-income securities that offered higher yields. In
addition, rising interest rates calmed fears of prepayments.
Q. WHY DID THE FUND OUTPACE ITS PEERS DURING THE PAST SIX MONTHS?
A. The fund's larger-than-average stake in commercial mortgage
securities (CMS) performed quite well and was the largest contributor
to the fund's outperformance during the past six months. Commercial
mortgage securities are bonds that are collateralized by mortgage
loans on commercial real estate - such as office buildings, shopping
malls, hotels and apartment buildings. Last fall, the CMS market was
hurt by credit concerns and a lack of liquidity. But when optimism and
liquidity returned in 1999, CMS securities snapped back.
Q. WHICH MORTGAGE SECURITIES DID YOU EMPHASIZE?
A. The fund was concentrated in relatively newly issued loans and
those known as "seasoned" securities, made up of home loans that
originated between five and 10 years ago. Brand new mortgages carry
less refinancing risk since homeowners aren't very likely to turn
around and refinance right after taking out a home loan. Surprisingly,
perhaps, fewer homeowners with seasoned loans chose to refinance their
mortgages even after being presented with several attractive
opportunities to cut their mortgage rates. Because of this reluctance
to refinance, seasoned mortgages are perceived to be more immunized
from increased prepayment activity that typically occurs when interest
rates fall. That wasn't necessarily the case early on in the period
when seasoned securities suffered from higher-than-expected prepayment
activity last fall. More recently, however, they've enjoyed a
significant turnaround and have been among the mortgage sector's best
performers.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. The fund had a relatively small exposure to mortgage securities
issued in 1992 and 1993. These moderately seasoned mortgages - which
had suffered more than older securities last fall - also bounded back
better in 1999.
Q. WHAT'S YOUR OUTLOOK?
A. There's more evidence each day that the worst of the crisis that
plagued global financial markets last fall is behind us. Given that, I
think we'll enter a more "normal," less volatile market environment
than we experienced in late 1998. Against that backdrop, I believe
that mortgage securities are poised to do better than Treasuries over
the near term. While they had gained some ground on Treasuries,
mortgage securities remained undervalued relative to them at the end
of the period. To the extent that investors look for attractively
priced, higher-yielding alternatives to Treasuries, mortgage
securities may benefit.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income by
investing in investment-grade
mortgage-related securities of
all kinds
START DATE: December 31, 1984
SIZE: as of April 30, 1999
more than $497 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MANAGING THE
FUND'S DURATION:
"My overall objective in managing
the fund is to limit relative
prepayment risk. One way I do that
is through the use of commercial
mortgage securities, which typically
have a much longer average life
than other mortgage securities.
The loans underlying commercial
mortgage securities usually have
prepayment restrictions built into
their structure, so they can help
reduce a fund's prepayment risk
when interest rates are falling.
However, fixed-rate commercial
mortgage securities tend to lengthen
the fund's duration - which
measures its sensitivity to
interest-rate changes. The longer
the fund's duration, the more its
share price will fall when rates
rise and vice versa. Since I
manage the fund so that its
duration is in line with the Lehman
Brothers Mortgage Securities
Index, I generally need to offset
longer-duration commercial
mortgage securities with
shorter-duration securities. Putting
some money into cash is one
option, although it doesn't provide
the fund with any additional yield.
That's why I generally prefer
higher-yielding alternatives
known as `floaters.' These
securities are backed by
commercial mortgages, but their
interest rates adjust, or float, each
month."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 3.1 3.3
6 - 6.99% 45.7 21.3
7 - 7.99% 23.3 47.6
8 - 8.99% 8.4 17.1
9 - 9.99% 5.1 6.5
10% and over 3.0 4.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 5.2 4.3
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 APRIL 30, 1999
6 MONTHS AGO
Years 3.5 2.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999
Mortgage
securities 73.7%
CMOs and other
mortgage related
securities 14.9%
Short-term
investments 11.4%
Row: 1, Col: 1, Value: 73.7
Row: 1, Col: 2, Value: 14.9
Row: 1, Col: 3, Value: 11.4
AS OF OCTOBER 31, 1998
Mortgage
securities 83.9%
CMOs and other
mortgage related
securities 15.9%
Short-term
investments 0.2%
Row: 1, Col: 1, Value: 83.90000000000001
Row: 1, Col: 2, Value: 15.9
Row: 1, Col: 3, Value: 0.2
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 73.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 40.7%
6% 10/1/28 to 4/1/29 $ 35,796,473 $ 34,688,930
6.5% 9/1/10 to 4/1/29 (c) 95,997,930 95,418,133
6.5% 5/1/29 (b) 35,000,000 34,803,125
7% 12/1/20 to 4/1/29 47,951,361 48,587,278
7% 5/1/29 (b) 450,000 456,188
7.5% 3/1/22 to 12/1/28 5,762,326 5,926,492
7.5% 5/1/29 (b) 325,000 334,141
7.5% 5/1/29 (b) 1,460,000 1,501,063
8% 1/1/07 to 7/1/08 67,113 68,514
8.25% 1/1/13 91,203 95,329
8.5% 11/1/03 to 12/1/26 10,403,665 10,924,486
8.75% 11/1/08 to 7/1/09 172,545 179,672
9% 1/1/08 to 2/1/13 635,347 666,912
9.5% 5/1/03 to 8/1/22 6,185,524 6,481,948
11% 12/1/02 to 8/1/10 1,578,198 1,712,737
12.25% 5/1/13 to 6/1/15 292,988 334,217
12.5% 11/1/14 to 3/1/16 422,826 485,287
12.75% 6/1/13 to 6/1/15 75,411 86,184
13.5% 9/1/13 to 12/1/14 154,298 182,698
14% 11/1/14 42,116 50,289
242,983,623
FREDDIE MAC - 12.3%
5% 7/1/10 3,058,514 2,926,615
6.5% 1/1/24 to 9/1/24 23,963,117 23,878,609
7% 5/1/99 to 7/1/01 289,478 290,577
7% 5/1/29 (b) 13,000,000 13,195,000
7.5% 1/1/28 to 3/1/28 3,442,987 3,538,737
8% 10/1/07 to 4/1/21 823,193 860,630
8.5% 11/1/03 to 12/1/25 13,412,085 14,084,411
9% 9/1/08 to 5/1/21 8,558,054 9,075,001
10% 1/1/09 to 5/1/19 1,419,436 1,519,576
10.5% 8/1/10 to 12/1/20 (d) 1,539,370 1,683,872
11.5% 4/1/12 74,801 83,099
11.75% 6/1/11 33,663 37,568
12.25% 6/1/14 to 7/1/15 164,411 186,734
12.5% 5/1/12 to 12/1/14 727,300 826,001
12.75% 6/1/05 to 3/1/15 133,337 147,952
13% 1/1/11 to 6/1/15 1,181,465 1,358,266
73,692,648
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 20.7%
6.5% 4/15/29 $ 1,999,800 $ 1,986,661
6.5% 5/15/29 (b) 51,600,000 51,309,750
7% 5/15/23 to 10/15/28 6,775,449 6,877,133
7.5% 7/15/05 to 9/15/27 16,553,168 17,090,179
8% 4/15/02 to 12/15/27 21,435,544 22,331,547
8.5% 7/15/16 to 6/15/18 2,303,204 2,445,072
9% 10/15/04 to 4/20/18 7,042,519 7,529,003
9.5% 6/15/09 to 12/15/24 3,857,144 4,121,620
10% 12/15/17 to 1/15/26 6,338,261 6,880,798
10.5% 8/15/00 to 2/20/18 823,457 897,314
11% 1/15/10 to 9/15/19 1,525,920 1,709,025
11.5% 10/15/10 29,732 33,283
13% 10/15/13 87,819 102,419
13.5% 7/15/11 to 10/15/14 70,278 82,250
123,396,054
TOTAL U.S. GOVERNMENT AGENCY 440,072,325
- - MORTGAGE SECURITIES
(Cost $439,209,357)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.4%
U.S. GOVERNMENT AGENCY - 0.4%
Freddie Mac planned 2,268,516 2,389,723
amortization class Series 70
Class C, 9% 9/15/20 (Cost
$2,382,296)
COMMERCIAL MORTGAGE
SECURITIES - 14.5%
ACP Mortgage LP Series 1 2,322,961 2,168,251
Class E, 6.9509% 2/28/28
(a)(e)
Bankers Trust II Series 5,000,000 4,999,219
1999-S1A, 7.0925% 2/28/14
(a)(e)
Bankers Trust REMIC Trust 3,890,000 3,899,117
1988-1 floater Series
1998-S1A Class D, 5.7869%
11/28/02 (a)(e)
CBM Funding Corp. sequential 2,300,000 2,347,797
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,850,625
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,521,063
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Federal Deposit Insurance $ 4,698,057 $ 4,723,015
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, 1,600,000 1,427,072
6.9707% 4/13/31 (a)(e)
Series 1999-GSFL II Class F, 4,500,000 4,431,150
7.6634% 11/13/13 (a)(e)
Nomura Asset Securities Corp. 15,000,000 14,076,563
Series 1998-D6 Class A-4,
7.5963% 3/17/28 (e)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 5.8263% 2/15/34 7,900,000 7,277,258
(a)(e)
Class A-5, 6.1763% 2/15/34 5,278,196 4,753,263
(a)(e)
Structured Asset Securities
Corp.:
floater Series 1997-C1 Class 4,228,479 4,223,193
C, 5.3869% 6/25/15 (a)(e)
Series 1992-M1 Class C, 7.05% 3,192,522 2,910,682
11/25/02
Thirteen Affiliates of 18,200,000 17,618,510
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 86,226,778
SECURITIES
(Cost $89,192,800)
COMMERCIAL PAPER - 8.3%
Lehman Brothers Holdings, 24,800,000 24,624,498
Inc. 5.15% 6/16/99
MCI WorldCom, Inc. 5.08% 24,800,000 24,753,512
5/17/99
TOTAL COMMERCIAL PAPER 49,378,010
(Cost $49,373,762)
CASH EQUIVALENTS - 3.1%
MATURITY AMOUNT
Investments in repurchase $ 18,789,748 18,782,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $18,782,000)
TOTAL INVESTMENT IN $ 596,848,836
SECURITIES - 100%
(Cost $598,940,215)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT UNREALIZED GAIN/(LOSS)
SOLD
90 U.S. Treasury Note Contracts Jun. 1999 $ 10,002,657 $ (24,447)
The face value of futures sold as a percentage of investment in
securities - 1.7%
</TABLE>
LEGEND
(a) 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 $50,797,033 or 10.2% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) A portion of these securities were sold on a delayed delivery or
when-issued basis.
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $120,573.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $599,005,337. Net unrealized depreciation
aggregated $2,156,501, of which $3,365,543 related to appreciated
investment securities and $5,522,044 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 596,848,836
value (including repurchase
agreements of $18,782,000)
(cost $598,940,215) - See
accompanying schedule
Commitment to sell securities $ (59,662,500)
on a delayed delivery basis
Receivable for securities 60,007,031 344,531
sold on a delayed delivery
basis
Receivable for investments 653,925
sold, regular delivery
Cash 387
Receivable for fund shares 1,283,733
sold
Interest receivable 2,551,514
Receivable for daily 66,093
variation on futures
contracts
TOTAL ASSETS 601,749,019
LIABILITIES
Payable for investments 102,454,570
purchased on a delayed
delivery basis
Payable for fund shares 719,992
redeemed
Distributions payable 368,736
Accrued management fee 176,425
Distribution fees payable 15,949
Other payables and accrued 151,373
expenses
TOTAL LIABILITIES 103,887,045
NET ASSETS $ 497,861,974
Net Assets consist of:
Paid in capital $ 498,789,591
Undistributed net investment 1,626,403
income
Accumulated undistributed net (782,725)
realized gain (loss) on
investments
Net unrealized appreciation (1,771,295)
(depreciation) on investments
NET ASSETS $ 497,861,974
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.74
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,811,913 (divided by)
261,701 shares)
Maximum offering price per $11.28
share (100/95.25 of $10.74)
CLASS T: NET ASSET VALUE and $10.75
redemption price per share
($26,236,920 (divided by)
2,440,770 shares)
Maximum offering price per $11.14
share (100/96.50 of $10.75)
CLASS B: NET ASSET VALUE and $10.74
offering price per share
($14,371,823 (divided by)
1,338,060 shares) A
INITIAL CLASS: NET ASSET $10.75
VALUE, offering price and
redemption price per share
($436,083,451 (divided by)
40,554,323 shares)
INSTITUTIONAL CLASS: NET $10.73
ASSET VALUE, offering price
and redemption price per
share ($18,357,867 (divided
by) 1,710,136 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 17,376,672
Interest
EXPENSES
Management fee $ 1,079,205
Transfer agent fees 477,237
Distribution fees 77,353
Accounting fees and expenses 80,220
Non-interested trustees' 1,014
compensation
Custodian fees and expenses 44,364
Registration fees 64,930
Audit 27,033
Legal 7,312
Total expenses before 1,858,668
reductions
Expense reductions (16,651) 1,842,017
NET INVESTMENT INCOME 15,534,655
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (1,272,999)
Futures contracts 294,559 (978,440)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,185,674)
Futures contracts 91,406
Delayed delivery commitments 161,219 (1,933,049)
NET GAIN (LOSS) (2,911,489)
NET INCREASE (DECREASE) IN $ 12,623,166
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 15,534,655 $ 32,333,262
income
Net realized gain (loss) (978,440) 8,605,529
Change in net unrealized (1,933,049) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 12,623,166 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (15,607,628) (30,575,427)
From net investment income
From net realized gain (6,924,551) (1,430,037)
TOTAL DISTRIBUTIONS (22,532,179) (32,005,464)
Share transactions - net (2,286,702) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (12,195,715) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 497,861,974 $ 510,057,689
undistributed net investment
income of $1,626,403 and
$1,699,376, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.960 $ 11.020 $ 11.050 $ 10.830
period
Income from Investment
Operations
Net investment incomeD .324 .669 .170 .268
Net realized and unrealized (.065) (.061) .048 .224
gain (loss)
Total from investment .259 .608 .218 .492
operations
Less Distributions
From net investment income (.329) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.479) (.668) (.248) (.272)
Net asset value, end of period $ 10.740 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.41% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,812 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% A, F .90% F .90% A, F .90% A, F
net assets
Ratio of net investment 6.07% A 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.960 $ 11.020 $ 11.050 $ 10.830
period
Income from Investment
Operations
Net investment income D .320 .665 .167 .255
Net realized and unrealized (.056) (.063) .048 .233
gain (loss)
Total from investment .264 .602 .215 .488
operations
Less Distributions
From net investment income (.324) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.474) (.662) (.245) (.268)
Net asset value, end of period $ 10.750 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.46% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 26,237 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% A, F 1.00% F 1.00% A, F 1.00% A, F
net assets
Ratio of net investment 5.99% A 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.950 $ 11.020 $ 11.040 $ 10.830
period
Income from Investment
Operations
Net investment income D .283 .584 .142 .234
Net realized and unrealized (.053) (.064) .065 .214
gain (loss)
Total from investment .230 .520 .207 .448
operations
Less Distributions
From net investment income (.290) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.440) (.590) (.227) (.238)
Net asset value, end of period $ 10.740 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.14% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,372 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.65% A, F 1.65% F 1.65% A, F 1.65% A, F
net assets
Ratio of net investment 5.32% A 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 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 MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
INITIAL CLASS
(UNAUDITED) 1998 1997 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
Income from Investment
Operations
Net investment income .338 D .700 D .176 D .678 D .729
Net realized and unrealized (.068) (.056) .047 .391 (.015)
gain (loss)
Total from investment .270 .644 .223 1.069 .714
operations
Less Distributions
From net investment income (.340) (.664) (.173) (.689) (.724)
From net realized gain (.150) (.030) (.080) (.110) (.100)
In excess of net realized gain - - - - -
Total distributions (.490) (.694) (.253) (.799) (.824)
Net asset value, end of period $ 10.750 $ 10.970 $ 11.020 $ 11.050 $ 10.780
TOTAL RETURN B, C 2.51% 5.99% 2.05% 10.34% 6.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 436,083 $ 459,212 $ 494,304 $ 506,113 $ 488,162
(000 omitted)
Ratio of expenses to average .71% A .71% .72% A .73% .74%
net assets
Ratio of expenses to average .71% A .71% .72% A .73% .73% E
net assets after expense
reductions
Ratio of net investment 6.30% A 6.34% 6.36% A 6.26% 6.75%
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149% 221%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INITIAL CLASS
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.580 $ 10.910
period
Income from Investment
Operations
Net investment income .772 .570
Net realized and unrealized .325 (.242)
gain (loss)
Total from investment 1.097 .328
operations
Less Distributions
From net investment income (.737) (.588)
From net realized gain - (.040)
In excess of net realized gain (.050) (.030)
Total distributions (.787) (.658)
Net asset value, end of period $ 10.890 $ 10.580
TOTAL RETURN B, C 10.88% 3.13%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 416,241 $ 365,801
(000 omitted)
Ratio of expenses to average .77% .79%
net assets
Ratio of expenses to average .77% .79%
net assets after expense
reductions
Ratio of net investment 7.37% 6.73%
income to average net assets
Portfolio turnover rate 329% 563%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
G FOR THE YEAR ENDED JULY 31.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 H 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.950 $ 11.010 $ 11.040 $ 10.830
period
Income from Investment
Operations
Net investment income D .337 .693 .172 .263
Net realized and unrealized (.070) (.063) .050 .226
gain (loss)
Total from investment .267 .630 .222 .489
operations
Less Distributions
From net investment income (.337) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.487) (.690) (.252) (.279)
Net asset value, end of period $ 10.730 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 2.49% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,358 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% A, F .75% F .75% A, F .75% A, F
net assets
Ratio of expenses to average .75% A .75% .75% A .70% A, G
net assets after expense
reductions
Ratio of net investment 6.26% A 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
H FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Mortgage Securities Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) (formerly a fund of Fidelity
Income Fund 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, Initial Class, 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. Class B shares will
automatically convert to Class A shares after a holding period of
seven years from the initial date of purchase. Interest income,
realized and unrealized capital gains and losses, the common expenses
of the fund, and certain fund-level expense reductions, if any, are
allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the fund. Each class
of shares differs in its respective distribution, transfer agent, and
certain other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, futures
transactions, and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
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 long-term U.S. government and government agency
obligations aggregated $581,641,197 and $655,867,063, respectively.
The market value of futures contracts opened and closed during the
period amounted to $20,271,420 and $20,200,455, 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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 .43% of average net assets .
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,706 $ 94
CLASS T 27,499 3,455
CLASS B 48,148 34,821
$ 77,353 $ 38,370
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six years of
purchase. The Class B charge is based on declining rates ranging from
5% to 1% of the lesser of the cost of shares at the initial date of
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains. In addition, purchases of
Class A and Class T shares that were subject to a finder's fee bear a
contingent deferred
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
sales charge on assets that do not remain in the fund for at least one
year. The Class A and Class T contingent deferred sales charge is
based on 0.25% of the lesser of the cost of shares at the initial date
of purchase or the net asset value of the redeemed shares, excluding
any reinvested dividends and capital gains. A portion of the sales
charges paid to FDC are paid to securities dealers, banks and other
financial institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 16,306 $ 6,809
CLASS T 36,127 14,503
CLASS B 25,655 25,655*
$ 78,088 $ 46,967
* WHEN CLASS B 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 (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, and
Institutional Class. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the transfer agent for the Initial Class. FIIOC
and FSC receive account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy
statements. For the period, the following amounts were paid to FIIOC
or FSC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 3,825 .34
CLASS T 34,734 .32
CLASS B 11,668 .22
INITIAL CLASS 403,941 .18
INSTITUTIONAL CLASS 23,069 .24
$ 477,237
* ANNUALIZED
ACCOUNTING FEES. FSC 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A .90% $ 1,298
CLASS T 1.00% 10,534
CLASS B 1.65% 145
INSTITUTIONAL CLASS .75% 1,214
$ 13,191
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 $3,460 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 68,239 $ 47,643
Class T 652,044 835,552
Class B 281,323 198,305
Initial Class 13,988,979 28,222,031
Institutional Class 617,043 1,271,896
Total $ 15,607,628 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,685 41,653
Class B 132,054 4,898
Initial Class 6,182,268 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,551 $ 1,430,037
Total $ 22,532,179 $ 32,005,464
</TABLE>
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
1999 1998 1999
CLASS A Shares sold 191,569 $ 1,461,292
135,530
Reinvestment of distributions 5,986 3,475 64,682
Shares redeemed (50,005) (174,371) (539,601)
Net increase (decrease) 91,511 20,673 $ 986,373
CLASS T Shares sold 1,163,924 1,214,468 $ 12,566,656
Reinvestment of distributions 79,376 72,903 858,202
Shares redeemed (545,037) (874,013) (5,890,400)
Net increase (decrease) 698,263 413,358 $ 7,534,458
CLASS B Shares sold 725,826 623,528 $ 7,844,982
Reinvestment of distributions 30,892 14,736 333,770
Shares redeemed (134,355) (66,613) (1,454,560)
Net increase (decrease) 622,363 571,651 $ 6,724,192
INITIAL CLASS Shares sold 2,493,970 5,885,198 $ 26,989,885
Reinvestment of distributions 1,532,847 2,196,325 16,587,600
Shares redeemed (5,344,146) (11,046,014) (57,853,505)
Net increase (decrease) (1,317,329) (2,964,491) $ (14,276,020)
INSTITUTIONAL CLASS Shares 433,680 1,131,767 $ 4,683,244
sold
Reinvestment of distributions 46,361 61,639 500,952
Shares redeemed (782,736) (971,330) (8,439,901)
Net increase (decrease) (302,695) 222,076 $ (3,255,705)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998
CLASS A Shares sold $ 2,113,314
Reinvestment of distributions 38,300
Shares redeemed (1,919,263)
Net increase (decrease) $ 232,351
CLASS T Shares sold $ 13,402,368
Reinvestment of distributions 803,861
Shares redeemed (9,643,136)
Net increase (decrease) $ 4,563,093
CLASS B Shares sold $ 6,874,797
Reinvestment of distributions 162,453
Shares redeemed (734,102)
Net increase (decrease) $ 6,303,148
INITIAL CLASS Shares sold $ 64,970,201
Reinvestment of distributions 24,230,109
Shares redeemed (121,871,170)
Net increase (decrease) $ (32,670,860)
INSTITUTIONAL CLASS Shares $ 12,463,547
sold
Reinvestment of distributions 679,028
Shares redeemed (10,710,195)
Net increase (decrease) $ 2,432,380
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investment Money
Management (FIMM) Inc., Merrimack, NH
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
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
MOR-SANN-0699 78325
1.703537.101
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Government Income
High Income
Intermediate Bond
Intermediate Government Income
International Bond
Investment Grade Bond
New Markets Income
Short-Term Bond
Spartan Government Income
Spartan Investment Grade Bond
Spartan Short-Term Bond
Strategic Income
Target TimelineSM 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY ADVISOR
MORTGAGE SECURITIES
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 15 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to financial statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR MORTGAGE SECURITIES 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. The initial offering of Institutional
Class shares took place on March 3, 1997. Returns prior to March 3,
1997 are those of Initial Class, the original class of the fund. If
Fidelity had not reimbursed certain class expenses, the total returns
and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.49% 5.07% 48.75% 128.04%
SECURITIES - INST CL
LB Mortgage 2.39% 6.16% 48.36% 135.23%
US Mortgage Funds Average 1.55% 5.13% 40.56% 114.26%
</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 the performance of the Lehman Brothers Mortgage-Backed
Securities Index - a market value-weighted index of fixed-rate
securities that represent interests in pools of mortgage loans with
original terms of 15 and 30 years that are issued by the Government
National Mortgage Association (GNMA), the Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corp. (FHLMC),
and balloon mortgages with fixed-rate coupons. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the U.S. mortgage funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 67 mutual
funds. These benchmarks reflect reinvestment of dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 5.07% 8.27% 8.59%
SECURITIES - INST CL
LB Mortgage 6.16% 8.21% 8.93%
US Mortgage Funds Average 5.13% 7.04% 7.91%
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 Mortgage Sec -CL I LB Mortgage Backed Secs
00240 LB006
1989/04/30 10000.00 10000.00
1989/05/31 10236.68 10309.65
1989/06/30 10484.42 10563.02
1989/07/31 10672.14 10802.12
1989/08/31 10559.42 10662.11
1989/09/30 10605.52 10737.77
1989/10/31 10815.87 10983.06
1989/11/30 10920.10 11102.08
1989/12/31 10995.37 11167.78
1990/01/31 10894.07 11089.69
1990/02/28 10966.64 11154.85
1990/03/31 10975.25 11182.32
1990/04/30 10880.32 11081.88
1990/05/31 11196.63 11425.72
1990/06/30 11358.95 11606.40
1990/07/31 11524.03 11807.80
1990/08/31 11493.55 11682.33
1990/09/30 11554.90 11778.18
1990/10/31 11673.27 11911.74
1990/11/30 11928.70 12161.34
1990/12/31 12134.47 12365.17
1991/01/31 12260.38 12553.11
1991/02/28 12338.88 12658.93
1991/03/31 12421.87 12745.09
1991/04/30 12556.34 12862.49
1991/05/31 12621.61 12975.58
1991/06/30 12653.18 12987.16
1991/07/31 12834.92 13206.87
1991/08/31 13080.20 13447.05
1991/09/30 13284.39 13699.08
1991/10/31 13441.42 13926.06
1991/11/30 13523.59 14027.03
1991/12/31 13786.30 14308.95
1992/01/31 13719.98 14143.62
1992/02/29 13856.50 14277.44
1992/03/31 13760.74 14186.43
1992/04/30 13889.75 14325.91
1992/05/31 14119.01 14584.13
1992/06/30 14268.60 14756.19
1992/07/31 14244.11 14885.16
1992/08/31 14336.25 15079.03
1992/09/30 14426.25 15196.42
1992/10/31 14282.80 15063.14
1992/11/30 14351.83 15110.26
1992/12/31 14538.07 15305.47
1993/01/31 14670.71 15506.61
1993/02/28 14796.36 15663.86
1993/03/31 14892.98 15758.91
1993/04/30 14996.96 15840.22
1993/05/31 15041.36 15930.42
1993/06/30 15224.85 16052.40
1993/07/31 15308.54 16116.48
1993/08/31 15337.05 16192.41
1993/09/30 15370.55 16206.41
1993/10/31 15397.89 16253.26
1993/11/30 15365.71 16221.49
1993/12/31 15514.01 16352.89
1994/01/31 15656.88 16514.98
1994/02/28 15574.32 16399.74
1994/03/31 15397.82 15972.70
1994/04/30 15330.36 15855.03
1994/05/31 15460.87 15917.77
1994/06/30 15540.00 15883.30
1994/07/31 15788.42 16201.30
1994/08/31 15859.16 16252.46
1994/09/30 15687.26 16021.16
1994/10/31 15719.12 16012.01
1994/11/30 15703.43 15961.93
1994/12/31 15815.23 16089.29
1995/01/31 16114.24 16433.67
1995/02/28 16474.99 16853.17
1995/03/31 16544.91 16932.60
1995/04/30 16805.75 17173.32
1995/05/31 17334.53 17714.80
1995/06/30 17466.77 17815.50
1995/07/31 17506.44 17846.20
1995/08/31 17722.46 18030.91
1995/09/30 17905.66 18189.50
1995/10/31 18104.84 18351.33
1995/11/30 18305.30 18561.08
1995/12/31 18506.97 18792.91
1996/01/31 18658.49 18934.54
1996/02/29 18539.60 18777.30
1996/03/31 18472.34 18709.44
1996/04/30 18433.84 18656.67
1996/05/31 18362.46 18602.28
1996/06/30 18615.87 18858.34
1996/07/31 18682.35 18927.54
1996/08/31 18678.23 18927.27
1996/09/30 18973.84 19244.19
1996/10/31 19324.91 19621.69
1996/11/30 19623.47 19902.53
1996/12/31 19512.82 19798.33
1997/01/31 19634.94 19945.34
1997/02/28 19698.95 20011.85
1997/03/31 19513.49 19823.37
1997/04/30 19819.07 20139.48
1997/05/31 20014.02 20336.57
1997/06/30 20248.02 20573.79
1997/07/31 20595.14 20961.52
1997/08/31 20571.89 20911.71
1997/09/30 20794.67 21176.93
1997/10/31 21016.51 21411.72
1997/11/30 21086.27 21482.00
1997/12/31 21271.53 21677.75
1998/01/31 21475.35 21893.43
1998/02/28 21504.08 21939.74
1998/03/31 21594.56 22032.63
1998/04/30 21702.66 22157.30
1998/05/31 21848.91 22304.59
1998/06/30 21956.33 22410.94
1998/07/31 22043.37 22524.57
1998/08/31 22232.06 22728.94
1998/09/30 22461.53 23003.31
1998/10/31 22249.05 22973.69
1998/11/30 22415.05 23088.13
1998/12/31 22490.50 23186.14
1999/01/31 22616.12 23351.19
1999/02/28 22553.05 23258.84
1999/03/31 22721.15 23415.03
1999/04/30 22803.72 23523.08
IMATRL PRASUN SHR__CHT 19990430 19990518 105716 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Institutional
Class on April 30, 1989. As the chart shows, by April 30, 1999, the
value of the investment would have grown to $22,804 - a 128.04%
increase on the initial investment. For comparison, look at how the
Lehman Brothers Mortgage-Backed Securities Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $23,523 - a 135.23% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997
Dividend returns 3.14% 6.13% 4.30%
Capital returns -0.65% -0.27% 2.43%
Total returns 2.49% 5.86% 6.73%
</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 paid
by the class are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.90(cents) 33.71(cents) 66.23(cents)
Annualized dividend rate 5.54% 6.29% 6.07%
30-day annualized yield 5.62% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.76 over the past one month, $10.80 over the past six months,
and $10.92 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Mortgage Securities Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 1999, the fund's
Institutional Class shares provided a total return of 2.49%. To get a
sense of how the fund did relative to its competitors, the U.S.
mortgage funds average returned 1.55% for the same six-month period,
according to Lipper Inc. Additionally, the Lehman Brothers Mortgage
Securities Index - which tracks the types of securities in which the
fund invests - returned 2.39% for the same six-month period. For the
12-month period that ended April 30, 1999, the fund's Institutional
Class shares had a total return of 5.07%. That return compared to the
U.S. mortgage funds average's 5.13% return and the Lehman Brothers
index's 6.16% return.
Q. WHAT FACTORS INFLUENCED THE PERFORMANCE OF THE MORTGAGE MARKET
DURING THE PAST SIX MONTHS?
A. There were two factors: a flight from quality and a slowdown in
prepayment activity. Amid a more upbeat global economic view, the
demand for U.S. Treasuries began to fade. Rather than flocking to the
relative safety and liquidity of Treasuries, investors increasingly
favored fixed-income securities that offered higher yields. In
addition, rising interest rates calmed fears of prepayments.
Q. WHY DID THE FUND OUTPACE ITS PEERS DURING THE PAST SIX MONTHS?
A. The fund's larger-than-average stake in commercial mortgage
securities (CMS) performed quite well and was the largest contributor
to the fund's outperformance during the past six months. Commercial
mortgage securities are bonds that are collateralized by mortgage
loans on commercial real estate - such as office buildings, shopping
malls, hotels and apartment buildings. Last fall, the CMS market was
hurt by credit concerns and a lack of liquidity. But when optimism and
liquidity returned in 1999, CMS securities snapped back.
Q. WHICH MORTGAGE SECURITIES DID YOU EMPHASIZE?
A. The fund was concentrated in relatively newly issued loans and
those known as "seasoned" securities, made up of home loans that
originated between five and 10 years ago. Brand new mortgages carry
less refinancing risk since homeowners aren't very likely to turn
around and refinance right after taking out a home loan. Surprisingly,
perhaps, fewer homeowners with seasoned loans chose to refinance their
mortgages even after being presented with several attractive
opportunities to cut their mortgage rates. Because of this reluctance
to refinance, seasoned mortgages are perceived to be more immunized
from increased prepayment activity that typically occurs when interest
rates fall. That wasn't necessarily the case early on in the period
when seasoned securities suffered from higher-than-expected prepayment
activity last fall. More recently, however, they've enjoyed a
significant turnaround and have been among the mortgage sector's best
performers.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. The fund had a relatively small exposure to mortgage securities
issued in 1992 and 1993. These moderately seasoned mortgages - which
had suffered more than older securities last fall - also bounded back
better in 1999.
Q. WHAT'S YOUR OUTLOOK?
A. There's more evidence each day that the worst of the crisis that
plagued global financial markets last fall is behind us. Given that, I
think we'll enter a more "normal," less volatile market environment
than we experienced in late 1998. Against that backdrop, I believe
that mortgage securities are poised to do better than Treasuries over
the near term. While they had gained some ground on Treasuries,
mortgage securities remained undervalued relative to them at the end
of the period. To the extent that investors look for attractively
priced, higher-yielding alternatives to Treasuries, mortgage
securities may benefit.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income by
investing in investment-grade
mortgage-related securities of
all kinds
START DATE: December 31, 1984
SIZE: as of April 30, 1999
more than $497 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MANAGING THE
FUND'S DURATION:
"My overall objective in managing
the fund is to limit relative
prepayment risk. One way I do that
is through the use of commercial
mortgage securities, which typically
have a much longer average life
than other mortgage securities.
The loans underlying commercial
mortgage securities usually have
prepayment restrictions built into
their structure, so they can help
reduce a fund's prepayment risk
when interest rates are falling.
However, fixed-rate commercial
mortgage securities tend to lengthen
the fund's duration - which
measures its sensitivity to
interest-rate changes. The longer
the fund's duration, the more its
share price will fall when rates
rise and vice versa. Since I
manage the fund so that its
duration is in line with the Lehman
Brothers Mortgage Securities
Index, I generally need to offset
longer-duration commercial
mortgage securities with
shorter-duration securities. Putting
some money into cash is one
option, although it doesn't provide
the fund with any additional yield.
That's why I generally prefer
higher-yielding alternatives
known as `floaters.' These
securities are backed by
commercial mortgages, but their
interest rates adjust, or float, each
month."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 3.1 3.3
6 - 6.99% 45.7 21.3
7 - 7.99% 23.3 47.6
8 - 8.99% 8.4 17.1
9 - 9.99% 5.1 6.5
10% and over 3.0 4.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 5.2 4.3
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 APRIL 30, 1999
6 MONTHS AGO
Years 3.5 2.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999
Mortgage
securities 73.7%
CMOs and other
mortgage related
securities 14.9%
Short-term
investments 11.4%
Row: 1, Col: 1, Value: 73.7
Row: 1, Col: 2, Value: 14.9
Row: 1, Col: 3, Value: 11.4
AS OF OCTOBER 31, 1998
Mortgage
securities 83.9%
CMOs and other
mortgage related
securities 15.9%
Short-term
investments 0.2%
Row: 1, Col: 3, Value: 83.90000000000001
Row: 1, Col: 2, Value: 15.9
Row: 1, Col: 3, Value: 0.2
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 73.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 40.7%
6% 10/1/28 to 4/1/29 $ 35,796,473 $ 34,688,930
6.5% 9/1/10 to 4/1/29 (c) 95,997,930 95,418,133
6.5% 5/1/29 (b) 35,000,000 34,803,125
7% 12/1/20 to 4/1/29 47,951,361 48,587,278
7% 5/1/29 (b) 450,000 456,188
7.5% 3/1/22 to 12/1/28 5,762,326 5,926,492
7.5% 5/1/29 (b) 325,000 334,141
7.5% 5/1/29 (b) 1,460,000 1,501,063
8% 1/1/07 to 7/1/08 67,113 68,514
8.25% 1/1/13 91,203 95,329
8.5% 11/1/03 to 12/1/26 10,403,665 10,924,486
8.75% 11/1/08 to 7/1/09 172,545 179,672
9% 1/1/08 to 2/1/13 635,347 666,912
9.5% 5/1/03 to 8/1/22 6,185,524 6,481,948
11% 12/1/02 to 8/1/10 1,578,198 1,712,737
12.25% 5/1/13 to 6/1/15 292,988 334,217
12.5% 11/1/14 to 3/1/16 422,826 485,287
12.75% 6/1/13 to 6/1/15 75,411 86,184
13.5% 9/1/13 to 12/1/14 154,298 182,698
14% 11/1/14 42,116 50,289
242,983,623
FREDDIE MAC - 12.3%
5% 7/1/10 3,058,514 2,926,615
6.5% 1/1/24 to 9/1/24 23,963,117 23,878,609
7% 5/1/99 to 7/1/01 289,478 290,577
7% 5/1/29 (b) 13,000,000 13,195,000
7.5% 1/1/28 to 3/1/28 3,442,987 3,538,737
8% 10/1/07 to 4/1/21 823,193 860,630
8.5% 11/1/03 to 12/1/25 13,412,085 14,084,411
9% 9/1/08 to 5/1/21 8,558,054 9,075,001
10% 1/1/09 to 5/1/19 1,419,436 1,519,576
10.5% 8/1/10 to 12/1/20 (d) 1,539,370 1,683,872
11.5% 4/1/12 74,801 83,099
11.75% 6/1/11 33,663 37,568
12.25% 6/1/14 to 7/1/15 164,411 186,734
12.5% 5/1/12 to 12/1/14 727,300 826,001
12.75% 6/1/05 to 3/1/15 133,337 147,952
13% 1/1/11 to 6/1/15 1,181,465 1,358,266
73,692,648
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 20.7%
6.5% 4/15/29 $ 1,999,800 $ 1,986,661
6.5% 5/15/29 (b) 51,600,000 51,309,750
7% 5/15/23 to 10/15/28 6,775,449 6,877,133
7.5% 7/15/05 to 9/15/27 16,553,168 17,090,179
8% 4/15/02 to 12/15/27 21,435,544 22,331,547
8.5% 7/15/16 to 6/15/18 2,303,204 2,445,072
9% 10/15/04 to 4/20/18 7,042,519 7,529,003
9.5% 6/15/09 to 12/15/24 3,857,144 4,121,620
10% 12/15/17 to 1/15/26 6,338,261 6,880,798
10.5% 8/15/00 to 2/20/18 823,457 897,314
11% 1/15/10 to 9/15/19 1,525,920 1,709,025
11.5% 10/15/10 29,732 33,283
13% 10/15/13 87,819 102,419
13.5% 7/15/11 to 10/15/14 70,278 82,250
123,396,054
TOTAL U.S. GOVERNMENT AGENCY 440,072,325
- - MORTGAGE SECURITIES
(Cost $439,209,357)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.4%
U.S. GOVERNMENT AGENCY - 0.4%
Freddie Mac planned 2,268,516 2,389,723
amortization class Series 70
Class C, 9% 9/15/20 (Cost
$2,382,296)
COMMERCIAL MORTGAGE
SECURITIES - 14.5%
ACP Mortgage LP Series 1 2,322,961 2,168,251
Class E, 6.9509% 2/28/28
(a)(e)
Bankers Trust II Series 5,000,000 4,999,219
1999-S1A, 7.0925% 2/28/14
(a)(e)
Bankers Trust REMIC Trust 3,890,000 3,899,117
1988-1 floater Series
1998-S1A Class D, 5.7869%
11/28/02 (a)(e)
CBM Funding Corp. sequential 2,300,000 2,347,797
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,850,625
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,521,063
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Federal Deposit Insurance $ 4,698,057 $ 4,723,015
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, 1,600,000 1,427,072
6.9707% 4/13/31 (a)(e)
Series 1999-GSFL II Class F, 4,500,000 4,431,150
7.6634% 11/13/13 (a)(e)
Nomura Asset Securities Corp. 15,000,000 14,076,563
Series 1998-D6 Class A-4,
7.5963% 3/17/28 (e)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 5.8263% 2/15/34 7,900,000 7,277,258
(a)(e)
Class A-5, 6.1763% 2/15/34 5,278,196 4,753,263
(a)(e)
Structured Asset Securities
Corp.:
floater Series 1997-C1 Class 4,228,479 4,223,193
C, 5.3869% 6/25/15 (a)(e)
Series 1992-M1 Class C, 7.05% 3,192,522 2,910,682
11/25/02
Thirteen Affiliates of 18,200,000 17,618,510
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 86,226,778
SECURITIES
(Cost $89,192,800)
COMMERCIAL PAPER - 8.3%
Lehman Brothers Holdings, 24,800,000 24,624,498
Inc. 5.15% 6/16/99
MCI WorldCom, Inc. 5.08% 24,800,000 24,753,512
5/17/99
TOTAL COMMERCIAL PAPER 49,378,010
(Cost $49,373,762)
CASH EQUIVALENTS - 3.1%
MATURITY AMOUNT
Investments in repurchase $ 18,789,748 18,782,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $18,782,000)
TOTAL INVESTMENT IN $ 596,848,836
SECURITIES - 100%
(Cost $598,940,215)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT UNREALIZED GAIN/(LOSS)
SOLD
90 U.S. Treasury Note Contracts Jun. 1999 $ 10,002,657 $ (24,447)
The face value of futures sold as a percentage of investment in
securities - 1.7%
</TABLE>
LEGEND
(a) 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 $50,797,033 or 10.2% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) A portion of these securities were sold on a delayed delivery or
when-issued basis.
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $120,573.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $599,005,337. Net unrealized depreciation
aggregated $2,156,501, of which $3,365,543 related to appreciated
investment securities and $5,522,044 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 596,848,836
value (including repurchase
agreements of $18,782,000)
(cost $598,940,215) - See
accompanying schedule
Commitment to sell securities $ (59,662,500)
on a delayed delivery basis
Receivable for securities 60,007,031 344,531
sold on a delayed delivery
basis
Receivable for investments 653,925
sold, regular delivery
Cash 387
Receivable for fund shares 1,283,733
sold
Interest receivable 2,551,514
Receivable for daily 66,093
variation on futures
contracts
TOTAL ASSETS 601,749,019
LIABILITIES
Payable for investments 102,454,570
purchased on a delayed
delivery basis
Payable for fund shares 719,992
redeemed
Distributions payable 368,736
Accrued management fee 176,425
Distribution fees payable 15,949
Other payables and accrued 151,373
expenses
TOTAL LIABILITIES 103,887,045
NET ASSETS $ 497,861,974
Net Assets consist of:
Paid in capital $ 498,789,591
Undistributed net investment 1,626,403
income
Accumulated undistributed net (782,725)
realized gain (loss) on
investments
Net unrealized appreciation (1,771,295)
(depreciation) on investments
NET ASSETS $ 497,861,974
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.74
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,811,913 (divided by)
261,701 shares)
Maximum offering price per $11.28
share (100/95.25 of $10.74)
CLASS T: NET ASSET VALUE and $10.75
redemption price per share
($26,236,920 (divided by)
2,440,770 shares)
Maximum offering price per $11.14
share (100/96.50 of $10.75)
CLASS B: NET ASSET VALUE and $10.74
offering price per share
($14,371,823 (divided by)
1,338,060 shares) A
INITIAL CLASS: NET ASSET $10.75
VALUE, offering price and
redemption price per share
($436,083,451 (divided by)
40,554,323 shares)
INSTITUTIONAL CLASS: NET $10.73
ASSET VALUE, offering price
and redemption price per
share ($18,357,867 (divided
by) 1,710,136 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 17,376,672
Interest
EXPENSES
Management fee $ 1,079,205
Transfer agent fees 477,237
Distribution fees 77,353
Accounting fees and expenses 80,220
Non-interested trustees' 1,014
compensation
Custodian fees and expenses 44,364
Registration fees 64,930
Audit 27,033
Legal 7,312
Total expenses before 1,858,668
reductions
Expense reductions (16,651) 1,842,017
NET INVESTMENT INCOME 15,534,655
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (1,272,999)
Futures contracts 294,559 (978,440)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,185,674)
Futures contracts 91,406
Delayed delivery commitments 161,219 (1,933,049)
NET GAIN (LOSS) (2,911,489)
NET INCREASE (DECREASE) IN $ 12,623,166
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 15,534,655 $ 32,333,262
income
Net realized gain (loss) (978,440) 8,605,529
Change in net unrealized (1,933,049) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 12,623,166 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (15,607,628) (30,575,427)
From net investment income
From net realized gain (6,924,551) (1,430,037)
TOTAL DISTRIBUTIONS (22,532,179) (32,005,464)
Share transactions - net (2,286,702) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (12,195,715) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 497,861,974 $ 510,057,689
undistributed net investment
income of $1,626,403 and
$1,699,376, respectively)
</TABLE>
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.960 $ 11.020 $ 11.050 $ 10.830
period
Income from Investment
Operations
Net investment incomeD .324 .669 .170 .268
Net realized and unrealized (.065) (.061) .048 .224
gain (loss)
Total from investment .259 .608 .218 .492
operations
Less Distributions
From net investment income (.329) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.479) (.668) (.248) (.272)
Net asset value, end of period $ 10.740 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.41% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,812 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% A, F .90% F .90% A, F .90% A, F
net assets
Ratio of net investment 6.07% A 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
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FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.960 $ 11.020 $ 11.050 $ 10.830
period
Income from Investment
Operations
Net investment income D .320 .665 .167 .255
Net realized and unrealized (.056) (.063) .048 .233
gain (loss)
Total from investment .264 .602 .215 .488
operations
Less Distributions
From net investment income (.324) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.474) (.662) (.245) (.268)
Net asset value, end of period $ 10.750 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.46% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 26,237 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% A, F 1.00% F 1.00% A, F 1.00% A, F
net assets
Ratio of net investment 5.99% A 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.950 $ 11.020 $ 11.040 $ 10.830
period
Income from Investment
Operations
Net investment income D .283 .584 .142 .234
Net realized and unrealized (.053) (.064) .065 .214
gain (loss)
Total from investment .230 .520 .207 .448
operations
Less Distributions
From net investment income (.290) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.440) (.590) (.227) (.238)
Net asset value, end of period $ 10.740 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.14% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,372 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.65% A, F 1.65% F 1.65% A, F 1.65% A, F
net assets
Ratio of net investment 5.32% A 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</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 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 MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 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.
G FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
<TABLE>
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FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
INITIAL CLASS
(UNAUDITED) 1998 1997 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
Income from Investment
Operations
Net investment income .338 D .700 D .176 D .678 D .729
Net realized and unrealized (.068) (.056) .047 .391 (.015)
gain (loss)
Total from investment .270 .644 .223 1.069 .714
operations
Less Distributions
From net investment income (.340) (.664) (.173) (.689) (.724)
From net realized gain (.150) (.030) (.080) (.110) (.100)
In excess of net realized gain - - - - -
Total distributions (.490) (.694) (.253) (.799) (.824)
Net asset value, end of period $ 10.750 $ 10.970 $ 11.020 $ 11.050 $ 10.780
TOTAL RETURN B, C 2.51% 5.99% 2.05% 10.34% 6.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 436,083 $ 459,212 $ 494,304 $ 506,113 $ 488,162
(000 omitted)
Ratio of expenses to average .71% A .71% .72% A .73% .74%
net assets
Ratio of expenses to average .71% A .71% .72% A .73% .73% E
net assets after expense
reductions
Ratio of net investment 6.30% A 6.34% 6.36% A 6.26% 6.75%
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149% 221%
</TABLE>
<TABLE>
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FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INITIAL CLASS
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.580 $ 10.910
period
Income from Investment
Operations
Net investment income .772 .570
Net realized and unrealized .325 (.242)
gain (loss)
Total from investment 1.097 .328
operations
Less Distributions
From net investment income (.737) (.588)
From net realized gain - (.040)
In excess of net realized gain (.050) (.030)
Total distributions (.787) (.658)
Net asset value, end of period $ 10.890 $ 10.580
TOTAL RETURN B, C 10.88% 3.13%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 416,241 $ 365,801
(000 omitted)
Ratio of expenses to average .77% .79%
net assets
Ratio of expenses to average .77% .79%
net assets after expense
reductions
Ratio of net investment 7.37% 6.73%
income to average net assets
Portfolio turnover rate 329% 563%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
G FOR THE YEAR ENDED JULY 31.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
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FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 H 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.950 $ 11.010 $ 11.040 $ 10.830
period
Income from Investment
Operations
Net investment income D .337 .693 .172 .263
Net realized and unrealized (.070) (.063) .050 .226
gain (loss)
Total from investment .267 .630 .222 .489
operations
Less Distributions
From net investment income (.337) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.487) (.690) (.252) (.279)
Net asset value, end of period $ 10.730 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 2.49% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,358 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% A, F .75% F .75% A, F .75% A, F
net assets
Ratio of expenses to average .75% A .75% .75% A .70% A, G
net assets after expense
reductions
Ratio of net investment 6.26% A 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 243% A 262% 125% A 149%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
H FOR THE THREE MONTHS ENDED OCTOBER 31, 1997.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Mortgage Securities Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) (formerly a fund of Fidelity
Income Fund 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, Initial Class, 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. Class B shares will
automatically convert to Class A shares after a holding period of
seven years from the initial date of purchase. Interest income,
realized and unrealized capital gains and losses, the common expenses
of the fund, and certain fund-level expense reductions, if any, are
allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the fund. Each class
of shares differs in its respective distribution, transfer agent, and
certain other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, futures
transactions, and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
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 long-term U.S. government and government agency
obligations aggregated $581,641,197 and $655,867,063, respectively.
The market value of futures contracts opened and closed during the
period amounted to $20,271,420 and $20,200,455, 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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 .43% of average net assets .
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,706 $ 94
CLASS T 27,499 3,455
CLASS B 48,148 34,821
$ 77,353 $ 38,370
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six years of
purchase. The Class B charge is based on declining rates ranging from
5% to 1% of the lesser of the cost of shares at the initial date of
purchase or the net asset value of the redeemed shares, excluding any
reinvested dividends and capital gains. In addition, purchases of
Class A and Class T shares that were subject to a finder's fee bear a
contingent deferred
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
sales charge on assets that do not remain in the fund for at least one
year. The Class A and Class T contingent deferred sales charge is
based on 0.25% of the lesser of the cost of shares at the initial date
of purchase or the net asset value of the redeemed shares, excluding
any reinvested dividends and capital gains. A portion of the sales
charges paid to FDC are paid to securities dealers, banks and other
financial institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 16,306 $ 6,809
CLASS T 36,127 14,503
CLASS B 25,655 25,655*
$ 78,088 $ 46,967
* WHEN CLASS B 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 (collectively referred to
as the transfer agent) for the fund's Class A, Class T, Class B, and
Institutional Class. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the transfer agent for the Initial Class. FIIOC
and FSC receive account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC and FSC pay for typesetting,
printing and mailing of all shareholder reports, except proxy
statements. For the period, the following amounts were paid to FIIOC
or FSC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 3,825 .34
CLASS T 34,734 .32
CLASS B 11,668 .22
INITIAL CLASS 403,941 .18
INSTITUTIONAL CLASS 23,069 .24
$ 477,237
* ANNUALIZED
ACCOUNTING FEES. FSC 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A .90% $ 1,298
CLASS T 1.00% 10,534
CLASS B 1.65% 145
INSTITUTIONAL CLASS .75% 1,214
$ 13,191
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 $3,460 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 68,239 $ 47,643
Class T 652,044 835,552
Class B 281,323 198,305
Initial Class 13,988,979 28,222,031
Institutional Class 617,043 1,271,896
Total $ 15,607,628 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,685 41,653
Class B 132,054 4,898
Initial Class 6,182,268 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,551 $ 1,430,037
Total $ 22,532,179 $ 32,005,464
</TABLE>
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
1999 1998 1999
CLASS A Shares sold 191,569 $ 1,461,292
135,530
Reinvestment of distributions 5,986 3,475 64,682
Shares redeemed (50,005) (174,371) (539,601)
Net increase (decrease) 91,511 20,673 $ 986,373
CLASS T Shares sold 1,163,924 1,214,468 $ 12,566,656
Reinvestment of distributions 79,376 72,903 858,202
Shares redeemed (545,037) (874,013) (5,890,400)
Net increase (decrease) 698,263 413,358 $ 7,534,458
CLASS B Shares sold 725,826 623,528 $ 7,844,982
Reinvestment of distributions 30,892 14,736 333,770
Shares redeemed (134,355) (66,613) (1,454,560)
Net increase (decrease) 622,363 571,651 $ 6,724,192
INITIAL CLASS Shares sold 2,493,970 5,885,198 $ 26,989,885
Reinvestment of distributions 1,532,847 2,196,325 16,587,600
Shares redeemed (5,344,146) (11,046,014) (57,853,505)
Net increase (decrease) (1,317,329) (2,964,491) $ (14,276,020)
INSTITUTIONAL CLASS Shares 433,680 1,131,767 $ 4,683,244
sold
Reinvestment of distributions 46,361 61,639 500,952
Shares redeemed (782,736) (971,330) (8,439,901)
Net increase (decrease) (302,695) 222,076 $ (3,255,705)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998
CLASS A Shares sold $ 2,113,314
Reinvestment of distributions 38,300
Shares redeemed (1,919,263)
Net increase (decrease) $ 232,351
CLASS T Shares sold $ 13,402,368
Reinvestment of distributions 803,861
Shares redeemed (9,643,136)
Net increase (decrease) $ 4,563,093
CLASS B Shares sold $ 6,874,797
Reinvestment of distributions 162,453
Shares redeemed (734,102)
Net increase (decrease) $ 6,303,148
INITIAL CLASS Shares sold $ 64,970,201
Reinvestment of distributions 24,230,109
Shares redeemed (121,871,170)
Net increase (decrease) $ (32,670,860)
INSTITUTIONAL CLASS Shares $ 12,463,547
sold
Reinvestment of distributions 679,028
Shares redeemed (10,710,195)
Net increase (decrease) $ 2,432,380
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investment Money
Management (FIMM) Inc., Merrimack, NH
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
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AMORI-SANN-0699 78323
1.703542.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
MUNICIPAL INCOME FUND -
CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 19 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 22 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 23 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 37 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 46 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR MUNICIPAL INCOME 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. Returns prior to September 3, 1996 are those of Class T, the
original class of the fund, and reflect Class T shares' 0.25% 12b-1
fee. If Fidelity had not reimbursed certain class expenses, the past
one year, past five years and past ten years total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 1.21% 6.11% 38.52% 120.14%
- - CL A
FIDELITY ADV MUNICIPAL INCOME -3.60% 1.07% 31.94% 109.68%
- - CL A (INCL. 4.75% SALES
CHARGE)
LB Municipal Bond 1.75% 6.95% 43.52% 116.15%
General Municipal Debt Funds 1.19% 5.78% 38.92% 105.23%
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 Municipal Bond Index - a market value-weighted index
of investment-grade municipal bonds with maturities of one year or
more. To measure how Class A's performance stacked up against its
peers, you can compare it to the general municipal debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 264 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 6.11% 6.73% 8.21%
- - CL A
FIDELITY ADV MUNICIPAL INCOME 1.07% 5.70% 7.69%
- - CL A (INCL. 4.75% SALES
CHARGE)
LB Municipal Bond 6.95% 7.49% 8.01%
General Municipal Debt Funds 5.78% 6.79% 7.44%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' cumulative return
and show you what would have happened if Class A shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Municipal Income -CL A LB Municipal Bond
00257 LB015
1989/04/30 9525.00 10000.00
1989/05/31 9680.62 10207.70
1989/06/30 9791.50 10346.32
1989/07/31 9877.39 10487.13
1989/08/31 9953.80 10384.46
1989/09/30 9983.81 10353.52
1989/10/31 10089.22 10480.14
1989/11/30 10213.43 10663.55
1989/12/31 10310.53 10750.77
1990/01/31 10326.80 10699.92
1990/02/28 10400.80 10795.15
1990/03/31 10466.06 10798.39
1990/04/30 10370.33 10720.21
1990/05/31 10582.85 10954.23
1990/06/30 10707.54 11050.52
1990/07/31 10872.69 11212.96
1990/08/31 10799.32 11050.15
1990/09/30 10876.11 11056.45
1990/10/31 11025.44 11257.01
1990/11/30 11299.00 11483.39
1990/12/31 11371.09 11533.34
1991/01/31 11503.42 11688.12
1991/02/28 11591.87 11789.81
1991/03/31 11660.02 11794.05
1991/04/30 11849.88 11950.91
1991/05/31 11996.36 12057.16
1991/06/30 12024.28 12045.22
1991/07/31 12179.76 12191.93
1991/08/31 12289.75 12352.50
1991/09/30 12433.90 12513.33
1991/10/31 12571.68 12625.95
1991/11/30 12618.97 12661.17
1991/12/31 12756.21 12932.88
1992/01/31 12897.62 12962.37
1992/02/29 12967.69 12966.52
1992/03/31 13032.75 12971.32
1992/04/30 13150.37 13086.76
1992/05/31 13268.34 13240.79
1992/06/30 13450.27 13462.97
1992/07/31 13918.62 13866.59
1992/08/31 13810.84 13731.39
1992/09/30 13897.03 13821.20
1992/10/31 13729.32 13685.33
1992/11/30 14004.48 13930.44
1992/12/31 14173.33 14072.67
1993/01/31 14413.06 14236.33
1993/02/28 14922.00 14751.26
1993/03/31 14766.36 14595.34
1993/04/30 14922.95 14742.61
1993/05/31 15046.53 14825.46
1993/06/30 15287.77 15072.90
1993/07/31 15299.13 15092.64
1993/08/31 15693.16 15406.87
1993/09/30 15910.48 15582.36
1993/10/31 15919.01 15612.43
1993/11/30 15763.43 15474.88
1993/12/31 16127.44 15801.56
1994/01/31 16315.23 15982.01
1994/02/28 15884.02 15568.08
1994/03/31 15037.35 14934.15
1994/04/30 15137.13 15060.79
1994/05/31 15226.65 15191.37
1994/06/30 15170.58 15098.55
1994/07/31 15444.24 15375.30
1994/08/31 15468.50 15428.50
1994/09/30 15226.18 15202.01
1994/10/31 14959.27 14932.02
1994/11/30 14478.33 14662.05
1994/12/31 14829.23 14984.76
1995/01/31 15330.21 15413.03
1995/02/28 15743.26 15861.24
1995/03/31 15826.03 16043.48
1995/04/30 15878.05 16062.42
1995/05/31 16386.17 16574.97
1995/06/30 16257.63 16430.77
1995/07/31 16310.60 16586.53
1995/08/31 16475.59 16796.85
1995/09/30 16608.46 16903.17
1995/10/31 16829.54 17148.94
1995/11/30 17147.18 17433.44
1995/12/31 17298.58 17600.98
1996/01/31 17392.94 17733.87
1996/02/29 17366.00 17614.16
1996/03/31 16999.07 17389.05
1996/04/30 16931.15 17339.84
1996/05/31 16911.19 17332.91
1996/06/30 17108.19 17521.66
1996/07/31 17220.01 17681.11
1996/08/31 17257.49 17676.87
1996/09/30 17411.43 17924.34
1996/10/31 17583.29 18127.07
1996/11/30 17890.51 18458.79
1996/12/31 17824.07 18381.26
1997/01/31 17904.60 18416.01
1997/02/28 18064.91 18585.06
1997/03/31 17865.61 18337.33
1997/04/30 18016.04 18490.81
1997/05/31 18231.13 18768.91
1997/06/30 18459.71 18968.80
1997/07/31 18986.75 19494.24
1997/08/31 18813.36 19311.57
1997/09/30 19060.81 19540.80
1997/10/31 19169.82 19666.45
1997/11/30 19293.62 19782.09
1997/12/31 19604.70 20070.71
1998/01/31 19793.39 20277.84
1998/02/28 19799.74 20283.92
1998/03/31 19862.73 20301.77
1998/04/30 19760.54 20210.21
1998/05/31 20062.67 20530.14
1998/06/30 20135.98 20611.03
1998/07/31 20179.56 20662.76
1998/08/31 20483.97 20982.00
1998/09/30 20721.90 21243.44
1998/10/31 20717.47 21243.01
1998/11/30 20794.08 21317.57
1998/12/31 20823.34 21371.30
1999/01/31 21053.13 21625.40
1999/02/28 20924.68 21530.90
1999/03/31 20923.14 21560.82
1999/04/30 20968.36 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990514 115846 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class A on April
30, 1989, and the current 4.75% sales charge was paid. As the chart
shows, by April 30, 1999, the value of the investment would have grown
to $20,968 - a 109.68% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did
over the same period. With dividends reinvested, the same $10,000
would have grown to $21,615 - a 116.15% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 2.25% 4.86% 5.51% 0.89%
Capital returns -1.04% 3.21% 3.51% 0.95%
Total returns 1.21% 8.07% 9.02% 1.84%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.69(cents) 28.12(cents) 55.88(cents)
Annualized dividend rate 4.59% 4.54% 4.48%
30-day annualized yield 3.74% - -
30-day annualized 5.84% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.44 over the past one
month, $12.49 over the past six months and $12.46 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class A's
current 4.75% sales charge. The tax-equivalent yield shows what you
would have to earn on a taxable investment to equal the class'
tax-free yield, if you're in the 36% federal tax bracket, but does not
reflect payment of the federal alternative minimum tax, if applicable.
FIDELITY ADVISOR MUNICIPAL INCOME 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. If Fidelity had not reimbursed certain
class expenses, the past 10 years total return and dividends would
have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 1.08% 6.07% 38.54% 120.16%
- - CL T
FIDELITY ADV MUNICIPAL INCOME -2.46% 2.36% 33.69% 112.46%
- - CL T (INCL. 3.50% SALES
CHARGE)
LB Municipal Bond 1.75% 6.95% 43.52% 116.15%
General Municipal Debt Funds 1.19% 5.78% 38.92% 105.23%
Average
</TABLE>
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 Municipal Bond Index - a market value-weighted index
of investment-grade municipal bonds with maturities of one year or
more. To measure how Class T's performance stacked up against its
peers, you can compare it to the general municipal debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 264 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 6.07% 6.74% 8.21%
- - CL T
FIDELITY ADV MUNICIPAL INCOME 2.36% 5.98% 7.83%
- - CL T (INCL. 3.50% SALES
CHARGE)
LB Municipal Bond 6.95% 7.49% 8.01%
General Municipal Debt Funds 5.78% 6.79% 7.44%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' cumulative return
and show you what would have happened if Class T shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Municipal Income -CL T LB Municipal Bond
00169 LB015
1989/04/30 9650.00 10000.00
1989/05/31 9807.66 10207.70
1989/06/30 9919.99 10346.32
1989/07/31 10007.02 10487.13
1989/08/31 10084.43 10384.46
1989/09/30 10114.83 10353.52
1989/10/31 10221.63 10480.14
1989/11/30 10347.46 10663.55
1989/12/31 10445.84 10750.77
1990/01/31 10462.32 10699.92
1990/02/28 10537.30 10795.15
1990/03/31 10603.41 10798.39
1990/04/30 10506.42 10720.21
1990/05/31 10721.73 10954.23
1990/06/30 10848.06 11050.52
1990/07/31 11015.37 11212.96
1990/08/31 10941.04 11050.15
1990/09/30 11018.84 11056.45
1990/10/31 11170.13 11257.01
1990/11/30 11447.28 11483.39
1990/12/31 11520.31 11533.34
1991/01/31 11654.39 11688.12
1991/02/28 11744.00 11789.81
1991/03/31 11813.04 11794.05
1991/04/30 12005.39 11950.91
1991/05/31 12153.79 12057.16
1991/06/30 12182.08 12045.22
1991/07/31 12339.60 12191.93
1991/08/31 12451.03 12352.50
1991/09/30 12597.08 12513.33
1991/10/31 12736.67 12625.95
1991/11/30 12784.58 12661.17
1991/12/31 12923.62 12932.88
1992/01/31 13066.88 12962.37
1992/02/29 13137.87 12966.52
1992/03/31 13203.78 12971.32
1992/04/30 13322.94 13086.76
1992/05/31 13442.46 13240.79
1992/06/30 13626.78 13462.97
1992/07/31 14101.28 13866.59
1992/08/31 13992.08 13731.39
1992/09/30 14079.40 13821.20
1992/10/31 13909.49 13685.33
1992/11/30 14188.26 13930.44
1992/12/31 14359.33 14072.67
1993/01/31 14602.21 14236.33
1993/02/28 15117.83 14751.26
1993/03/31 14960.15 14595.34
1993/04/30 15118.79 14742.61
1993/05/31 15243.99 14825.46
1993/06/30 15488.40 15072.90
1993/07/31 15499.90 15092.64
1993/08/31 15899.11 15406.87
1993/09/30 16119.28 15582.36
1993/10/31 16127.92 15612.43
1993/11/30 15970.30 15474.88
1993/12/31 16339.08 15801.56
1994/01/31 16529.34 15982.01
1994/02/28 16092.47 15568.08
1994/03/31 15234.69 14934.15
1994/04/30 15335.78 15060.79
1994/05/31 15426.47 15191.37
1994/06/30 15369.67 15098.55
1994/07/31 15646.92 15375.30
1994/08/31 15671.50 15428.50
1994/09/30 15426.00 15202.01
1994/10/31 15155.59 14932.02
1994/11/30 14668.34 14662.05
1994/12/31 15023.84 14984.76
1995/01/31 15531.39 15413.03
1995/02/28 15949.86 15861.24
1995/03/31 16033.73 16043.48
1995/04/30 16086.43 16062.42
1995/05/31 16601.21 16574.97
1995/06/30 16470.98 16430.77
1995/07/31 16524.64 16586.53
1995/08/31 16691.81 16796.85
1995/09/30 16826.41 16903.17
1995/10/31 17050.40 17148.94
1995/11/30 17372.21 17433.44
1995/12/31 17525.60 17600.98
1996/01/31 17621.19 17733.87
1996/02/29 17593.91 17614.16
1996/03/31 17222.15 17389.05
1996/04/30 17153.35 17339.84
1996/05/31 17133.12 17332.91
1996/06/30 17332.71 17521.66
1996/07/31 17446.00 17681.11
1996/08/31 17483.97 17676.87
1996/09/30 17640.87 17924.34
1996/10/31 17848.40 18127.07
1996/11/30 18112.15 18458.79
1996/12/31 18042.52 18381.26
1997/01/31 18123.50 18416.01
1997/02/28 18300.81 18585.06
1997/03/31 18099.31 18337.33
1997/04/30 18251.25 18490.81
1997/05/31 18468.98 18768.91
1997/06/30 18700.18 18968.80
1997/07/31 19233.62 19494.24
1997/08/31 19074.05 19311.57
1997/09/30 19308.86 19540.80
1997/10/31 19435.57 19666.45
1997/11/30 19541.89 19782.09
1997/12/31 19870.89 20070.71
1998/01/31 20062.39 20277.84
1998/02/28 20084.49 20283.92
1998/03/31 20133.15 20301.77
1998/04/30 20030.49 20210.21
1998/05/31 20337.47 20530.14
1998/06/30 20412.20 20611.03
1998/07/31 20457.21 20662.76
1998/08/31 20766.37 20982.00
1998/09/30 21007.82 21243.44
1998/10/31 21019.82 21243.01
1998/11/30 21078.87 21317.57
1998/12/31 21106.44 21371.30
1999/01/31 21336.99 21625.40
1999/02/28 21205.08 21530.90
1999/03/31 21201.80 21560.82
1999/04/30 21245.88 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990514 105118 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class T on April
30, 1989, and the current 3.50% sales charge was paid. As the chart
shows, by April 30, 1999, the value of the investment would have grown
to $21,246 - a 112.46% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index did
over the same period. With dividends reinvested, the same $10,000
would have grown to $21,615 - a 116.15% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.19% 4.86% 5.47% 5.69% 6.62% 5.27%
Capital returns -1.11% 3.29% 3.42% -1.01% 5.88% -11.30%
Total returns 1.08% 8.15% 8.89% 4.68% 12.50% -6.03%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.59(cents) 27.44(cents) 55.41(cents)
Annualized dividend rate 4.49% 4.42% 4.44%
30-day annualized yield 3.71% - -
30-day annualized 5.80% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.45 over the past one
month, $12.51 over the past six months and $12.47 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current 3.50% sales charge. The tax-equivalent yield shows what you
would have to earn on a taxable investment to equal the class'
tax-free yield, if you're in the 36% federal tax bracket, but does not
reflect payment of the federal alternative minimum tax, if applicable.
FIDELITY ADVISOR MUNICIPAL INCOME 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). Returns prior to June 30, 1994 are
those of Class T, the original class of the fund, and reflect Class T
shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six months,
past one year, past five years and past 10 years total return figures
are 5%, 5%, 2% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses, the past five years and past 10 years total
returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 0.76% 5.41% 33.63% 112.37%
- - CL B
FIDELITY ADV MUNICIPAL INCOME -4.19% 0.41% 31.63% 112.37%
- - CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond 1.75% 6.95% 43.52% 116.15%
General Municipal Debt Funds 1.19% 5.78% 38.92% 105.23%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers Municipal Bond Index - a market value-weighted index
of investment-grade municipal bonds with maturities of one year or
more. To measure how Class B's performance stacked up against its
peers, you can compare it to the general municipal debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 264 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 5.41% 5.97% 7.82%
- - CL B
FIDELITY ADV MUNICIPAL INCOME 0.41% 5.65% 7.82%
- - CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond 6.95% 7.49% 8.01%
General Municipal Debt Funds 5.78% 6.79% 7.44%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' cumulative return
and show you what would have happened if Class B shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Municipal Income -CL B LB Municipal Bond
00669 LB015
1989/04/30 10000.00 10000.00
1989/05/31 10163.38 10207.70
1989/06/30 10279.79 10346.32
1989/07/31 10369.96 10487.13
1989/08/31 10450.18 10384.46
1989/09/30 10481.69 10353.52
1989/10/31 10592.36 10480.14
1989/11/30 10722.76 10663.55
1989/12/31 10824.70 10750.77
1990/01/31 10841.78 10699.92
1990/02/28 10919.48 10795.15
1990/03/31 10987.99 10798.39
1990/04/30 10887.48 10720.21
1990/05/31 11110.60 10954.23
1990/06/30 11241.51 11050.52
1990/07/31 11414.89 11212.96
1990/08/31 11337.87 11050.15
1990/09/30 11418.49 11056.45
1990/10/31 11575.26 11257.01
1990/11/30 11862.47 11483.39
1990/12/31 11938.15 11533.34
1991/01/31 12077.09 11688.12
1991/02/28 12169.95 11789.81
1991/03/31 12241.49 11794.05
1991/04/30 12440.82 11950.91
1991/05/31 12594.60 12057.16
1991/06/30 12623.91 12045.22
1991/07/31 12787.15 12191.93
1991/08/31 12902.63 12352.50
1991/09/30 13053.97 12513.33
1991/10/31 13198.62 12625.95
1991/11/30 13248.27 12661.17
1991/12/31 13392.35 12932.88
1992/01/31 13540.81 12962.37
1992/02/29 13614.37 12966.52
1992/03/31 13682.67 12971.32
1992/04/30 13806.16 13086.76
1992/05/31 13930.01 13240.79
1992/06/30 14121.02 13462.97
1992/07/31 14612.72 13866.59
1992/08/31 14499.57 13731.39
1992/09/30 14590.06 13821.20
1992/10/31 14413.98 13685.33
1992/11/30 14702.87 13930.44
1992/12/31 14880.13 14072.67
1993/01/31 15131.82 14236.33
1993/02/28 15666.14 14751.26
1993/03/31 15502.74 14595.34
1993/04/30 15667.14 14742.61
1993/05/31 15796.88 14825.46
1993/06/30 16050.15 15072.90
1993/07/31 16062.07 15092.64
1993/08/31 16475.76 15406.87
1993/09/30 16703.91 15582.36
1993/10/31 16712.87 15612.43
1993/11/30 16549.54 15474.88
1993/12/31 16931.69 15801.56
1994/01/31 17128.85 15982.01
1994/02/28 16676.14 15568.08
1994/03/31 15787.24 14934.15
1994/04/30 15892.00 15060.79
1994/05/31 15985.98 15191.37
1994/06/30 15927.12 15098.55
1994/07/31 16193.81 15375.30
1994/08/31 16219.61 15428.50
1994/09/30 15950.65 15202.01
1994/10/31 15630.89 14932.02
1994/11/30 15118.13 14662.05
1994/12/31 15489.03 14984.76
1995/01/31 15988.15 15413.03
1995/02/28 16408.78 15861.24
1995/03/31 16484.51 16043.48
1995/04/30 16513.75 16062.42
1995/05/31 17032.37 16574.97
1995/06/30 16887.64 16430.77
1995/07/31 16931.83 16586.53
1995/08/31 17092.52 16796.85
1995/09/30 17220.21 16903.17
1995/10/31 17439.56 17148.94
1995/11/30 17758.94 17433.44
1995/12/31 17905.18 17600.98
1996/01/31 17993.67 17733.87
1996/02/29 17956.39 17614.16
1996/03/31 17566.44 17389.05
1996/04/30 17485.38 17339.84
1996/05/31 17453.30 17332.91
1996/06/30 17646.22 17521.66
1996/07/31 17751.75 17681.11
1996/08/31 17781.05 17676.87
1996/09/30 17931.07 17924.34
1996/10/31 18132.84 18127.07
1996/11/30 18392.93 18458.79
1996/12/31 18313.23 18381.26
1997/01/31 18371.02 18416.01
1997/02/28 18557.36 18585.06
1997/03/31 18343.23 18337.33
1997/04/30 18472.41 18490.81
1997/05/31 18699.82 18768.91
1997/06/30 18908.92 18968.80
1997/07/31 19439.02 19494.24
1997/08/31 19265.73 19311.57
1997/09/30 19493.29 19540.80
1997/10/31 19611.31 19666.45
1997/11/30 19724.78 19782.09
1997/12/31 20030.49 20070.71
1998/01/31 20228.49 20277.84
1998/02/28 20223.57 20283.92
1998/03/31 20261.50 20301.77
1998/04/30 20146.75 20210.21
1998/05/31 20445.51 20530.14
1998/06/30 20509.85 20611.03
1998/07/31 20544.21 20662.76
1998/08/31 20844.44 20982.00
1998/09/30 21076.30 21243.44
1998/10/31 21077.20 21243.01
1998/11/30 21125.38 21317.57
1998/12/31 21141.86 21371.30
1999/01/31 21362.17 21625.40
1999/02/28 21218.43 21530.90
1999/03/31 21203.81 21560.82
1999/04/30 21236.62 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990514 104753 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class B on April
30, 1989. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $21,237 - a 112.37% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends
reinvested, the same $10,000 would have grown to $21,615 - a 116.15%
increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JUNE 30, 1994 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 1.88% 4.17% 4.81% 4.99% 5.77% 1.59%
Capital returns -1.12% 3.30% 3.34% -1.01% 5.80% -3.45%
Total returns 0.76% 7.47% 8.15% 3.98% 11.57% -1.86%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.92(cents) 23.45(cents) 47.45(cents)
Annualized dividend rate 3.84% 3.79% 3.81%
30-day annualized yield 3.19% - -
30-day annualized 4.98% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.42 over the past one
month, $12.47 over the past six months, and $12.44 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge. The tax-equivalent yield shows what
you would have to earn on a taxable investment to equal the class'
tax-free yield, if you're in the 36% federal tax bracket, but does not
reflect payment of the federal alternative minimum tax, if applicable.
FIDELITY ADVISOR MUNICIPAL INCOME 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.
Returns between June 30, 1994 and November 3, 1997 are those of Class
B shares and reflect Class B shares' 0.90% (1.00% prior to January 1,
1996) 12b-1 fee. Returns prior to June 30, 1994 are those of Class T,
the original class of the fund, and reflect Class T shares' 0.25%
12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns
between November 3, 1997 and January 1, 1996 and prior to June 30,
1994 would have been lower. Class C shares' contingent deferred sales
charge included in the past six months, past one year, past five year
and past 10 year total return figures are 1%, 1%, 0%, and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past one year, past five years and past 10 years total returns
and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 0.71% 5.22% 33.21% 111.70%
- - CL C
FIDELITY ADV MUNICIPAL INCOME -0.27% 4.22% 33.21% 111.70%
- - CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond 1.75% 6.95% 43.52% 116.15%
General Municipal Debt Funds 1.19% 5.78% 38.92% 105.23%
Average
</TABLE>
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 Municipal Bond Index - a market value-weighted index
of investment-grade municipal bonds with maturities of one year or
more. To measure how Class C's performance stacked up against its
peers, you can compare it to the general municipal debt funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 264 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 5.22% 5.90% 7.79%
- - CL C
FIDELITY ADV MUNICIPAL INCOME 4.22% 5.90% 7.79%
- - CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond 6.95% 7.49% 8.01%
General Municipal Debt Funds 5.78% 6.79% 7.44%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class C shares' cumulative return
and show you what would have happened if Class C shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Municipal Income -CL C LB Municipal Bond
00490 LB015
1989/04/30 10000.00 10000.00
1989/05/31 10163.38 10207.70
1989/06/30 10279.79 10346.32
1989/07/31 10369.96 10487.13
1989/08/31 10450.18 10384.46
1989/09/30 10481.69 10353.52
1989/10/31 10592.36 10480.14
1989/11/30 10722.76 10663.55
1989/12/31 10824.70 10750.77
1990/01/31 10841.78 10699.92
1990/02/28 10919.48 10795.15
1990/03/31 10987.99 10798.39
1990/04/30 10887.48 10720.21
1990/05/31 11110.60 10954.23
1990/06/30 11241.51 11050.52
1990/07/31 11414.89 11212.96
1990/08/31 11337.87 11050.15
1990/09/30 11418.49 11056.45
1990/10/31 11575.26 11257.01
1990/11/30 11862.47 11483.39
1990/12/31 11938.15 11533.34
1991/01/31 12077.09 11688.12
1991/02/28 12169.95 11789.81
1991/03/31 12241.49 11794.05
1991/04/30 12440.82 11950.91
1991/05/31 12594.60 12057.16
1991/06/30 12623.91 12045.22
1991/07/31 12787.15 12191.93
1991/08/31 12902.63 12352.50
1991/09/30 13053.97 12513.33
1991/10/31 13198.62 12625.95
1991/11/30 13248.27 12661.17
1991/12/31 13392.35 12932.88
1992/01/31 13540.81 12962.37
1992/02/29 13614.37 12966.52
1992/03/31 13682.67 12971.32
1992/04/30 13806.16 13086.76
1992/05/31 13930.01 13240.79
1992/06/30 14121.02 13462.97
1992/07/31 14612.72 13866.59
1992/08/31 14499.57 13731.39
1992/09/30 14590.06 13821.20
1992/10/31 14413.98 13685.33
1992/11/30 14702.87 13930.44
1992/12/31 14880.13 14072.67
1993/01/31 15131.82 14236.33
1993/02/28 15666.14 14751.26
1993/03/31 15502.74 14595.34
1993/04/30 15667.14 14742.61
1993/05/31 15796.88 14825.46
1993/06/30 16050.15 15072.90
1993/07/31 16062.07 15092.64
1993/08/31 16475.76 15406.87
1993/09/30 16703.91 15582.36
1993/10/31 16712.87 15612.43
1993/11/30 16549.54 15474.88
1993/12/31 16931.69 15801.56
1994/01/31 17128.85 15982.01
1994/02/28 16676.14 15568.08
1994/03/31 15787.24 14934.15
1994/04/30 15892.00 15060.79
1994/05/31 15985.98 15191.37
1994/06/30 15927.12 15098.55
1994/07/31 16193.81 15375.30
1994/08/31 16219.61 15428.50
1994/09/30 15950.65 15202.01
1994/10/31 15630.89 14932.02
1994/11/30 15118.13 14662.05
1994/12/31 15489.03 14984.76
1995/01/31 15988.15 15413.03
1995/02/28 16408.78 15861.24
1995/03/31 16484.51 16043.48
1995/04/30 16513.75 16062.42
1995/05/31 17032.37 16574.97
1995/06/30 16887.64 16430.77
1995/07/31 16931.83 16586.53
1995/08/31 17092.52 16796.85
1995/09/30 17220.21 16903.17
1995/10/31 17439.56 17148.94
1995/11/30 17758.94 17433.44
1995/12/31 17905.18 17600.98
1996/01/31 17993.67 17733.87
1996/02/29 17956.39 17614.16
1996/03/31 17566.44 17389.05
1996/04/30 17485.38 17339.84
1996/05/31 17453.30 17332.91
1996/06/30 17646.22 17521.66
1996/07/31 17751.75 17681.11
1996/08/31 17781.05 17676.87
1996/09/30 17931.07 17924.34
1996/10/31 18132.84 18127.07
1996/11/30 18392.93 18458.79
1996/12/31 18313.23 18381.26
1997/01/31 18371.02 18416.01
1997/02/28 18557.36 18585.06
1997/03/31 18343.23 18337.33
1997/04/30 18472.41 18490.81
1997/05/31 18699.82 18768.91
1997/06/30 18908.92 18968.80
1997/07/31 19439.02 19494.24
1997/08/31 19265.73 19311.57
1997/09/30 19493.29 19540.80
1997/10/31 19611.31 19666.45
1997/11/30 19705.31 19782.09
1997/12/31 20020.51 20070.71
1998/01/31 20197.89 20277.84
1998/02/28 20206.92 20283.92
1998/03/31 20239.07 20301.77
1998/04/30 20120.78 20210.21
1998/05/31 20413.48 20530.14
1998/06/30 20473.39 20611.03
1998/07/31 20502.91 20662.76
1998/08/31 20797.26 20982.00
1998/09/30 21040.78 21243.44
1998/10/31 21019.95 21243.01
1998/11/30 21066.63 21317.57
1998/12/31 21081.92 21371.30
1999/01/31 21300.02 21625.40
1999/02/28 21155.52 21530.90
1999/03/31 21139.31 21560.82
1999/04/30 21170.14 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990514 104918 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class C on April
30, 1989. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $21,170 - a 111.70% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index did over the same period. With dividends
reinvested, the same $10,000 would have grown to $21,615 - a 116.15%
increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31
1999 1998
Dividend returns 1.82% 3.87%
Capital returns -1.11% 3.54%
Total returns 0.71% 7.41%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.81(cents) 22.95(cents) 45.31(cents)
Annualized dividend rate 3.72% 3.70% 3.63%
30-day annualized yield 3.06% - -
30-day annualized 4.78% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.45 over the past one
month, $12.51 over the past six months, and $12.47 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class C's
contingent deferred sales charge. The tax-equivalent yield shows what
you would have to earn on a taxable investment to equal the class'
tax-free yield, if you're in the 36% federal tax bracket, but does
not reflect payment of the federal alternative minimum tax, if
applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Municipal bonds outperformed
Treasuries during the six-month
period that ended April 30, 1999.
During that time, the Lehman Brothers
Municipal Bond Index - an index
of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned 1.75%.
In contrast, the Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable bond
performance - gained 0.69%.
During the six-month period, the
ratio of municipal bond yields to
Treasury bond yields improved.
While Treasury yields rose during
the first quarter of the year,
municipal yields remained
relatively stable, due in part to an
improving supply and demand
environment. Municipal bond
issuance was off its torrid pace
experienced last year (which was
just shy of the record $292 billion
issued in 1993), while retail investor
demand strengthened in 1999,
helping municipal bonds
outperform Treasuries. Although the
municipal market managed to
produce marginal returns over the
past six months, bond market
sentiment turned bearish late in the
period as strong economic reports
indicated that the U.S. economy
continued to grow at brisk pace. The
strength of the domestic economy
combined with a perception of
improving overseas markets caused
investors to once again focus on the
threat of inflation and the prospects of
higher interest rates.
(photograph of Christine Thompson)
An interview with Christine Thompson, Portfolio Manager of Fidelity
Advisor Municipal Income Fund
Q. HOW DID THE FUND PERFORM, CHRISTINE?
A. For the six-month period ended April 30, 1999, the fund's Class A,
Class T, Class B and Class C shares had total returns of 1.21%, 1.08%,
0.76% and 0.71%, respectively. To get a sense of how the fund did
relative to its competitors, the general municipal debt funds average
returned 1.19% for the same six-month period, according to Lipper Inc.
Additionally, the Lehman Brothers Municipal Bond Index - which tracks
the types of securities in which the fund invests - returned 1.75% for
the same six-month period. For the 12-month period that ended April
30, 1999, the fund's Class A, Class T, Class B and Class C shares had
total returns of 6.11%, 6.07%, 5.41% and 5.22%, respectively. Those
returns compared to the general municipal debt funds average's 5.78%
return and the Lehman Brothers index's 6.95% return for the same
12-month period.
Q. HOW DID YOU POSITION THE FUND DURING THE PERIOD?
A. I continued to emphasize intermediate-term bonds with maturities of
between five and 15 years. I also kept the fund's investments
concentrated in higher-quality bonds - those rated A or higher.
Throughout the first quarter of 1999, municipal bond investors became
increasingly discriminating on the basis of quality. As a result,
lower-quality securities - including Baa-rated issues in the
investment-grade range - underperformed. The fund's concentration in
higher-quality bonds - those rated A or higher - helped its
performance over the past six months. However, some of the fund's
Baa-rated holdings, particularly those in the hospital sector, were
disappointments during the period.
Q. WHY DID HOSPITALS PERFORM POORLY?
A. Cutbacks in federally funded health care programs and the growing
competitiveness of the industry is putting pressure on hospitals
nationwide. That's why investing in the health care sector requires
thorough research. In this difficult operating environment, my
strategy is to be opportunistic, relying on Fidelity's research to
identify those institutions that will navigate through these problems
and ultimately emerge as the successful, dominant hospitals in their
respective markets. I believe selective hospital issues will be among
the market's strongest performers in coming periods.
Q. WHERE DID YOU FIND ATTRACTIVE OPPORTUNITIES DURING THE PAST SIX
MONTHS?
A. I added to the fund's stake in student loan bonds, which offered
high yields relative to comparably rated bonds from other sectors.
Investors demand higher yields from student loan bonds because there
is a risk that the securities will be prepaid prior to maturity as
borrowers pay off student loans early. Some student loan bonds offered
above-average return potential even after taking into account that
prepayment risk. I also added to the fund's stake in education bonds,
primarily those backed by colleges and universities. Higher education
tends to be resistant to an economic slowdown, so bonds issued by
colleges and universities help diversify the fund away from the more
cyclical sectors - such as state and local general obligation bonds -
which make up the vast majority of the municipal market. What's more,
demographic trends favor the education sector because one of the
fastest-growing segments of the American population is at or is
approaching college age.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. Although they gained some ground during the past six months,
municipals were priced attractively compared to their U.S. Treasury
counterparts at the end of the period. One indication of munis' cheap
prices was their yields, which were roughly 90% of Treasury yields.
Historically, municipals yield between 65% and 85% of Treasuries. If
municipal bond yields - which move in the opposite direction of their
prices - move back to their historical relationship with Treasuries
because of more favorable supply and demand conditions, they are
likely to perform relatively well. One trend we've seen lately is that
municipals have outperformed Treasuries when interest rates rise, but
tend to lag Treasuries when interest rates decline. I believe that
trend will continue to define the municipal market over the near term.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks to provide a high
current yield exempt from
federal income tax
START DATE: September 16,
1987
SIZE: as of April 30, 1999,
more than $455 million
MANAGER: Christine Thompson,
since 1998; joined Fidelity
in 1985
CHRISTINE THOMPSON ON Y2K
AND ITS POTENTIAL EFFECTS ON
MUNICIPAL BOND ISSUERS:
"Y2K may pose a number of
challenges for municipal bond
issuers. My primary focus with
regard to Y2K-related issues is
how they will impact the credit
quality of various issuers.
Fidelity's research team asks
issuers a number of things,
including how vulnerable they
believe they are to potential
problems, what their short-term
contingency plans are in the event
of any problems and what
long-term solutions they've
developed. What we've found so
far is that there are varying
degrees of sophistication among
issuers, with some much more
poised to deal with potential
problems than others. That's why
we carefully consider Y2K-related
issues in our routine security
selection process."
(solid bullet) General obligation bonds
(GOs) made up the fund's largest
sector concentration at 20.7% of
investments at the end of the
period. A GO is backed by the full
faith and credit - which includes
the taxing power - of a city,
county, state or other issuers, and
is paid with general revenue,
including taxes.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE HOLDINGS 6 MONTHS AGO
New York 19.0 20.6
Massachusetts 6.8 6.0
Colorado 5.2 5.8
California 5.1 6.6
Michigan 5.0 5.7
TOP FIVE SECTORS AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 20.7 20.5
Electric Utilities 17.6 19.1
Health Care 14.0 13.4
Transportation 12.6 12.0
Escrowed/Pre-Refunded 7.7 11.3
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 12.9 13.3
</TABLE>
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 APRIL 30, 1999
6 MONTHS AGO
Years 6.4 6.7
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.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 1999
Aaa 43.9%
Aa, A 28.6%
Baa 20.8%
Not Rated 4.8%
Short-term
investments 1.9%
Row: 1, Col: 1, Value: 43.9
Row: 1, Col: 2, Value: 28.6
Row: 1, Col: 3, Value: 20.8
Row: 1, Col: 4, Value: 4.8
Row: 1, Col: 5, Value: 1.9
AS OF OCTOBER 31, 1998
Aaa 43.0%
Aa, A 27.3%
Baa 23.0%
Not Rated 5.6%
Short-term
investments 1.1%
Row: 1, Col: 1, Value: 43.0
Row: 1, Col: 2, Value: 27.3
Row: 1, Col: 3, Value: 23.0
Row: 1, Col: 4, Value: 5.6
Row: 1, Col: 5, Value: 1.1
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT APRIL 30, 1999
AND OCTOBER 31, 1998 ACCOUNT FOR 0% AND 5.4% RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 98.1%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALABAMA - 1.0%
Shelby County Gen. Oblig. - $ 4,000,000 $ 4,417,560
Series A, 7.7% 8/1/17
ALASKA - 1.9%
Alaska Hsg. Fin. Corp. Rfdg. Aa2 5,490,000 5,598,977
Series A 5.4% 12/1/13
Alaska Student Ln. Corp.
Student Ln. Rev. Series A:
5.25% 7/1/07 (AMBAC Insured) Aaa 1,500,000 1,574,130
(d)
5.45% 7/1/09 (AMBAC Insured) Aaa 1,500,000 1,578,705
(d)
8,751,812
ARIZONA - 1.0%
Maricopa County Ind. Dev. A2 4,495,000 4,501,113
Auth. Health Facilities Rev.
Rfdg. (Catholic Healthcare
West Proj.) Series A 4.1%
7/1/03
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Aaa 1,095,000 1,192,893
Facilities Charge Rev. 5.65%
5/1/16 (AMBAC Insured) (d)
CALIFORNIA - 5.1%
California Dept. of Wtr. Aa2 2,190,000 2,322,670
Resources Wtr. Sys. Rev.
(Central Valley Proj.)
Series J 2, 6.125% 12/1/13
California Gen. Oblig. 6% Aa3 2,500,000 2,841,300
10/1/09
California Hsg. Fin. Agcy.
Rev.:
(Home Mtg.):
Series B, 5.2% 8/1/26 (MBIA Aaa 925,000 941,992
Insured) (d)
Series R, 6.15% 8/1/27 (MBIA Aaa 1,500,000 1,572,855
Insured) (d)
Rfdg. (Home Mtg.) Series A, Aaa 135,000 137,931
5.7% 8/1/16 (MBIA Insured)
California Pub. Works Board
Lease Rev. Rfdg.:
(California Univ. Proj.) A1 2,000,000 2,139,900
Series A, 5.5% 10/1/13
(Dept. of Corrections State Aaa 1,750,000 1,761,218
Prisons) Series A, 5%
12/1/19 (AMBAC Insured)
(Various California Univ. Aa3 1,500,000 1,638,540
Projs.) Series A, 5.5% 6/1/14
Central Valley Fing. Auth. BBB- 4,500,000 4,788,495
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6%
7/1/09
Foothill/Eastern Trans. Baa3 2,000,000 926,660
Corridor Agcy. Toll Road
Rev. (Cap. Appreciation) Sr.
Lien Series A, 0% 1/1/14
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CALIFORNIA - CONTINUED
Northern California Pwr. Aaa $ 750,000 $ 844,073
Agcy. Pub. Pwr. Rev. (Proj.
No. 3) 5.85% 7/1/10 (AMBAC
Insured) (Escrowed to
Maturity) (e)
Sacramento City Fing. Auth. Aaa 2,000,000 2,115,720
Lease Rev. Rfdg. Series A,
5.4% 11/1/20 (AMBAC Insured)
Sacramento City Fing. Auth. Aaa 1,225,000 688,413
Rev. (Cap. Appreciation)
Series B, 0% 11/1/11 (MBIA
Insured)
Sacramento Cogeneration Auth. BBB- 500,000 546,380
Cogeneration Proj. Rev.
(Procter & Gamble) 6.375%
7/1/10
23,266,147
COLORADO - 5.2%
Arapaho County Cap. Impt. Aaa 7,800,000 1,252,836
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/2005 @ 20.8626) (e)
Colorado Health Facilities
Auth. Rev.:
(Nat'l. Benevolent Assoc. Baa1 1,360,000 1,469,208
Proj.) Series A, 6.5% 6/1/25
Rfdg. (Rocky Mountain
Adventist):
6.625% 2/1/13 Baa2 6,900,000 7,095,408
6.625% 2/1/22 Baa2 4,000,000 4,113,280
Colorado Springs Arpt. Rev.
(Cap. Appreciation) Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 1,061,618
0% 1/1/08 (MBIA Insured) Aaa 870,000 595,324
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Aaa 2,115,000 1,843,032
Insured) (d)
Series D, 0% 11/15/04 (MBIA Aaa 1,700,000 1,349,630
Insured) (d)
Series A:
7.5% 11/15/23 (d) Baa1 2,070,000 2,354,749
7.5% 11/15/23 (Pre-Refunded Aaa 430,000 510,169
to 11/15/2004 @ 102) (d)(e)
8.5% 11/15/23 (d) Baa1 1,000,000 1,078,170
Series C, 6.55% 11/15/02 (d) Baa1 1,000,000 1,071,890
23,795,314
CONNECTICUT - 1.7%
Connecticut Spl. Tax Oblig. Aaa 1,500,000 1,630,350
Rev. (Trans. Infrastructure)
Series A, 5.5% 11/1/06 (FSA
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONNECTICUT - CONTINUED
Connecticut Health & Edl. AAA $ 2,400,000 $ 2,636,184
Facilities Auth. Rev. (New
Britain Memorial Hosp.)
Series A, 7.5% 7/1/06
(Pre-Refunded to 7/1/2002 @
102) (e)
Eastern Connecticut Resources BBB+ 3,350,000 3,296,769
Recovery Auth. Solid Waste
Rev. (Wheelabrator Lisbon
Proj.) Series A, 5.5% 1/1/20
(d)
7,563,303
DISTRICT OF COLUMBIA - 3.2%
District of Columbia:
(Nat'l. Academy of Science Aaa 2,500,000 2,432,600
Proj.) Series A, 5% 1/1/19
(AMBAC Insured)
Rfdg. (Georgetown Univ.) Aaa 2,000,000 2,228,900
Series A, 5.95% 4/1/14 (MBIA
Insured)
District of Columbia Gen.
Oblig. Rfdg.:
Series A:
6% 6/1/07 (MBIA Insured) Aaa 1,850,000 2,041,623
6% 6/1/07 (MBIA Insured) Aaa 150,000 166,907
(Escrowed to Maturity) (e)
Series B, 5% 6/1/05 (MBIA Aaa 4,135,000 4,312,143
Insured)
District of Columbia Hosp. - 940,000 1,004,296
Rev. (Hosp. for Sick
Children) Series A, 8.875%
1/1/21
District of Columbia Redev.
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.:
5.3% 11/1/99 Baa 1,700,000 1,712,631
5.625% 11/1/10 Baa 510,000 526,147
14,425,247
FLORIDA - 1.9%
Broward County Resource A3 545,000 572,888
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 5,000,000 5,419,000
Rfdg. Series D, 5.75%
10/1/09 (AMBAC Insured) (d)
Florida Mid-Bay Bridge Auth. - 2,500,000 2,762,550
Rev. Series A, 7.5% 10/1/17
8,754,438
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
HAWAII - 1.9%
Hawaii Series CN, 6.25% Aaa $ 4,515,000 $ 4,893,086
3/1/03 (FGIC Insured)
Honolulu City & County Gen. Aaa 3,500,000 3,662,470
Oblig. Rfdg. Series C, 5%
7/1/07 (FGIC Insured)
8,555,556
IDAHO - 0.0%
Boise Urban Renewal Agcy. BBB+ 180,000 183,055
Parking Rev. Series A-C,
8.125% 9/1/15
ILLINOIS - 4.8%
Chicago Midway Arpt. Rev. Aaa 1,500,000 1,539,855
Series A, 5.5% 1/1/29 (MBIA
Insured)
Chicago O'Hare Int'l. Arpt.
Rev.:
(Passenger Facility Charge) Aaa 2,500,000 2,675,400
Series A, 5.6% 1/1/10 (AMBAC
Insured)
Rfdg. (Gen. Arpt. Proj.)
Series A:
6.25% 1/1/09 (AMBAC Insured) Aaa 3,700,000 4,129,903
(d)
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,554,910
Chicago O'Hare Int'l. Arpt. Baa2 1,000,000 1,180,180
Spl. Facilities Rev. Rfdg.
(American Airlines, Inc.
Proj.) 8.2% 12/1/24
Chicago School Reform Board Aaa 5,000,000 5,244,100
5.75% 12/1/27 (AMBAC Insured)
Du Page County Cmnty. High Aaa 1,640,000 1,810,544
School District #99 (Downers
Grove) Series A, 6% 2/1/06
(AMBAC Insured)
Illinois Edl. Facilities Aaa 1,200,000 1,325,748
Auth. Rfdg. (DePaul Univ.)
6% 10/1/05 (AMBAC Insured)
Illinois Health Facilities
Auth. Rev. (Memorial Hosp.):
7.125% 5/1/10 (Pre-Refunded - 1,000,000 1,112,180
to 5/1/2002 @ 102) (e)
7.25% 5/1/22 (Pre-Refunded to - 1,000,000 1,115,680
5/1/2002 @ 102) (e)
21,688,500
INDIANA - 0.2%
Indianapolis Econ. Dev. & Baa1 1,000,000 1,098,100
Impt. Rev. Rfdg. (Nat'l.
Benevolent Assoc.) 7.625%
10/1/22
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
KANSAS - 0.6%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth):
5% 12/1/13 (MBIA Insured) Aaa $ 2,390,000 $ 2,419,039
5% 12/1/14 (MBIA Insured) Aaa 500,000 507,670
2,926,709
KENTUCKY - 1.8%
Kenton County Arpt. Board
Arpt. Rev.:
(Cincinnati/Northern Kentucky Aaa 5,570,000 6,066,733
Int'l.) Series A, 6% 3/1/05
(MBIA Insured) (d)
(Spl. Facilities Delta Baa3 2,000,000 2,169,800
Airlines, Inc. Proj.)
Series A, 7.5% 2/1/20 (d)
8,236,533
MARYLAND - 1.1%
Maryland Health & Higher Edl.
Facilities Auth. Rev.:
(Good Samaritian Hosp.):
5.75% 7/1/13 (AMBAC Insured) Aaa 1,015,000 1,122,935
5.75% 7/1/13 (Escrowed to A1 1,665,000 1,820,345
Maturity) (e)
Rfdg. (John Hopkins Univ.) 6% Aa2 2,000,000 2,271,400
7/1/10
5,214,680
MASSACHUSETTS - 6.8%
Martha's Vineyard Land Bank Aaa 1,000,000 1,002,500
Rev. Series A, 5.125% 5/1/18
(FSA Insured)
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Bentley College) Series J, Aaa 1,265,000 1,260,345
5% 7/1/17 (MBIA Insured)
(Fairview Extended Care) Aaa 5,000,000 5,670,700
Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/2001 @
103) (e)
(Hebrew Rehab. Ctr. for Aged) A 2,000,000 1,992,720
Series C, 5.25% 7/1/17
(New England Med. Ctr. Hosp.) Aaa 500,000 503,915
Series G, 5.375% 7/1/24
(MBIA Insured)
Massachusetts Ind. Fin. Agcy. BBB 1,000,000 1,006,470
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.7% 12/1/03
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy.
Rev.:
(Atlanticare Med. Ctr.) - $ 700,000 $ 736,750
Series B, 10.125% 11/1/14
(Pre-Refunded to 11/1/99 @
102)
(Cap. Appreciation)
(Massachusetts Biomedical)
Series A 2:
0% 8/1/08 - 800,000 529,792
0% 8/1/10 - 4,500,000 2,617,605
Rfdg. (Emerson College) Issue - 1,000,000 1,103,210
A, 8.9% 1/1/18 (Pre-Refunded
to 1/1/2001 @ 102) (e)
Massachusetts Muni. Wholesale Baa2 1,000,000 1,086,650
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series C, 6.5%
7/1/03
Massachusetts Tpk. Auth. Aaa 5,000,000 4,936,000
Metro Hwy. Sys. Rev. Series
A, 5.125% 1/1/23 (MBIA
Insured)
New England Ed. Ln. Marketing
Corp.:
Rfdg. 5.625% 7/1/04 (d) A1 3,880,000 4,099,336
Student Ln. Rev. Issue A, Aaa 4,005,000 4,196,439
5.8% 3/1/02
30,742,432
MICHIGAN - 4.3%
Detroit Gen. Oblig. Rfdg. Baa1 1,710,000 1,745,722
Series B, 6% 4/1/00
Michigan Bldg. Auth. Rev. Aaa 3,000,000 3,319,710
(Facilities Prog.) Series
1, 6% 10/1/05 (AMBAC Insured)
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Med. Ctr.)
Series A:
5.5% 10/1/18 Baa2 4,250,000 4,097,085
5.5% 10/1/27 Baa2 3,000,000 2,851,470
(Pontiac Osteopathic Hosp.) Baa2 2,000,000 1,982,040
Series A, 6% 2/1/24
Michigan Strategic Fund Rev. Aaa 3,000,000 3,006,630
Rfdg. (Detroit Edison Co.
Proj.) Series A, 5.55%
9/1/29 (MBIA Insured) (d)(f)
Royal Oak Hosp. Fin. Auth. Aa3 2,310,000 2,599,489
Rev. Rfdg. (William Beaumont
Hosp.) 6.25% 1/1/09
19,602,146
MINNESOTA - 2.0%
Minneapolis & Saint Paul Hsg. Aaa 1,800,000 1,739,844
& Redev. Auth. Health Care
Sys. Rev. Rfdg. (Healthspan
Corp.) Series A, 4.75%
11/15/18 (AMBAC Insured)
Minnesota Hsg. Fin. Agcy. Aa2 2,000,000 2,103,500
(Single Family Mtg.) Series
D, 6.4% 7/1/15 (d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MINNESOTA - CONTINUED
Rochester Health Care AA+ $ 2,000,000 $ 2,076,280
Facilities Rev. (Mayo
Foundation) Series A, 5.5%
11/15/27
Western Minnesota Muni. Pwr. Aaa 3,000,000 3,364,710
Agcy. Pwr. Supply Rev. Rfdg.
Series A, 6.25% 1/1/06
(AMBAC Insured)
9,284,334
MISSISSIPPI - 0.6%
Mississippi Gen. Oblig. 6.2% Aaa 2,245,000 2,534,313
2/1/08 (Escrowed to
Maturity) (e)
Mississippi Home Corp. Single Aaa 175,000 184,357
Family Rev. Rfdg. Series A,
9.25% 3/1/12 (FGIC Insured)
2,718,670
NEBRASKA - 1.4%
Nebraska Pub. Pwr. District
Rev. Rfdg.:
(Elec. Sys.) Series A, 6% A1 1,500,000 1,613,235
1/1/06 (Pre-Refunded to
1/1/2002 @ 102) (e)
(Pwr. Supply Sys.) Series C, A1 4,590,000 4,854,522
5% 1/1/17 (Pre-Refunded to
7/1/2004 @ 101) (e)
6,467,757
NEVADA - 0.6%
Las Vegas Downtown Redev.
Agcy. Tax Increment Rev.
(Fremont Street Proj.)
Series A:
6% 6/15/10 BBB+ 1,500,000 1,547,820
6.1% 6/15/14 BBB+ 1,000,000 1,048,610
2,596,430
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & - 485,000 518,756
Health Facilities Auth. Rev.
(Littleton Hosp. Assoc.,
Inc.) Series A, 9.5% 5/1/20
(Pre-Refunded to 5/1/2000 @
102) (e)
NEW JERSEY - 2.0%
New Jersey Edl. Facilities
Auth. Rev. Rfdg. (Seton Hall
Univ. Proj.):
5% 7/1/18 (AMBAC Insured) (f) Aaa 1,000,000 988,960
5.25% 7/1/07 (AMBAC Insured) Aaa 1,610,000 1,717,886
(f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Trans. Trust Fund Aaa $ 4,000,000 $ 4,278,160
Auth. Rfdg. (Trans. Sys.)
Series A, 5.5% 6/15/11
(MBIA Insured)
Passaic County Util. Auth. Aaa 2,500,000 2,246,775
Solid Waste Disp. Rev. Rfdg.
(Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
9,231,781
NEW MEXICO - 1.8%
Albuquerque Arpt. Rev. Rfdg.:
6.7% 7/1/18 (AMBAC Insured) Aaa 3,970,000 4,537,273
(d)
6.75% 7/1/11 (AMBAC Insured) Aaa 1,805,000 2,153,419
(d)
New Mexico Edl. Assistance Aaa 1,350,000 1,378,080
Foundation Student Ln. Rev.
Series B, 5.25% 4/1/05
(AMBAC Insured) (d)
8,068,772
NEW YORK - 19.0%
Long Island Pwr. Auth. Elec.
Sys. Rev.:
Series A:
5.125% 12/1/22 (FSA Insured) Aaa 9,390,000 9,381,831
5.5% 12/1/29 Baa1 2,400,000 2,454,912
4% 4/1/00 Baa1 2,250,000 2,256,885
Muni. Assistance Corp. for Aa2 5,000,000 5,522,800
New York City Rfdg. Series
H, 6% 7/1/05
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/03 A3 2,000,000 2,230,800
Series B:
5.7% 8/15/02 A3 1,130,000 1,192,659
5.7% 8/15/02 (Escrowed to A3 35,000 37,151
Maturity) (e)
6.75% 8/15/03 A3 2,000,000 2,213,280
Series E, 6.5% 2/15/04 (FGIC Aaa 1,500,000 1,656,195
Insured)
Series D, 5.5% 2/15/04 A3 5,000,000 5,298,800
Series H, 6.875% 2/1/02 A3 240,000 258,163
New York City Ind. Dev. Agcy. Aaa 1,000,000 1,092,790
Ind. Dev. Rev. (Japan
Airlines Co. Ltd. Proj.)
Series 1991, 6% 11/1/15 (FSA
Insured) (d)
New York City Ind. Dev. Agcy. A3 8,680,000 9,345,409
Spl. Facilities Rev. (Term.
One Group Assoc. Proj.) 5.9%
1/1/06 (d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Sys. Rev.
Series B:
5.5% 6/15/27 (MBIA Insured) Aaa $ 3,500,000 $ 3,606,715
5.75% 6/15/26 A1 5,000,000 5,295,250
5.75% 6/15/29 A1 4,000,000 4,236,200
New York Metro. Trans. Auth.
Rfdg. (Svc. Contract) Series
R:
5% 7/1/02 Baa1 2,370,000 2,447,997
5% 7/1/03 Baa1 2,490,000 2,587,982
New York State Dorm. Auth.
Rev.:
(Consolidated City Univ. Baa1 3,000,000 3,227,820
Sys.) Series A, 5.7% 7/1/05
(New York Univ.) Series A, Aaa 1,000,000 1,119,700
5.75% 7/1/14 (MBIA Insured)
Rfdg. (Jamaica Hosp.) Series Aaa 6,150,000 6,341,757
F, 5.2% 2/15/14 (MBIA
Insured)
New York State Envir.
Facilities Corp.:
Clean Wtr. & Drinking Wtr.
Rev.:
Series F, 4.875% 6/15/18 Aa2 1,000,000 971,430
4.875% 6/15/20 Aa2 1,300,000 1,250,990
Poll. Cont. Rev. 5.125% Aa1 1,000,000 1,004,120
6/15/19
New York State Local Govt. A3 7,500,000 7,946,100
Assistance Corp. Rfdg.
Series C, 5.5% 4/1/17
New York State Thruway Auth. Baa1 2,000,000 2,186,160
Svc. Contract Rev. (Local
Hwy. & Bridges) 5.9% 4/1/07
Suffolk County Wtr. Auth. Aaa 1,000,000 1,124,450
Wtrwks. Rev. Rfdg. 6% 6/1/17
(MBIA Insured)
86,288,346
NORTH CAROLINA - 4.4%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.
Rfdg.:
Series A, 5.5% 1/1/05 (MBIA Aaa 4,000,000 4,264,480
Insured)
Series B:
6% 1/1/06 Baa1 4,175,000 4,449,590
7.25% 1/1/07 Baa1 1,000,000 1,155,470
Series C:
5.125% 1/1/03 Baa1 2,600,000 2,667,262
5.25% 1/1/04 Baa1 1,365,000 1,408,680
5.5% 1/1/07 (MBIA Insured) Aaa 2,000,000 2,145,780
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NORTH CAROLINA - CONTINUED
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.75% 1/1/02 A3 $ 1,750,000 $ 1,825,425
6.25% 1/1/17 (AMBAC Insured) Aaa 1,150,000 1,245,128
6.25% 1/1/17 (AMBAC Insured) Aaa 650,000 716,105
(Pre-Refunded to 1/1/2003 @
102) (e)
19,877,920
OHIO - 4.5%
Cincinnati Student Ln. Fdg. - 1,530,000 1,592,699
Corp. Student Ln. Rev.
Series B, 8.875% 8/1/08 (d)
Franklin County Hosp. Rev. Baa3 5,000,000 4,957,150
(Doctor's Ohio Health Corp.)
Series A 4.75% 12/1/03
Gateway Economic Dev. Corp. - 3,000,000 3,141,600
Greater Cleveland Stadium
Rev. 6.5% 9/15/14 (d)
Marion County Hosp. Impt. BBB+ 1,000,000 1,028,100
Rev. Rfdg. (Comnty. Hosp.
Proj.) 5.6% 5/15/01
Ohio Tpk. Commission Tpk. Aaa 5,000,000 5,353,650
Rev. Rfdg. Series A, 5.5%
2/15/24 (FGIC Insured)
Ohio Wtr. Dev. Auth. Poll.
Cont. Facilities Rev. (Wtr.
Cont. Ln. Fund):
State Match Series, 6.5% Aaa 1,835,000 2,062,687
12/1/04 (MBIA Insured)
Wtr. Quality Series, 5.625% Aaa 2,000,000 2,168,800
6/1/06 (MBIA Insured)
20,304,686
OKLAHOMA - 1.2%
Sapulpa Muni. Auth. Util. Aaa 1,000,000 1,059,450
Rev. Rfdg. 5.75% 4/1/23
(FGIC Insured)
Tulsa Muni. Arpt. Trust Rev. Baa2 4,000,000 4,408,240
(American Airlines Corp.)
7.35% 12/1/11
5,467,690
PENNSYLVANIA - 4.1%
Allegheny County Ind. Dev. - 325,000 347,926
Auth. Rev. (YMCA) Series A,
8.75% 3/1/10
Butler County Ind. Dev. Auth. A 3,000,000 3,098,430
Health Ctr. Rev. Rfdg.
(Sherwood Oaks Proj.) 5.75%
6/1/11
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health):
6.8% 11/15/14 Baa2 3,250,000 3,508,440
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
PENNSYLVANIA - CONTINUED
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health): - continued
6.8% 11/15/23 Baa2 $ 1,000,000 $ 1,079,520
Delaware County Auth. Rev.
(Riddle Village Proj.):
8.25% 6/1/22 (Escrowed to Aaa 2,250,000 2,714,153
Maturity) (e)
8.75% 6/1/10 (Pre-Refunded to Aaa 2,870,000 3,342,058
6/1/2002 @ 102) (e)
Pennsylvania Gen. Oblig. Aa3 3,000,000 3,261,420
Second Series, 5.8% 7/1/04
Pennsylvania Ind. Dev. Auth. Aaa 1,345,000 1,489,130
Rev. (Econ. Dev.) 5.8%
7/1/09 (AMBAC Insured)
18,841,077
RHODE ISLAND - 1.1%
Rhode Island Port Auth. & Aaa 4,000,000 4,915,000
Economic Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14
(FSA Insured) (d)
SOUTH CAROLINA - 0.4%
Piedmont Muni. Pwr. Agcy. Aaa 1,715,000 1,899,928
Elec. Rev. Rfdg. Series A,
6.25% 1/1/05 (FGIC Insured)
TENNESSEE - 0.2%
Metro Govt. Nashville & Aaa 1,000,000 740,830
Davidson County Elec. Rev.
(Cap. Appreciation) Series
A, 0% 5/15/06 (MBIA Insured)
TEXAS - 3.6%
Conroe Independent School Aaa 750,000 478,455
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/09
Dallas-Fort Worth Int'l. Baa1 6,000,000 6,380,340
Arpt. Facility Impt. Corp.
Rev. (American Airlines,
Inc.) 7.5% 11/1/25 (d)
Midlothian Independent School Aaa 1,845,000 1,512,513
District Rfdg. (Cap.
Appreciation) 0% 2/15/04
San Antonio Elec. & Gas Rev.
Rfdg.:
5.5% 2/1/20 Aa1 1,425,000 1,475,274
5.5% 2/1/20 (Pre-Refunded to Aa1 75,000 81,768
2/1/2007 @ 101) (e)
San Antonio Gen. Oblig. Aa2 1,390,000 1,397,353
Series 2000 5% 2/1/11 (f)
Texas Pub. Fin. Auth. Series Aa2 5,000,000 5,040,650
A, 5% 10/1/14
16,366,353
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTAH - 2.8%
Intermountain Pwr. Agcy. Pwr.
Supply Sys. Rev.:
Rfdg.:
Series A, 6.5% 7/1/09 (AMBAC Aaa $ 1,000,000 $ 1,166,500
Insured)
Series B, 5.75% 7/1/16 (MBIA Aaa 2,500,000 2,700,450
Insured)
Series D, 5% 7/1/21 (MBIA Aaa 1,200,000 1,168,608
Insured)
Spl. Oblig. 6th Series B, 6% Aaa 7,000,000 7,647,640
7/1/16 (MBIA Insured)
South Salt Lake City Ind. - 250,000 271,638
Rev. (Price Savers Wholesale
Club Proj.) 9% 11/15/13
12,954,836
VIRGINIA - 0.6%
Henrico County Wtr. & Swr. Aa2 1,750,000 1,731,923
Rev. Rfdg. 5% 5/1/28
Loudoun County Ind. Dev. AAA 1,000,000 1,174,860
Auth. Residential Care
Facilities Rev. (Falcons
Landing Proj.) Series A,
9.25% 11/1/04 (Escrowed to
Maturity) (e)
2,906,783
WASHINGTON - 4.9%
King County Gen. Oblig. Aa1 3,990,000 4,375,873
Series D, 5.75% 12/1/11
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series A:
4.8% 7/1/04 Aa1 2,000,000 2,063,740
5.9% 7/1/04 Aa1 1,000,000 1,082,540
5.4% 7/1/12 Aa1 14,000,000 14,751,934
22,274,087
TOTAL MUNICIPAL BONDS 446,639,574
(Cost $425,013,980)
MUNICIPAL NOTES - 0.7%
MICHIGAN - 0.7%
Michigan Muni. Bond Auth. 3,000,000 3,008,640
Rev. RAN Series 1998 D1,
4.25% 8/27/99 (Cost
$3,007,552)
CASH EQUIVALENTS - 1.2%
SHARES VALUE (NOTE 1)
Municipal Central Cash Fund 5,495,204 $ 5,495,204
(b)(c) (Cost $5,495,204)
TOTAL INVESTMENT IN $ 455,143,418
SECURITIES - 100%
(Cost $433,516,736)
</TABLE>
SECURITY TYPE ABBREVIATION
RAN - REVENUE ANTICIPATION NOTE
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(c) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.54%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(e) Security collateralized by an amount sufficient to pay interest
and principal.
(f) Security purchased on a delayed delivery basis.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.2% AAA, AA, A 69.2%
Baa 17.9% BBB 17.0%
Ba 0.0% BB 1.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 4.8%.
The distribution of municipal securities
by revenue source, as a percentage of
total value of investments in securities,
is as follows:
General Obligations 20.7%
Electric Utilities 17.6
Health Care 14.0
Transportation 12.6
Escrowed/Pre-Refunded 7.7
Industrial Development 6.3
Water & Sewer 5.9
Education 5.5
Others (individually less 9.7
than 5%)
100.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $433,516,736. Net unrealized appreciation
aggregated $21,626,682, of which $22,346,283 related to appreciated
investment securities and $719,601 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $15,845,000 of which $2,066,000, $7,511,000 and
$6,268,000 will expire on October 31, 2002, 2003 and 2004,
respectively.
At October 31, 1998, the fund was required to defer approximately
$756,000 of losses on futures contracts.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 455,143,418
value (cost $433,516,736) -
See accompanying schedule
Cash 4,281,064
Receivable for investments 3,573,719
sold
Receivable for fund shares 765,881
sold
Interest receivable 7,429,063
Other receivables 22,338
TOTAL ASSETS 471,215,483
LIABILITIES
Payable for investments $ 6,554,847
purchased Regular delivery
Delayed delivery 7,028,120
Payable for fund shares 937,747
redeemed
Distributions payable 626,701
Accrued management fee 144,211
Distribution fees payable 134,077
Other payables and accrued 70,439
expenses
TOTAL LIABILITIES 15,496,142
NET ASSETS $ 455,719,341
Net Assets consist of:
Paid in capital $ 448,688,358
Accumulated undistributed net (14,595,699)
realized gain (loss) on
investments
Net unrealized appreciation 21,626,682
(depreciation) on investments
NET ASSETS $ 455,719,341
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $12.41
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($9,233,541 (divided by)
744,302 shares)
Maximum offering price per $13.03
share (100/95.25 of $12.41)
CLASS T: NET ASSET VALUE and $12.42
redemption price per share
($367,831,228 (divided by)
29,618,240 shares)
Maximum offering price per $12.87
share (100/96.50 of $12.42)
CLASS B: NET ASSET VALUE and $12.39
offering price per share
($62,982,489 (divided by)
5,084,185 shares) A
CLASS C: NET ASSET VALUE and $12.42
offering price per share
($11,638,377 (divided by)
937,176 shares) A
INSTITUTIONAL CLASS: NET $12.37
ASSET VALUE, offering price
and redemption price per
share ($4,033,706 (divided
by) 326,171 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INTEREST INCOME $ 11,775,977
EXPENSES
Management fee $ 866,136
Transfer agent fees 220,951
Distribution fees 785,108
Accounting fees and expenses 74,079
Non-interested trustees' 788
compensation
Custodian fees and expenses 14,115
Registration fees 55,803
Audit 17,720
Legal 1,190
Total expenses before 2,035,890
reductions
Expense reductions (1,042) 2,034,848
NET INTEREST INCOME 9,741,129
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,042,368
Futures contracts 21,684 2,064,052
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (6,972,317)
Futures contracts (83,889) (7,056,206)
NET GAIN (LOSS) (4,992,154)
NET INCREASE (DECREASE) IN $ 4,748,975
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 9,741,129 $ 20,054,896
Net realized gain (loss) 2,064,052 842,117
Change in net unrealized (7,056,206) 13,362,203
appreciation (depreciation)
NET INCREASE (DECREASE) IN 4,748,975 34,259,216
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,741,129) (20,054,896)
from net interest income
Share transactions - net 7,862,458 279,500
increase (decrease)
TOTAL INCREASE (DECREASE) 2,870,304 14,483,820
IN NET ASSETS
NET ASSETS
Beginning of period 452,849,037 438,365,217
End of period $ 455,719,341 $ 452,849,037
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.540 $ 12.150 $ 11.740 $ 11.630
period
Income from Investment
Operations
Net interest income .281 .571 .583 D .105D, E
Net realized and unrealized (.130) .390 .445 .109
gain (loss)
Total from investment .151 .961 1.028 .214
operations
Less Distributions
From net interest income (.281) (.571) (.616) E (.104)
In excess of net interest - - (.002) -
income
Total distributions (.281) (.571) (.618) (.104)
Net asset value, end of period $ 12.410 $ 12.540 $ 12.150 $ 11.740
TOTAL RETURN B, C 1.21% 8.07% 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,234 $ 6,721 $ 3,755 $ 202
(000 omitted)
Ratio of expenses to average .72% A .90% G .90% G .90% A, G
net assets
Ratio of net interest income 4.51% A 4.57% 4.87% 5.73% A
to average net assets
Portfolio turnover rate 17% A 36% 36% 49%
</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 INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.560 $ 12.150 $ 11.760 $ 11.880 $ 11.220
period
Income from Investment
Operations
Net interest income .274 .571 .597 C .677 C, D .700
Net realized and unrealized (.140) .410 .407 (.136) .660
gain (loss)
Total from invesment .134 .981 1.004 .541 1.360
operations
Less Distributions
From net interest income (.274) (.571) (.612) D (.661) (.700)
In excess of net interest - - (.002) - -
income
From net realized gain - - - - -
In excess of net realized - - - - -
gain
Total distributions (.274) (.571) (.614) (.661) (.700)
Net asset value, end of $ 12.420 $ 12.560 $ 12.150 $ 11.760 $ 11.880
period
TOTAL RETURN B 1.08% 8.15% 8.89% 4.68% 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 367,831 $ 380,325 $ 392,075 $ 480,432 $ 565,131
(000 omitted)
Ratio of expenses to average .81% A .87% .89% .89% .91%
net assets
Ratio of net interest income 4.42% A 4.62% 5.04% 5.74% 6.06%
to average net assets
Portfolio turnover rate 17% A 36% 36% 49% 37%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.720
period
Income from Investment
Operations
Net interest income .689
Net realized and unrealized (1.430)
gain (loss)
Total from invesment (.741)
operations
Less Distributions
From net interest income (.689)
In excess of net interest -
income
From net realized gain (.060)
In excess of net realized (.010)
gain
Total distributions (.759)
Net asset value, end of $ 11.220
period
TOTAL RETURN B (6.03)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 544,422
(000 omitted)
Ratio of expenses to average .89%
net assets
Ratio of net interest income 5.78%
to average net assets
Portfolio turnover rate 38%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.530 $ 12.130 $ 11.740 $ 11.860 $ 11.210
period
Income from Investment
Operations
Net interest income .235 .491 .515 D .596 D, E .612
Net realized and unrealized (.140) .400 .416 (.136) .650
gain (loss)
Total from investment .095 .891 .931 .460 1.262
operations
Less Distributions
From net interest income (.235) (.491) (.539) E (.580) (.612)
In excess of net interest - - (.002) - -
income
Total distributions (.235) (.491) (.541) (.580) (.612)
Net asset value, end of period $ 12.390 $ 12.530 $ 12.130 $ 11.740 $ 11.860
TOTAL RETURN B, C 0.76% 7.47% 8.15% 3.98% 11.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 62,982 $ 55,032 $ 41,024 $ 39,389 $ 32,395
(000 omitted)
Ratio of expenses to average 1.46% A 1.53% 1.56% 1.57% 1.86% G
net assets
Ratio of net interest income 3.78% A 3.96% 4.35% 5.06% 5.18%
to average net assets
Portfolio turnover rate 17% A 36% 36% 49% 37%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31,
1994 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.610
period
Income from Investment
Operations
Net interest income .188
Net realized and unrealized (.400)
gain (loss)
Total from investment (.212)
operations
Less Distributions
From net interest income (.188)
In excess of net interest -
income
Total distributions (.188)
Net asset value, end of period $ 11.210
TOTAL RETURN B, C (1.86)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,968
(000 omitted)
Ratio of expenses to average 2.09% A
net assets
Ratio of net interest income 4.58% A
to average net assets
Portfolio turnover rate 38%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO OCTOBER 31, 1994.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.560 $ 12.130
period
Income from Investment
Operations
Net interest income .230 .455
Net realized and unrealized (.140) .430
gain (loss)
Total from investment .090 .885
operations
Less Distributions
From net interest income (.230) (.455)
Net asset value, end of period $ 12.420 $ 12.560
TOTAL RETURN B, C 0.71% 7.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,638 $ 7,031
(000 omitted)
Ratio of expenses to average 1.57% A 1.75% A, E
net assets
Ratio of net interest income 3.69% A 3.60% A
to average net assets
Portfolio turnover rate 17% A 36%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.510 $ 12.120 $ 11.720 $ 11.880 $ 11.700
of period
Income from Investment
Operations
Net interest income .289 .592 .609 D .707 D, E .232
Net realized and unrealized (.140) .390 .464 (.197) .180
gain (loss)
Total from investment .149 .982 1.073 .510 .412
operations
Less Distributions
From net interest income (.289) (.592) (.671) E (.670) (.232)
In excess of net interest - - (.002) - -
income
Total Distributions (.289) (.592) (.673) (.670) (.232)
Net asset value, end of $ 12.370 $ 12.510 $ 12.120 $ 11.720 $ 11.880
period
TOTAL RETURN B, C 1.20% 8.28% 9.44% 4.41% 3.55%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,034 $ 3,741 $ 1,511 $ 927 $ 154
(000 omitted)
Ratio of expenses to average .59% A .75% G .75% G .75% G .75% A, G
net assets
Ratio of net interest income 4.65% A 4.75% 5.11% 5.88% 5.89% A
to average net assets
Portfolio turnover rate 17% A 36% 36% 49% 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Income Fund(the fund) is a fund of Fidelity
Advisor Series II (the trust) (formerly a fund of Fidelity Advisor
Series V) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. 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 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."
INTEREST INCOME. Interest income, which includes amortization of
premium and 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 interest 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 futures transactions, market discount, capital loss
carryforwards and losses deferred due to futures.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc. (FIMM), an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Losses may arise from changes in the value of the underlying
instruments or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $40,403,222 and $37,591,948, respectively.
The market value of futures contracts opened and closed during the
period amounted to $0 and $6,962,986, 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 .25%. 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 .38% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with FIMM, a wholly
owned subsidiary of FMR. For its services, FIMM receives a fee from
FMR of 50% of the management fee payable to FMR. The fee is paid prior
to any voluntary expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 6,114 $ 71
CLASS T 467,393 9,864
CLASS B 265,040 192,091
CLASS C 46,561 43,051
785,108 245,077
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six 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 5% 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 FDC RETAINED BY FDC
CLASS A $ 26,941 $ 17,990
CLASS T 127,121 48,688
CLASS B 89,528 89,528*
CLASS C 8,413 8,413*
252,003 164,619
* 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 AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Class C, and Institutional Class
shares. UMB has entered into a sub-arrangement with Fidelity
Investments Institutional Operations Company, Inc. (FIIOC) with
respect to all classes of the fund to perform the transfer, dividend
disbursing, and shareholder servicing agent functions. FIIOC, an
affiliate of FMR, receives account fees and asset-based fees that vary
according to the account size and type of account of the shareholders
of the respective classes of the fund. All fees are paid to FIIOC by
UMB, which is reimbursed by each class for such payments. FIIOC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, each class paid the following
transfer agent fees:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 4,582 .11
CLASS T 180,323 .10
CLASS B 28,549 .10
CLASS C 4,900 .11
INSTITUTIONAL CLASS 2,597 .14
$ 220,951
* ANNUALIZED
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC 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.
The fund has entered into an arrangement with each class' transfer
agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of expenses. During the period, Class
T's expenses were reduced by $1,042 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
1999 1998 A
FROM NET INVESTMENT INCOME
Class A $ 182,451 $ 231,309
Class T 8,195,947 17,722,552
Class B 1,104,451 1,865,869
Class C 170,313 106,528
Institutional Class 87,967 128,638
Total $ 9,741,129 $ 20,054,896
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
SIX MONTHS ENDED APRIL 30,
1999 1998 A 1999
CLASS A Shares sold 362,699 $ 3,893,501
311,733
Reinvestment of distributions 9,589 11,508 119,777
Shares redeemed (112,849) (147,406) (1,408,031)
Net increase (decrease) 208,473 226,801 $ 2,605,247
CLASS T Shares sold 2,388,600 4,799,958 $ 29,904,426
Reinvestment of distributions 412,017 873,770 5,152,094
Shares redeemed (3,473,995) (7,639,811) (43,472,672)
Net increase (decrease) (673,378) (1,966,083) $ (8,416,152)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998 A
CLASS A Shares sold $ 4,479,496
Reinvestment of distributions 142,669
Shares redeemed (1,811,982)
Net increase (decrease) $ 2,810,183
CLASS T Shares sold $ 59,544,980
Reinvestment of distributions 10,820,895
Shares redeemed (94,496,816)
Net increase (decrease) $ (24,130,941)
</TABLE>
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
SIX MONTHS ENDED APRIL 30,
1999 1998 A 1999
CLASS B Shares sold 1,129,341 1,497,112 $ 14,087,520
Reinvestment of distributions 51,638 86,162 644,019
Shares redeemed (490,289) (572,594) (6,111,350)
Net increase (decrease) 690,690 1,010,680 $ 8,620,189
CLASS C Shares sold 507,158 650,179 $ 6,339,048
Reinvestment of distributions 8,863 4,455 110,753
Shares redeemed (138,682) (94,797) (1,733,438)
Net increase (decrease) 377,339 559,837 $ 4,716,363
INSTITUTIONAL CLASS Shares 85,982 238,568 $ 1,070,973
sold
Reinvestment of distributions 3,689 6,313 45,550
Shares redeemed (62,662) (70,388) (779,712)
Net increase (decrease) 27,009 174,493 $ 336,811
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998 A
CLASS B Shares sold $ 18,512,808
Reinvestment of distributions 1,065,255
Shares redeemed (7,073,528)
Net increase (decrease) $ 12,504,535
CLASS C Shares sold $ 8,065,902
Reinvestment of distributions 55,539
Shares redeemed (1,177,225)
Net increase (decrease) $ 6,944,216
INSTITUTIONAL CLASS Shares $ 2,943,409
sold
Reinvestment of distributions 77,958
Shares redeemed (869,860)
Net increase (decrease) $ 2,151,507
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Christine J. Thompson, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
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 Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
HIM-SANN-0699 77848
1.703467.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
MUNICIPAL INCOME FUND -
INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 25 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 34 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR MUNICIPAL INCOME 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. The initial offering of Institutional
Class shares took place on July 3, 1995. Institutional Class shares
are sold to eligible investors without a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T, the original class
of the fund, and reflect Class T shares' 0.25% 12b-1 fee. If Fidelity
had not reimbursed certain class expenses, the past one year, past
five years and past 10 years total returns and dividends would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 1.20% 6.28% 39.33% 121.42%
- - INST CL
LB Municipal Bond 1.75% 6.95% 43.52% 116.15%
General Municipal Debt Funds 1.19% 5.78% 38.92% 105.23%
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 Municipal Bond Index - a
market value-weighted index of investment-grade municipal bonds with
maturities of one year or more. To measure how Institutional Class'
performance stacked up against its peers, you can compare it to the
general municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Inc. The
past six months average represents a peer group of 264 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 6.28% 6.86% 8.27%
- - INST CL
LB Municipal Bond 6.95% 7.49% 8.01%
General Municipal Debt Funds 5.78% 6.79% 7.44%
Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class shares'
cumulative return and show you what would have happened if
Institutional Class shares had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Municipal Income -CL I LB Municipal Bond
00679 LB015
1989/04/30 10000.00 10000.00
1989/05/31 10163.38 10207.70
1989/06/30 10279.79 10346.32
1989/07/31 10369.96 10487.13
1989/08/31 10450.18 10384.46
1989/09/30 10481.69 10353.52
1989/10/31 10592.36 10480.14
1989/11/30 10722.76 10663.55
1989/12/31 10824.70 10750.77
1990/01/31 10841.78 10699.92
1990/02/28 10919.48 10795.15
1990/03/31 10987.99 10798.39
1990/04/30 10887.48 10720.21
1990/05/31 11110.60 10954.23
1990/06/30 11241.51 11050.52
1990/07/31 11414.89 11212.96
1990/08/31 11337.87 11050.15
1990/09/30 11418.49 11056.45
1990/10/31 11575.26 11257.01
1990/11/30 11862.47 11483.39
1990/12/31 11938.15 11533.34
1991/01/31 12077.09 11688.12
1991/02/28 12169.95 11789.81
1991/03/31 12241.49 11794.05
1991/04/30 12440.82 11950.91
1991/05/31 12594.60 12057.16
1991/06/30 12623.91 12045.22
1991/07/31 12787.15 12191.93
1991/08/31 12902.63 12352.50
1991/09/30 13053.97 12513.33
1991/10/31 13198.62 12625.95
1991/11/30 13248.27 12661.17
1991/12/31 13392.35 12932.88
1992/01/31 13540.81 12962.37
1992/02/29 13614.37 12966.52
1992/03/31 13682.67 12971.32
1992/04/30 13806.16 13086.76
1992/05/31 13930.01 13240.79
1992/06/30 14121.02 13462.97
1992/07/31 14612.72 13866.59
1992/08/31 14499.57 13731.39
1992/09/30 14590.06 13821.20
1992/10/31 14413.98 13685.33
1992/11/30 14702.87 13930.44
1992/12/31 14880.13 14072.67
1993/01/31 15131.82 14236.33
1993/02/28 15666.14 14751.26
1993/03/31 15502.74 14595.34
1993/04/30 15667.14 14742.61
1993/05/31 15796.88 14825.46
1993/06/30 16050.15 15072.90
1993/07/31 16062.07 15092.64
1993/08/31 16475.76 15406.87
1993/09/30 16703.91 15582.36
1993/10/31 16712.87 15612.43
1993/11/30 16549.54 15474.88
1993/12/31 16931.69 15801.56
1994/01/31 17128.85 15982.01
1994/02/28 16676.14 15568.08
1994/03/31 15787.24 14934.15
1994/04/30 15892.00 15060.79
1994/05/31 15985.98 15191.37
1994/06/30 15927.12 15098.55
1994/07/31 16214.42 15375.30
1994/08/31 16239.90 15428.50
1994/09/30 15985.49 15202.01
1994/10/31 15705.27 14932.02
1994/11/30 15200.35 14662.05
1994/12/31 15568.75 14984.76
1995/01/31 16094.70 15413.03
1995/02/28 16528.36 15861.24
1995/03/31 16615.26 16043.48
1995/04/30 16669.87 16062.42
1995/05/31 17203.32 16574.97
1995/06/30 17068.37 16430.77
1995/07/31 17127.09 16586.53
1995/08/31 17303.97 16796.85
1995/09/30 17476.54 16903.17
1995/10/31 17682.72 17148.94
1995/11/30 18033.36 17433.44
1995/12/31 18193.39 17600.98
1996/01/31 18293.88 17733.87
1996/02/29 18252.69 17614.16
1996/03/31 17882.56 17389.05
1996/04/30 17810.22 17339.84
1996/05/31 17745.38 17332.91
1996/06/30 17954.17 17521.66
1996/07/31 18073.34 17681.11
1996/08/31 18114.54 17676.87
1996/09/30 18278.47 17924.34
1996/10/31 18462.27 18127.07
1996/11/30 18820.75 18458.79
1996/12/31 18756.19 18381.26
1997/01/31 18816.68 18416.01
1997/02/28 19010.01 18585.06
1997/03/31 18809.97 18337.33
1997/04/30 18961.39 18490.81
1997/05/31 19197.23 18768.91
1997/06/30 19446.83 18968.80
1997/07/31 20009.63 19494.24
1997/08/31 19833.22 19311.57
1997/09/30 20084.27 19540.80
1997/10/31 20205.93 19666.45
1997/11/30 20340.43 19782.09
1997/12/31 20673.94 20070.71
1998/01/31 20878.33 20277.84
1998/02/28 20904.52 20283.92
1998/03/31 20940.05 20301.77
1998/04/30 20834.72 20210.21
1998/05/31 21157.05 20530.14
1998/06/30 21237.23 20611.03
1998/07/31 21286.13 20662.76
1998/08/31 21611.00 20982.00
1998/09/30 21882.90 21243.44
1998/10/31 21879.75 21243.01
1998/11/30 21945.78 21317.57
1998/12/31 21978.84 21371.30
1999/01/31 22224.19 21625.40
1999/02/28 22090.74 21530.90
1999/03/31 22091.81 21560.82
1999/04/30 22142.39 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990514 104950 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Institutional
Class on April 30, 1989. As the chart shows, by April 30, 1999, the
value of the investment would have grown to $22,142 - a 121.42%
increase on the initial investment. For comparison, look at how the
Lehman Brothers Municipal Bond Index did over the same period. With
dividends reinvested, the same $10,000 would have grown to $21,615 - a
116.15% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 2.32% 5.06% 6.01% 5.76% 2.01%
Capital returns -1.12% 3.22% 3.43% -1.35% 1.54%
Total returns 1.20% 8.28% 9.44% 4.41% 3.55%
</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.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.84(cents) 28.94(cents) 57.58(cents)
Annualized dividend rate 4.75% 4.69% 4.64%
30-day annualized yield 4.09% - -
30-day annualized 6.39% - -
tax-equivalent yield
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 $12.40 over the past
one month, $12.45 over the past six months, and $12.42 over the past
one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all bond funds
based on the yields of the bonds in the fund, averaged over the past
30 days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The tax-equivalent yield
shows what you would have to earn on a taxable investment to equal the
class' tax-free yield, if you're in the 36% federal tax bracket, but
does not reflect payment of the federal alternative minimum tax, if
applicable.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Municipal bonds outperformed
Treasuries during the six-month
period that ended April 30, 1999.
During that time, the Lehman Brothers
Municipal Bond Index - an index
of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned 1.75%.
In contrast, the Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable bond
performance - gained 0.69%.
During the six-month period, the
ratio of municipal bond yields to
Treasury bond yields improved.
While Treasury yields rose during
the first quarter of the year,
municipal yields remained
relatively stable, due in part to an
improving supply and demand
environment. Municipal bond
issuance was off its torrid pace
experienced last year (which was
just shy of the record $292 billion
issued in 1993), while retail investor
demand strengthened in 1999,
helping municipal bonds
outperform Treasuries. Although the
municipal market managed to
produce marginal returns over the
past six months, bond market
sentiment turned bearish late in the
period as strong economic reports
indicated that the U.S. economy
continued to grow at brisk pace. The
strength of the domestic economy
combined with a perception of
improving overseas markets caused
investors to once again focus on the
threat of inflation and the prospects of
higher interest rates.
(photograph of Christine Thompson)
An interview with Christine Thompson, Portfolio Manager of Fidelity
Advisor Municipal Income Fund
Q. HOW DID THE FUND PERFORM, CHRISTINE?
A. For the six-month period ended April 30, 1999, the fund's
Institutional Class shares had a total return of 1.20%. To get a sense
of how the fund did relative to its competitors, the general municipal
debt funds average returned 1.19% for the same six-month period,
according to Lipper Inc. Additionally, the Lehman Brothers Municipal
Bond Index - which tracks the types of securities in which the fund
invests - returned 1.75% for the same six-month period. For the
12-month period that ended April 30, 1999, the fund's Institutional
Class shares had a total return of 6.28%. That compared to the general
municipal debt funds average's 5.78% return and the Lehman Brothers
index's 6.95% return for the same 12-month period.
Q. HOW DID YOU POSITION THE FUND DURING THE PERIOD?
A. I continued to emphasize intermediate-term bonds with maturities of
between five and 15 years. I also kept the fund's investments
concentrated in higher-quality bonds - those rated A or higher.
Throughout the first quarter of 1999, municipal bond investors became
increasingly discriminating on the basis of quality. As a result,
lower-quality securities - including Baa-rated issues in the
investment-grade range - underperformed. The fund's concentration in
higher-quality bonds - those rated A or higher - helped its
performance over the past six months. However, some of the fund's
Baa-rated holdings, particularly those in the hospital sector, were
disappointments during the period.
Q. WHY DID HOSPITALS PERFORM POORLY?
A. Cutbacks in federally funded health care programs and the growing
competitiveness of the industry is putting pressure on hospitals
nationwide. That's why investing in the health care sector requires
thorough research. In this difficult operating environment, my
strategy is to be opportunistic, relying on Fidelity's research to
identify those institutions that will navigate through these problems
and ultimately emerge as the successful, dominant hospitals in their
respective markets. I believe selective hospital issues will be among
the market's strongest performers in coming periods.
Q. WHERE DID YOU FIND ATTRACTIVE OPPORTUNITIES DURING THE PAST SIX
MONTHS?
A. I added to the fund's stake in student loan bonds, which offered
high yields relative to comparably rated bonds from other sectors.
Investors demand higher yields from student loan bonds because there
is a risk that the securities will be prepaid prior to maturity as
borrowers pay off student loans early. Some student loan bonds offered
above-average return potential even after taking into account that
prepayment risk. I also added to the fund's stake in education bonds,
primarily those backed by colleges and universities. Higher education
tends to be resistant to an economic slowdown, so bonds issued by
colleges and universities help diversify the fund away from the more
cyclical sectors - such as state and local general obligation bonds -
which make up the vast majority of the municipal market. What's more,
demographic trends favor the education sector because one of the
fastest-growing segments of the American population is at or is
approaching college age.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. Although they gained some ground during the past six months,
municipals were priced attractively compared to their U.S. Treasury
counterparts at the end of the period. One indication of munis' cheap
prices was their yields, which were roughly 90% of Treasury yields.
Historically, municipals yield between 65% and 85% of Treasuries. If
municipal bond yields - which move in the opposite direction of their
prices - move back to their historical relationship with Treasuries
because of more favorable supply and demand conditions, they are
likely to perform relatively well. One trend we've seen lately is that
municipals have outperformed Treasuries when interest rates rise, but
tend to lag Treasuries when interest rates decline. I believe that
trend will continue to define the municipal market over the near term.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks to provide a high
current yield exempt from
federal income tax
START DATE: September 16,
1987
SIZE: as of April 30, 1999,
more than $455 million
MANAGER: Christine Thompson,
since 1998; joined Fidelity
in 1985
CHRISTINE THOMPSON ON Y2K
AND ITS POTENTIAL EFFECTS ON
MUNICIPAL BOND ISSUERS:
"Y2K may pose a number of
challenges for municipal bond
issuers. My primary focus with
regard to Y2K-related issues is
how they will impact the credit
quality of various issuers.
Fidelity's research team asks
issuers a number of things,
including how vulnerable they
believe they are to potential
problems, what their short-term
contingency plans are in the event
of any problems and what
long-term solutions they've
developed. What we've found so
far is that there are varying
degrees of sophistication among
issuers, with some much more
poised to deal with potential
problems than others. That's why
we carefully consider Y2K-related
issues in our routine security
selection process."
(solid bullet) General obligation bonds
(GOs) made up the fund's largest
sector concentration at 20.7% of
investments at the end of the
period. A GO is backed by the full
faith and credit - which includes
the taxing power - of a city,
county, state or other issuers, and
is paid with general revenue,
including taxes.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE HOLDINGS 6 MONTHS AGO
New York 19.0 20.6
Massachusetts 6.8 6.0
Colorado 5.2 5.8
California 5.1 6.6
Michigan 5.0 5.7
TOP FIVE SECTORS AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 20.7 20.5
Electric Utilities 17.6 19.1
Health Care 14.0 13.4
Transportation 12.6 12.0
Escrowed/Pre-Refunded 7.7 11.3
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 12.9 13.3
</TABLE>
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 APRIL 30, 1999
6 MONTHS AGO
Years 6.4 6.7
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.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 1999
Aaa 43.9%
Aa, A 28.6%
Baa 20.8%
Not Rated 4.8%
Short-term
investments 1.9%
Row: 1, Col: 1, Value: 43.9
Row: 1, Col: 2, Value: 28.6
Row: 1, Col: 3, Value: 20.8
Row: 1, Col: 4, Value: 4.8
Row: 1, Col: 5, Value: 1.9
AS OF OCTOBER 31, 1998
Aaa 43.0%
Aa, A 27.3%
Baa 23.0%
Not Rated 5.6%
Short-term
investments 1.1%
Row: 1, Col: 1, Value: 43.0
Row: 1, Col: 2, Value: 27.3
Row: 1, Col: 3, Value: 23.0
Row: 1, Col: 4, Value: 5.6
Row: 1, Col: 5, Value: 1.1
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT APRIL 30, 1999
AND OCTOBER 31, 1998 ACCOUNT FOR 0% AND 5.4% RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 98.1%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALABAMA - 1.0%
Shelby County Gen. Oblig. - $ 4,000,000 $ 4,417,560
Series A, 7.7% 8/1/17
ALASKA - 1.9%
Alaska Hsg. Fin. Corp. Rfdg. Aa2 5,490,000 5,598,977
Series A 5.4% 12/1/13
Alaska Student Ln. Corp.
Student Ln. Rev. Series A:
5.25% 7/1/07 (AMBAC Insured) Aaa 1,500,000 1,574,130
(d)
5.45% 7/1/09 (AMBAC Insured) Aaa 1,500,000 1,578,705
(d)
8,751,812
ARIZONA - 1.0%
Maricopa County Ind. Dev. A2 4,495,000 4,501,113
Auth. Health Facilities Rev.
Rfdg. (Catholic Healthcare
West Proj.) Series A 4.1%
7/1/03
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Aaa 1,095,000 1,192,893
Facilities Charge Rev. 5.65%
5/1/16 (AMBAC Insured) (d)
CALIFORNIA - 5.1%
California Dept. of Wtr. Aa2 2,190,000 2,322,670
Resources Wtr. Sys. Rev.
(Central Valley Proj.)
Series J 2, 6.125% 12/1/13
California Gen. Oblig. 6% Aa3 2,500,000 2,841,300
10/1/09
California Hsg. Fin. Agcy.
Rev.:
(Home Mtg.):
Series B, 5.2% 8/1/26 (MBIA Aaa 925,000 941,992
Insured) (d)
Series R, 6.15% 8/1/27 (MBIA Aaa 1,500,000 1,572,855
Insured) (d)
Rfdg. (Home Mtg.) Series A, Aaa 135,000 137,931
5.7% 8/1/16 (MBIA Insured)
California Pub. Works Board
Lease Rev. Rfdg.:
(California Univ. Proj.) A1 2,000,000 2,139,900
Series A, 5.5% 10/1/13
(Dept. of Corrections State Aaa 1,750,000 1,761,218
Prisons) Series A, 5%
12/1/19 (AMBAC Insured)
(Various California Univ. Aa3 1,500,000 1,638,540
Projs.) Series A, 5.5% 6/1/14
Central Valley Fing. Auth. BBB- 4,500,000 4,788,495
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6%
7/1/09
Foothill/Eastern Trans. Baa3 2,000,000 926,660
Corridor Agcy. Toll Road
Rev. (Cap. Appreciation) Sr.
Lien Series A, 0% 1/1/14
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CALIFORNIA - CONTINUED
Northern California Pwr. Aaa $ 750,000 $ 844,073
Agcy. Pub. Pwr. Rev. (Proj.
No. 3) 5.85% 7/1/10 (AMBAC
Insured) (Escrowed to
Maturity) (e)
Sacramento City Fing. Auth. Aaa 2,000,000 2,115,720
Lease Rev. Rfdg. Series A,
5.4% 11/1/20 (AMBAC Insured)
Sacramento City Fing. Auth. Aaa 1,225,000 688,413
Rev. (Cap. Appreciation)
Series B, 0% 11/1/11 (MBIA
Insured)
Sacramento Cogeneration Auth. BBB- 500,000 546,380
Cogeneration Proj. Rev.
(Procter & Gamble) 6.375%
7/1/10
23,266,147
COLORADO - 5.2%
Arapaho County Cap. Impt. Aaa 7,800,000 1,252,836
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/2005 @ 20.8626) (e)
Colorado Health Facilities
Auth. Rev.:
(Nat'l. Benevolent Assoc. Baa1 1,360,000 1,469,208
Proj.) Series A, 6.5% 6/1/25
Rfdg. (Rocky Mountain
Adventist):
6.625% 2/1/13 Baa2 6,900,000 7,095,408
6.625% 2/1/22 Baa2 4,000,000 4,113,280
Colorado Springs Arpt. Rev.
(Cap. Appreciation) Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 1,061,618
0% 1/1/08 (MBIA Insured) Aaa 870,000 595,324
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Aaa 2,115,000 1,843,032
Insured) (d)
Series D, 0% 11/15/04 (MBIA Aaa 1,700,000 1,349,630
Insured) (d)
Series A:
7.5% 11/15/23 (d) Baa1 2,070,000 2,354,749
7.5% 11/15/23 (Pre-Refunded Aaa 430,000 510,169
to 11/15/2004 @ 102) (d)(e)
8.5% 11/15/23 (d) Baa1 1,000,000 1,078,170
Series C, 6.55% 11/15/02 (d) Baa1 1,000,000 1,071,890
23,795,314
CONNECTICUT - 1.7%
Connecticut Spl. Tax Oblig. Aaa 1,500,000 1,630,350
Rev. (Trans. Infrastructure)
Series A, 5.5% 11/1/06 (FSA
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONNECTICUT - CONTINUED
Connecticut Health & Edl. AAA $ 2,400,000 $ 2,636,184
Facilities Auth. Rev. (New
Britain Memorial Hosp.)
Series A, 7.5% 7/1/06
(Pre-Refunded to 7/1/2002 @
102) (e)
Eastern Connecticut Resources BBB+ 3,350,000 3,296,769
Recovery Auth. Solid Waste
Rev. (Wheelabrator Lisbon
Proj.) Series A, 5.5% 1/1/20
(d)
7,563,303
DISTRICT OF COLUMBIA - 3.2%
District of Columbia:
(Nat'l. Academy of Science Aaa 2,500,000 2,432,600
Proj.) Series A, 5% 1/1/19
(AMBAC Insured)
Rfdg. (Georgetown Univ.) Aaa 2,000,000 2,228,900
Series A, 5.95% 4/1/14 (MBIA
Insured)
District of Columbia Gen.
Oblig. Rfdg.:
Series A:
6% 6/1/07 (MBIA Insured) Aaa 1,850,000 2,041,623
6% 6/1/07 (MBIA Insured) Aaa 150,000 166,907
(Escrowed to Maturity) (e)
Series B, 5% 6/1/05 (MBIA Aaa 4,135,000 4,312,143
Insured)
District of Columbia Hosp. - 940,000 1,004,296
Rev. (Hosp. for Sick
Children) Series A, 8.875%
1/1/21
District of Columbia Redev.
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.:
5.3% 11/1/99 Baa 1,700,000 1,712,631
5.625% 11/1/10 Baa 510,000 526,147
14,425,247
FLORIDA - 1.9%
Broward County Resource A3 545,000 572,888
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 5,000,000 5,419,000
Rfdg. Series D, 5.75%
10/1/09 (AMBAC Insured) (d)
Florida Mid-Bay Bridge Auth. - 2,500,000 2,762,550
Rev. Series A, 7.5% 10/1/17
8,754,438
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
HAWAII - 1.9%
Hawaii Series CN, 6.25% Aaa $ 4,515,000 $ 4,893,086
3/1/03 (FGIC Insured)
Honolulu City & County Gen. Aaa 3,500,000 3,662,470
Oblig. Rfdg. Series C, 5%
7/1/07 (FGIC Insured)
8,555,556
IDAHO - 0.0%
Boise Urban Renewal Agcy. BBB+ 180,000 183,055
Parking Rev. Series A-C,
8.125% 9/1/15
ILLINOIS - 4.8%
Chicago Midway Arpt. Rev. Aaa 1,500,000 1,539,855
Series A, 5.5% 1/1/29 (MBIA
Insured)
Chicago O'Hare Int'l. Arpt.
Rev.:
(Passenger Facility Charge) Aaa 2,500,000 2,675,400
Series A, 5.6% 1/1/10 (AMBAC
Insured)
Rfdg. (Gen. Arpt. Proj.)
Series A:
6.25% 1/1/09 (AMBAC Insured) Aaa 3,700,000 4,129,903
(d)
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,554,910
Chicago O'Hare Int'l. Arpt. Baa2 1,000,000 1,180,180
Spl. Facilities Rev. Rfdg.
(American Airlines, Inc.
Proj.) 8.2% 12/1/24
Chicago School Reform Board Aaa 5,000,000 5,244,100
5.75% 12/1/27 (AMBAC Insured)
Du Page County Cmnty. High Aaa 1,640,000 1,810,544
School District #99 (Downers
Grove) Series A, 6% 2/1/06
(AMBAC Insured)
Illinois Edl. Facilities Aaa 1,200,000 1,325,748
Auth. Rfdg. (DePaul Univ.)
6% 10/1/05 (AMBAC Insured)
Illinois Health Facilities
Auth. Rev. (Memorial Hosp.):
7.125% 5/1/10 (Pre-Refunded - 1,000,000 1,112,180
to 5/1/2002 @ 102) (e)
7.25% 5/1/22 (Pre-Refunded to - 1,000,000 1,115,680
5/1/2002 @ 102) (e)
21,688,500
INDIANA - 0.2%
Indianapolis Econ. Dev. & Baa1 1,000,000 1,098,100
Impt. Rev. Rfdg. (Nat'l.
Benevolent Assoc.) 7.625%
10/1/22
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
KANSAS - 0.6%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth):
5% 12/1/13 (MBIA Insured) Aaa $ 2,390,000 $ 2,419,039
5% 12/1/14 (MBIA Insured) Aaa 500,000 507,670
2,926,709
KENTUCKY - 1.8%
Kenton County Arpt. Board
Arpt. Rev.:
(Cincinnati/Northern Kentucky Aaa 5,570,000 6,066,733
Int'l.) Series A, 6% 3/1/05
(MBIA Insured) (d)
(Spl. Facilities Delta Baa3 2,000,000 2,169,800
Airlines, Inc. Proj.)
Series A, 7.5% 2/1/20 (d)
8,236,533
MARYLAND - 1.1%
Maryland Health & Higher Edl.
Facilities Auth. Rev.:
(Good Samaritian Hosp.):
5.75% 7/1/13 (AMBAC Insured) Aaa 1,015,000 1,122,935
5.75% 7/1/13 (Escrowed to A1 1,665,000 1,820,345
Maturity) (e)
Rfdg. (John Hopkins Univ.) 6% Aa2 2,000,000 2,271,400
7/1/10
5,214,680
MASSACHUSETTS - 6.8%
Martha's Vineyard Land Bank Aaa 1,000,000 1,002,500
Rev. Series A, 5.125% 5/1/18
(FSA Insured)
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Bentley College) Series J, Aaa 1,265,000 1,260,345
5% 7/1/17 (MBIA Insured)
(Fairview Extended Care) Aaa 5,000,000 5,670,700
Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/2001 @
103) (e)
(Hebrew Rehab. Ctr. for Aged) A 2,000,000 1,992,720
Series C, 5.25% 7/1/17
(New England Med. Ctr. Hosp.) Aaa 500,000 503,915
Series G, 5.375% 7/1/24
(MBIA Insured)
Massachusetts Ind. Fin. Agcy. BBB 1,000,000 1,006,470
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.7% 12/1/03
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy.
Rev.:
(Atlanticare Med. Ctr.) - $ 700,000 $ 736,750
Series B, 10.125% 11/1/14
(Pre-Refunded to 11/1/99 @
102)
(Cap. Appreciation)
(Massachusetts Biomedical)
Series A 2:
0% 8/1/08 - 800,000 529,792
0% 8/1/10 - 4,500,000 2,617,605
Rfdg. (Emerson College) Issue - 1,000,000 1,103,210
A, 8.9% 1/1/18 (Pre-Refunded
to 1/1/2001 @ 102) (e)
Massachusetts Muni. Wholesale Baa2 1,000,000 1,086,650
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series C, 6.5%
7/1/03
Massachusetts Tpk. Auth. Aaa 5,000,000 4,936,000
Metro Hwy. Sys. Rev. Series
A, 5.125% 1/1/23 (MBIA
Insured)
New England Ed. Ln. Marketing
Corp.:
Rfdg. 5.625% 7/1/04 (d) A1 3,880,000 4,099,336
Student Ln. Rev. Issue A, Aaa 4,005,000 4,196,439
5.8% 3/1/02
30,742,432
MICHIGAN - 4.3%
Detroit Gen. Oblig. Rfdg. Baa1 1,710,000 1,745,722
Series B, 6% 4/1/00
Michigan Bldg. Auth. Rev. Aaa 3,000,000 3,319,710
(Facilities Prog.) Series
1, 6% 10/1/05 (AMBAC Insured)
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Med. Ctr.)
Series A:
5.5% 10/1/18 Baa2 4,250,000 4,097,085
5.5% 10/1/27 Baa2 3,000,000 2,851,470
(Pontiac Osteopathic Hosp.) Baa2 2,000,000 1,982,040
Series A, 6% 2/1/24
Michigan Strategic Fund Rev. Aaa 3,000,000 3,006,630
Rfdg. (Detroit Edison Co.
Proj.) Series A, 5.55%
9/1/29 (MBIA Insured) (d)(f)
Royal Oak Hosp. Fin. Auth. Aa3 2,310,000 2,599,489
Rev. Rfdg. (William Beaumont
Hosp.) 6.25% 1/1/09
19,602,146
MINNESOTA - 2.0%
Minneapolis & Saint Paul Hsg. Aaa 1,800,000 1,739,844
& Redev. Auth. Health Care
Sys. Rev. Rfdg. (Healthspan
Corp.) Series A, 4.75%
11/15/18 (AMBAC Insured)
Minnesota Hsg. Fin. Agcy. Aa2 2,000,000 2,103,500
(Single Family Mtg.) Series
D, 6.4% 7/1/15 (d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MINNESOTA - CONTINUED
Rochester Health Care AA+ $ 2,000,000 $ 2,076,280
Facilities Rev. (Mayo
Foundation) Series A, 5.5%
11/15/27
Western Minnesota Muni. Pwr. Aaa 3,000,000 3,364,710
Agcy. Pwr. Supply Rev. Rfdg.
Series A, 6.25% 1/1/06
(AMBAC Insured)
9,284,334
MISSISSIPPI - 0.6%
Mississippi Gen. Oblig. 6.2% Aaa 2,245,000 2,534,313
2/1/08 (Escrowed to
Maturity) (e)
Mississippi Home Corp. Single Aaa 175,000 184,357
Family Rev. Rfdg. Series A,
9.25% 3/1/12 (FGIC Insured)
2,718,670
NEBRASKA - 1.4%
Nebraska Pub. Pwr. District
Rev. Rfdg.:
(Elec. Sys.) Series A, 6% A1 1,500,000 1,613,235
1/1/06 (Pre-Refunded to
1/1/2002 @ 102) (e)
(Pwr. Supply Sys.) Series C, A1 4,590,000 4,854,522
5% 1/1/17 (Pre-Refunded to
7/1/2004 @ 101) (e)
6,467,757
NEVADA - 0.6%
Las Vegas Downtown Redev.
Agcy. Tax Increment Rev.
(Fremont Street Proj.)
Series A:
6% 6/15/10 BBB+ 1,500,000 1,547,820
6.1% 6/15/14 BBB+ 1,000,000 1,048,610
2,596,430
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & - 485,000 518,756
Health Facilities Auth. Rev.
(Littleton Hosp. Assoc.,
Inc.) Series A, 9.5% 5/1/20
(Pre-Refunded to 5/1/2000 @
102) (e)
NEW JERSEY - 2.0%
New Jersey Edl. Facilities
Auth. Rev. Rfdg. (Seton Hall
Univ. Proj.):
5% 7/1/18 (AMBAC Insured) (f) Aaa 1,000,000 988,960
5.25% 7/1/07 (AMBAC Insured) Aaa 1,610,000 1,717,886
(f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Trans. Trust Fund Aaa $ 4,000,000 $ 4,278,160
Auth. Rfdg. (Trans. Sys.)
Series A, 5.5% 6/15/11
(MBIA Insured)
Passaic County Util. Auth. Aaa 2,500,000 2,246,775
Solid Waste Disp. Rev. Rfdg.
(Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
9,231,781
NEW MEXICO - 1.8%
Albuquerque Arpt. Rev. Rfdg.:
6.7% 7/1/18 (AMBAC Insured) Aaa 3,970,000 4,537,273
(d)
6.75% 7/1/11 (AMBAC Insured) Aaa 1,805,000 2,153,419
(d)
New Mexico Edl. Assistance Aaa 1,350,000 1,378,080
Foundation Student Ln. Rev.
Series B, 5.25% 4/1/05
(AMBAC Insured) (d)
8,068,772
NEW YORK - 19.0%
Long Island Pwr. Auth. Elec.
Sys. Rev.:
Series A:
5.125% 12/1/22 (FSA Insured) Aaa 9,390,000 9,381,831
5.5% 12/1/29 Baa1 2,400,000 2,454,912
4% 4/1/00 Baa1 2,250,000 2,256,885
Muni. Assistance Corp. for Aa2 5,000,000 5,522,800
New York City Rfdg. Series
H, 6% 7/1/05
New York City Gen. Oblig.:
Rfdg.:
Series A, 7% 8/1/03 A3 2,000,000 2,230,800
Series B:
5.7% 8/15/02 A3 1,130,000 1,192,659
5.7% 8/15/02 (Escrowed to A3 35,000 37,151
Maturity) (e)
6.75% 8/15/03 A3 2,000,000 2,213,280
Series E, 6.5% 2/15/04 (FGIC Aaa 1,500,000 1,656,195
Insured)
Series D, 5.5% 2/15/04 A3 5,000,000 5,298,800
Series H, 6.875% 2/1/02 A3 240,000 258,163
New York City Ind. Dev. Agcy. Aaa 1,000,000 1,092,790
Ind. Dev. Rev. (Japan
Airlines Co. Ltd. Proj.)
Series 1991, 6% 11/1/15 (FSA
Insured) (d)
New York City Ind. Dev. Agcy. A3 8,680,000 9,345,409
Spl. Facilities Rev. (Term.
One Group Assoc. Proj.) 5.9%
1/1/06 (d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Sys. Rev.
Series B:
5.5% 6/15/27 (MBIA Insured) Aaa $ 3,500,000 $ 3,606,715
5.75% 6/15/26 A1 5,000,000 5,295,250
5.75% 6/15/29 A1 4,000,000 4,236,200
New York Metro. Trans. Auth.
Rfdg. (Svc. Contract) Series
R:
5% 7/1/02 Baa1 2,370,000 2,447,997
5% 7/1/03 Baa1 2,490,000 2,587,982
New York State Dorm. Auth.
Rev.:
(Consolidated City Univ. Baa1 3,000,000 3,227,820
Sys.) Series A, 5.7% 7/1/05
(New York Univ.) Series A, Aaa 1,000,000 1,119,700
5.75% 7/1/14 (MBIA Insured)
Rfdg. (Jamaica Hosp.) Series Aaa 6,150,000 6,341,757
F, 5.2% 2/15/14 (MBIA
Insured)
New York State Envir.
Facilities Corp.:
Clean Wtr. & Drinking Wtr.
Rev.:
Series F, 4.875% 6/15/18 Aa2 1,000,000 971,430
4.875% 6/15/20 Aa2 1,300,000 1,250,990
Poll. Cont. Rev. 5.125% Aa1 1,000,000 1,004,120
6/15/19
New York State Local Govt. A3 7,500,000 7,946,100
Assistance Corp. Rfdg.
Series C, 5.5% 4/1/17
New York State Thruway Auth. Baa1 2,000,000 2,186,160
Svc. Contract Rev. (Local
Hwy. & Bridges) 5.9% 4/1/07
Suffolk County Wtr. Auth. Aaa 1,000,000 1,124,450
Wtrwks. Rev. Rfdg. 6% 6/1/17
(MBIA Insured)
86,288,346
NORTH CAROLINA - 4.4%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.
Rfdg.:
Series A, 5.5% 1/1/05 (MBIA Aaa 4,000,000 4,264,480
Insured)
Series B:
6% 1/1/06 Baa1 4,175,000 4,449,590
7.25% 1/1/07 Baa1 1,000,000 1,155,470
Series C:
5.125% 1/1/03 Baa1 2,600,000 2,667,262
5.25% 1/1/04 Baa1 1,365,000 1,408,680
5.5% 1/1/07 (MBIA Insured) Aaa 2,000,000 2,145,780
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NORTH CAROLINA - CONTINUED
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.75% 1/1/02 A3 $ 1,750,000 $ 1,825,425
6.25% 1/1/17 (AMBAC Insured) Aaa 1,150,000 1,245,128
6.25% 1/1/17 (AMBAC Insured) Aaa 650,000 716,105
(Pre-Refunded to 1/1/2003 @
102) (e)
19,877,920
OHIO - 4.5%
Cincinnati Student Ln. Fdg. - 1,530,000 1,592,699
Corp. Student Ln. Rev.
Series B, 8.875% 8/1/08 (d)
Franklin County Hosp. Rev. Baa3 5,000,000 4,957,150
(Doctor's Ohio Health Corp.)
Series A 4.75% 12/1/03
Gateway Economic Dev. Corp. - 3,000,000 3,141,600
Greater Cleveland Stadium
Rev. 6.5% 9/15/14 (d)
Marion County Hosp. Impt. BBB+ 1,000,000 1,028,100
Rev. Rfdg. (Comnty. Hosp.
Proj.) 5.6% 5/15/01
Ohio Tpk. Commission Tpk. Aaa 5,000,000 5,353,650
Rev. Rfdg. Series A, 5.5%
2/15/24 (FGIC Insured)
Ohio Wtr. Dev. Auth. Poll.
Cont. Facilities Rev. (Wtr.
Cont. Ln. Fund):
State Match Series, 6.5% Aaa 1,835,000 2,062,687
12/1/04 (MBIA Insured)
Wtr. Quality Series, 5.625% Aaa 2,000,000 2,168,800
6/1/06 (MBIA Insured)
20,304,686
OKLAHOMA - 1.2%
Sapulpa Muni. Auth. Util. Aaa 1,000,000 1,059,450
Rev. Rfdg. 5.75% 4/1/23
(FGIC Insured)
Tulsa Muni. Arpt. Trust Rev. Baa2 4,000,000 4,408,240
(American Airlines Corp.)
7.35% 12/1/11
5,467,690
PENNSYLVANIA - 4.1%
Allegheny County Ind. Dev. - 325,000 347,926
Auth. Rev. (YMCA) Series A,
8.75% 3/1/10
Butler County Ind. Dev. Auth. A 3,000,000 3,098,430
Health Ctr. Rev. Rfdg.
(Sherwood Oaks Proj.) 5.75%
6/1/11
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health):
6.8% 11/15/14 Baa2 3,250,000 3,508,440
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
PENNSYLVANIA - CONTINUED
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health): - continued
6.8% 11/15/23 Baa2 $ 1,000,000 $ 1,079,520
Delaware County Auth. Rev.
(Riddle Village Proj.):
8.25% 6/1/22 (Escrowed to Aaa 2,250,000 2,714,153
Maturity) (e)
8.75% 6/1/10 (Pre-Refunded to Aaa 2,870,000 3,342,058
6/1/2002 @ 102) (e)
Pennsylvania Gen. Oblig. Aa3 3,000,000 3,261,420
Second Series, 5.8% 7/1/04
Pennsylvania Ind. Dev. Auth. Aaa 1,345,000 1,489,130
Rev. (Econ. Dev.) 5.8%
7/1/09 (AMBAC Insured)
18,841,077
RHODE ISLAND - 1.1%
Rhode Island Port Auth. & Aaa 4,000,000 4,915,000
Economic Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14
(FSA Insured) (d)
SOUTH CAROLINA - 0.4%
Piedmont Muni. Pwr. Agcy. Aaa 1,715,000 1,899,928
Elec. Rev. Rfdg. Series A,
6.25% 1/1/05 (FGIC Insured)
TENNESSEE - 0.2%
Metro Govt. Nashville & Aaa 1,000,000 740,830
Davidson County Elec. Rev.
(Cap. Appreciation) Series
A, 0% 5/15/06 (MBIA Insured)
TEXAS - 3.6%
Conroe Independent School Aaa 750,000 478,455
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/09
Dallas-Fort Worth Int'l. Baa1 6,000,000 6,380,340
Arpt. Facility Impt. Corp.
Rev. (American Airlines,
Inc.) 7.5% 11/1/25 (d)
Midlothian Independent School Aaa 1,845,000 1,512,513
District Rfdg. (Cap.
Appreciation) 0% 2/15/04
San Antonio Elec. & Gas Rev.
Rfdg.:
5.5% 2/1/20 Aa1 1,425,000 1,475,274
5.5% 2/1/20 (Pre-Refunded to Aa1 75,000 81,768
2/1/2007 @ 101) (e)
San Antonio Gen. Oblig. Aa2 1,390,000 1,397,353
Series 2000 5% 2/1/11 (f)
Texas Pub. Fin. Auth. Series Aa2 5,000,000 5,040,650
A, 5% 10/1/14
16,366,353
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTAH - 2.8%
Intermountain Pwr. Agcy. Pwr.
Supply Sys. Rev.:
Rfdg.:
Series A, 6.5% 7/1/09 (AMBAC Aaa $ 1,000,000 $ 1,166,500
Insured)
Series B, 5.75% 7/1/16 (MBIA Aaa 2,500,000 2,700,450
Insured)
Series D, 5% 7/1/21 (MBIA Aaa 1,200,000 1,168,608
Insured)
Spl. Oblig. 6th Series B, 6% Aaa 7,000,000 7,647,640
7/1/16 (MBIA Insured)
South Salt Lake City Ind. - 250,000 271,638
Rev. (Price Savers Wholesale
Club Proj.) 9% 11/15/13
12,954,836
VIRGINIA - 0.6%
Henrico County Wtr. & Swr. Aa2 1,750,000 1,731,923
Rev. Rfdg. 5% 5/1/28
Loudoun County Ind. Dev. AAA 1,000,000 1,174,860
Auth. Residential Care
Facilities Rev. (Falcons
Landing Proj.) Series A,
9.25% 11/1/04 (Escrowed to
Maturity) (e)
2,906,783
WASHINGTON - 4.9%
King County Gen. Oblig. Aa1 3,990,000 4,375,873
Series D, 5.75% 12/1/11
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series A:
4.8% 7/1/04 Aa1 2,000,000 2,063,740
5.9% 7/1/04 Aa1 1,000,000 1,082,540
5.4% 7/1/12 Aa1 14,000,000 14,751,934
22,274,087
TOTAL MUNICIPAL BONDS 446,639,574
(Cost $425,013,980)
MUNICIPAL NOTES - 0.7%
MICHIGAN - 0.7%
Michigan Muni. Bond Auth. 3,000,000 3,008,640
Rev. RAN Series 1998 D1,
4.25% 8/27/99 (Cost
$3,007,552)
CASH EQUIVALENTS - 1.2%
SHARES VALUE (NOTE 1)
Municipal Central Cash Fund 5,495,204 $ 5,495,204
(b)(c) (Cost $5,495,204)
TOTAL INVESTMENT IN $ 455,143,418
SECURITIES - 100%
(Cost $433,516,736)
</TABLE>
SECURITY TYPE ABBREVIATION
RAN - REVENUE ANTICIPATION NOTE
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(c) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.54%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(e) Security collateralized by an amount sufficient to pay interest
and principal.
(f) Security purchased on a delayed delivery basis.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.2% AAA, AA, A 69.2%
Baa 17.9% BBB 17.0%
Ba 0.0% BB 1.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 4.8%.
The distribution of municipal securities
by revenue source, as a percentage of
total value of investments in securities,
is as follows:
General Obligations 20.7%
Electric Utilities 17.6
Health Care 14.0
Transportation 12.6
Escrowed/Pre-Refunded 7.7
Industrial Development 6.3
Water & Sewer 5.9
Education 5.5
Others (individually less 9.7
than 5%)
100.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $433,516,736. Net unrealized appreciation
aggregated $21,626,682, of which $22,346,283 related to appreciated
investment securities and $719,601 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $15,845,000 of which $2,066,000, $7,511,000 and
$6,268,000 will expire on October 31, 2002, 2003 and 2004,
respectively.
At October 31, 1998, the fund was required to defer approximately
$756,000 of losses on futures contracts.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 455,143,418
value (cost $433,516,736) -
See accompanying schedule
Cash 4,281,064
Receivable for investments 3,573,719
sold
Receivable for fund shares 765,881
sold
Interest receivable 7,429,063
Other receivables 22,338
TOTAL ASSETS 471,215,483
LIABILITIES
Payable for investments $ 6,554,847
purchased Regular delivery
Delayed delivery 7,028,120
Payable for fund shares 937,747
redeemed
Distributions payable 626,701
Accrued management fee 144,211
Distribution fees payable 134,077
Other payables and accrued 70,439
expenses
TOTAL LIABILITIES 15,496,142
NET ASSETS $ 455,719,341
Net Assets consist of:
Paid in capital $ 448,688,358
Accumulated undistributed net (14,595,699)
realized gain (loss) on
investments
Net unrealized appreciation 21,626,682
(depreciation) on investments
NET ASSETS $ 455,719,341
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $12.41
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($9,233,541 (divided by)
744,302 shares)
Maximum offering price per $13.03
share (100/95.25 of $12.41)
CLASS T: NET ASSET VALUE and $12.42
redemption price per share
($367,831,228 (divided by)
29,618,240 shares)
Maximum offering price per $12.87
share (100/96.50 of $12.42)
CLASS B: NET ASSET VALUE and $12.39
offering price per share
($62,982,489 (divided by)
5,084,185 shares) A
CLASS C: NET ASSET VALUE and $12.42
offering price per share
($11,638,377 (divided by)
937,176 shares) A
INSTITUTIONAL CLASS: NET $12.37
ASSET VALUE, offering price
and redemption price per
share ($4,033,706 (divided
by) 326,171 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INTEREST INCOME $ 11,775,977
EXPENSES
Management fee $ 866,136
Transfer agent fees 220,951
Distribution fees 785,108
Accounting fees and expenses 74,079
Non-interested trustees' 788
compensation
Custodian fees and expenses 14,115
Registration fees 55,803
Audit 17,720
Legal 1,190
Total expenses before 2,035,890
reductions
Expense reductions (1,042) 2,034,848
NET INTEREST INCOME 9,741,129
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,042,368
Futures contracts 21,684 2,064,052
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (6,972,317)
Futures contracts (83,889) (7,056,206)
NET GAIN (LOSS) (4,992,154)
NET INCREASE (DECREASE) IN $ 4,748,975
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 9,741,129 $ 20,054,896
Net realized gain (loss) 2,064,052 842,117
Change in net unrealized (7,056,206) 13,362,203
appreciation (depreciation)
NET INCREASE (DECREASE) IN 4,748,975 34,259,216
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,741,129) (20,054,896)
from net interest income
Share transactions - net 7,862,458 279,500
increase (decrease)
TOTAL INCREASE (DECREASE) 2,870,304 14,483,820
IN NET ASSETS
NET ASSETS
Beginning of period 452,849,037 438,365,217
End of period $ 455,719,341 $ 452,849,037
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.540 $ 12.150 $ 11.740 $ 11.630
period
Income from Investment
Operations
Net interest income .281 .571 .583 D .105D, E
Net realized and unrealized (.130) .390 .445 .109
gain (loss)
Total from investment .151 .961 1.028 .214
operations
Less Distributions
From net interest income (.281) (.571) (.616) E (.104)
In excess of net interest - - (.002) -
income
Total distributions (.281) (.571) (.618) (.104)
Net asset value, end of period $ 12.410 $ 12.540 $ 12.150 $ 11.740
TOTAL RETURN B, C 1.21% 8.07% 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,234 $ 6,721 $ 3,755 $ 202
(000 omitted)
Ratio of expenses to average .72% A .90% G .90% G .90% A, G
net assets
Ratio of net interest income 4.51% A 4.57% 4.87% 5.73% A
to average net assets
Portfolio turnover rate 17% A 36% 36% 49%
</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 INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.560 $ 12.150 $ 11.760 $ 11.880 $ 11.220
period
Income from Investment
Operations
Net interest income .274 .571 .597 C .677 C, D .700
Net realized and unrealized (.140) .410 .407 (.136) .660
gain (loss)
Total from invesment .134 .981 1.004 .541 1.360
operations
Less Distributions
From net interest income (.274) (.571) (.612) D (.661) (.700)
In excess of net interest - - (.002) - -
income
From net realized gain - - - - -
In excess of net realized - - - - -
gain
Total distributions (.274) (.571) (.614) (.661) (.700)
Net asset value, end of $ 12.420 $ 12.560 $ 12.150 $ 11.760 $ 11.880
period
TOTAL RETURN B 1.08% 8.15% 8.89% 4.68% 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 367,831 $ 380,325 $ 392,075 $ 480,432 $ 565,131
(000 omitted)
Ratio of expenses to average .81% A .87% .89% .89% .91%
net assets
Ratio of net interest income 4.42% A 4.62% 5.04% 5.74% 6.06%
to average net assets
Portfolio turnover rate 17% A 36% 36% 49% 37%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.720
period
Income from Investment
Operations
Net interest income .689
Net realized and unrealized (1.430)
gain (loss)
Total from invesment (.741)
operations
Less Distributions
From net interest income (.689)
In excess of net interest -
income
From net realized gain (.060)
In excess of net realized (.010)
gain
Total distributions (.759)
Net asset value, end of $ 11.220
period
TOTAL RETURN B (6.03)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 544,422
(000 omitted)
Ratio of expenses to average .89%
net assets
Ratio of net interest income 5.78%
to average net assets
Portfolio turnover rate 38%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.530 $ 12.130 $ 11.740 $ 11.860 $ 11.210
period
Income from Investment
Operations
Net interest income .235 .491 .515 D .596 D, E .612
Net realized and unrealized (.140) .400 .416 (.136) .650
gain (loss)
Total from investment .095 .891 .931 .460 1.262
operations
Less Distributions
From net interest income (.235) (.491) (.539) E (.580) (.612)
In excess of net interest - - (.002) - -
income
Total distributions (.235) (.491) (.541) (.580) (.612)
Net asset value, end of period $ 12.390 $ 12.530 $ 12.130 $ 11.740 $ 11.860
TOTAL RETURN B, C 0.76% 7.47% 8.15% 3.98% 11.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 62,982 $ 55,032 $ 41,024 $ 39,389 $ 32,395
(000 omitted)
Ratio of expenses to average 1.46% A 1.53% 1.56% 1.57% 1.86% G
net assets
Ratio of net interest income 3.78% A 3.96% 4.35% 5.06% 5.18%
to average net assets
Portfolio turnover rate 17% A 36% 36% 49% 37%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31,
1994 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.610
period
Income from Investment
Operations
Net interest income .188
Net realized and unrealized (.400)
gain (loss)
Total from investment (.212)
operations
Less Distributions
From net interest income (.188)
In excess of net interest -
income
Total distributions (.188)
Net asset value, end of period $ 11.210
TOTAL RETURN B, C (1.86)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,968
(000 omitted)
Ratio of expenses to average 2.09% A
net assets
Ratio of net interest income 4.58% A
to average net assets
Portfolio turnover rate 38%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO OCTOBER 31, 1994.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.560 $ 12.130
period
Income from Investment
Operations
Net interest income .230 .455
Net realized and unrealized (.140) .430
gain (loss)
Total from investment .090 .885
operations
Less Distributions
From net interest income (.230) (.455)
Net asset value, end of period $ 12.420 $ 12.560
TOTAL RETURN B, C 0.71% 7.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,638 $ 7,031
(000 omitted)
Ratio of expenses to average 1.57% A 1.75% A, E
net assets
Ratio of net interest income 3.69% A 3.60% A
to average net assets
Portfolio turnover rate 17% A 36%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.510 $ 12.120 $ 11.720 $ 11.880 $ 11.700
of period
Income from Investment
Operations
Net interest income .289 .592 .609 D .707 D, E .232
Net realized and unrealized (.140) .390 .464 (.197) .180
gain (loss)
Total from investment .149 .982 1.073 .510 .412
operations
Less Distributions
From net interest income (.289) (.592) (.671) E (.670) (.232)
In excess of net interest - - (.002) - -
income
Total Distributions (.289) (.592) (.673) (.670) (.232)
Net asset value, end of $ 12.370 $ 12.510 $ 12.120 $ 11.720 $ 11.880
period
TOTAL RETURN B, C 1.20% 8.28% 9.44% 4.41% 3.55%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,034 $ 3,741 $ 1,511 $ 927 $ 154
(000 omitted)
Ratio of expenses to average .59% A .75% G .75% G .75% G .75% A, G
net assets
Ratio of net interest income 4.65% A 4.75% 5.11% 5.88% 5.89% A
to average net assets
Portfolio turnover rate 17% A 36% 36% 49% 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Income Fund(the fund) is a fund of Fidelity
Advisor Series II (the trust) (formerly a fund of Fidelity Advisor
Series V) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. 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 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."
INTEREST INCOME. Interest income, which includes amortization of
premium and 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 interest 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 futures transactions, market discount, capital loss
carryforwards and losses deferred due to futures.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc. (FIMM), an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Losses may arise from changes in the value of the underlying
instruments or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $40,403,222 and $37,591,948, respectively.
The market value of futures contracts opened and closed during the
period amounted to $0 and $6,962,986, 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 .25%. 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 .38% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with FIMM, a wholly
owned subsidiary of FMR. For its services, FIMM receives a fee from
FMR of 50% of the management fee payable to FMR. The fee is paid prior
to any voluntary expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 6,114 $ 71
CLASS T 467,393 9,864
CLASS B 265,040 192,091
CLASS C 46,561 43,051
785,108 245,077
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six 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 5% 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 FDC RETAINED BY FDC
CLASS A $ 26,941 $ 17,990
CLASS T 127,121 48,688
CLASS B 89,528 89,528*
CLASS C 8,413 8,413*
252,003 164,619
* 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 AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Class C, and Institutional Class
shares. UMB has entered into a sub-arrangement with Fidelity
Investments Institutional Operations Company, Inc. (FIIOC) with
respect to all classes of the fund to perform the transfer, dividend
disbursing, and shareholder servicing agent functions. FIIOC, an
affiliate of FMR, receives account fees and asset-based fees that vary
according to the account size and type of account of the shareholders
of the respective classes of the fund. All fees are paid to FIIOC by
UMB, which is reimbursed by each class for such payments. FIIOC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, each class paid the following
transfer agent fees:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 4,582 .11
CLASS T 180,323 .10
CLASS B 28,549 .10
CLASS C 4,900 .11
INSTITUTIONAL CLASS 2,597 .14
$ 220,951
* ANNUALIZED
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC 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.
The fund has entered into an arrangement with each class' transfer
agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of expenses. During the period, Class
T's expenses were reduced by $1,042 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
1999 1998 A
FROM NET INVESTMENT INCOME
Class A $ 182,451 $ 231,309
Class T 8,195,947 17,722,552
Class B 1,104,451 1,865,869
Class C 170,313 106,528
Institutional Class 87,967 128,638
Total $ 9,741,129 $ 20,054,896
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
SIX MONTHS ENDED APRIL 30,
1999 1998 A 1999
CLASS A Shares sold 362,699 $ 3,893,501
311,733
Reinvestment of distributions 9,589 11,508 119,777
Shares redeemed (112,849) (147,406) (1,408,031)
Net increase (decrease) 208,473 226,801 $ 2,605,247
CLASS T Shares sold 2,388,600 4,799,958 $ 29,904,426
Reinvestment of distributions 412,017 873,770 5,152,094
Shares redeemed (3,473,995) (7,639,811) (43,472,672)
Net increase (decrease) (673,378) (1,966,083) $ (8,416,152)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998 A
CLASS A Shares sold $ 4,479,496
Reinvestment of distributions 142,669
Shares redeemed (1,811,982)
Net increase (decrease) $ 2,810,183
CLASS T Shares sold $ 59,544,980
Reinvestment of distributions 10,820,895
Shares redeemed (94,496,816)
Net increase (decrease) $ (24,130,941)
</TABLE>
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
SIX MONTHS ENDED APRIL 30,
1999 1998 A 1999
CLASS B Shares sold 1,129,341 1,497,112 $ 14,087,520
Reinvestment of distributions 51,638 86,162 644,019
Shares redeemed (490,289) (572,594) (6,111,350)
Net increase (decrease) 690,690 1,010,680 $ 8,620,189
CLASS C Shares sold 507,158 650,179 $ 6,339,048
Reinvestment of distributions 8,863 4,455 110,753
Shares redeemed (138,682) (94,797) (1,733,438)
Net increase (decrease) 377,339 559,837 $ 4,716,363
INSTITUTIONAL CLASS Shares 85,982 238,568 $ 1,070,973
sold
Reinvestment of distributions 3,689 6,313 45,550
Shares redeemed (62,662) (70,388) (779,712)
Net increase (decrease) 27,009 174,493 $ 336,811
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1998 A
CLASS B Shares sold $ 18,512,808
Reinvestment of distributions 1,065,255
Shares redeemed (7,073,528)
Net increase (decrease) $ 12,504,535
CLASS C Shares sold $ 8,065,902
Reinvestment of distributions 55,539
Shares redeemed (1,177,225)
Net increase (decrease) $ 6,944,216
INSTITUTIONAL CLASS Shares $ 2,943,409
sold
Reinvestment of distributions 77,958
Shares redeemed (869,860)
Net increase (decrease) $ 2,151,507
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Christine J. Thompson, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
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 Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
HIMI-SANN-0699 77849
1.703468.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
HIGH YIELD
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 48 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 57 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR HIGH YIELD 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. Returns prior to September 3, 1996 are those of Class T, the
original class of the fund, and reflect Class T shares' 0.25% 12b-1
fee. If Fidelity had not reimbursed certain class expenses during the
periods shown, the past five years and the past 10 years total returns
and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL A 17.52% 3.45% 70.77% 268.45%
FIDELITY ADV HIGH YIELD - CL 11.94% -1.47% 62.66% 250.95%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master 7.37% 3.05% 62.93% 186.76%
ML High Yield Master II 8.88% 3.23% 65.44% 193.83%
High Current Yield Funds 10.17% -0.03% 54.12% 155.67%
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
Merrill Lynch High Yield Master Index - a market value-weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. You can also compare
Class A's returns to those of the Merrill Lynch High Yield Master II
Index - a market value-weighted index of all domestic and yankee
high-yield bonds, including deferred interest bonds and
payment-in-kind securities. Issues included in the index have
maturities of one year or more and have a credit rating lower than
BBB-/Baa3, but are not in default. To measure how Class A's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 304 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL A 3.45% 11.30% 13.93%
FIDELITY ADV HIGH YIELD - CL -1.47% 10.22% 13.38%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master 3.05% 10.26% 11.11%
ML High Yield Master II 3.23% 10.59% 11.38%
High Current Yield Funds -0.03% 8.98% 9.77%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' cumulative return
and show you what would have happened if Class A shares 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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
FA High Yield -CL A ML High Yield Master II
00258 ML012
1989/04/30 9525.00 10000.00
1989/05/31 9765.65 10188.71
1989/06/30 10114.26 10343.85
1989/07/31 10169.49 10385.62
1989/08/31 10272.34 10434.10
1989/09/30 9970.88 10324.00
1989/10/31 9596.51 10068.00
1989/11/30 9624.50 10083.15
1989/12/31 9746.35 10042.25
1990/01/31 9604.95 9770.87
1990/02/28 9553.96 9623.23
1990/03/31 9722.26 9798.14
1990/04/30 9839.15 9865.59
1990/05/31 10169.61 10030.30
1990/06/30 10459.87 10285.01
1990/07/31 10703.22 10540.45
1990/08/31 10440.47 10058.36
1990/09/30 10176.52 9637.73
1990/10/31 9939.63 9362.21
1990/11/30 10249.96 9460.51
1990/12/31 10457.94 9604.25
1991/01/31 10698.54 9800.85
1991/02/28 11312.50 10651.10
1991/03/31 11736.88 11168.59
1991/04/30 12094.28 11564.58
1991/05/31 12223.10 11609.62
1991/06/30 12551.26 11866.10
1991/07/31 13004.68 12191.77
1991/08/31 13173.48 12469.13
1991/09/30 13351.36 12648.82
1991/10/31 13883.04 13078.06
1991/11/30 14043.32 13215.82
1991/12/31 14112.42 13366.34
1992/01/31 14759.32 13817.82
1992/02/29 15370.29 14163.18
1992/03/31 15805.98 14366.39
1992/04/30 15949.82 14440.86
1992/05/31 16123.84 14646.07
1992/06/30 16367.22 14823.21
1992/07/31 16662.33 15111.33
1992/08/31 16970.42 15303.79
1992/09/30 17152.17 15466.03
1992/10/31 16931.82 15262.81
1992/11/30 17116.83 15500.63
1992/12/31 17370.91 15697.94
1993/01/31 17835.23 16063.16
1993/02/28 18225.90 16350.48
1993/03/31 18648.80 16637.41
1993/04/30 18755.02 16751.57
1993/05/31 19010.09 16955.90
1993/06/30 19473.99 17285.88
1993/07/31 19729.68 17454.82
1993/08/31 19883.33 17619.05
1993/09/30 19921.21 17697.26
1993/10/31 20397.33 18024.92
1993/11/30 20545.12 18128.00
1993/12/31 20923.17 18318.62
1994/01/31 21524.35 18714.61
1994/02/28 21435.96 18584.58
1994/03/31 20782.47 17983.94
1994/04/30 20550.96 17760.24
1994/05/31 20678.54 17721.41
1994/06/30 20640.39 17802.41
1994/07/31 20720.27 17909.88
1994/08/31 20868.53 18051.87
1994/09/30 20974.59 18048.28
1994/10/31 20936.24 18095.88
1994/11/30 20601.35 17940.18
1994/12/31 20610.62 18129.20
1995/01/31 20787.85 18383.76
1995/02/28 21457.10 18973.00
1995/03/31 21650.24 19229.39
1995/04/30 22348.93 19716.58
1995/05/31 22849.65 20335.48
1995/06/30 22801.42 20472.20
1995/07/31 23362.95 20738.80
1995/08/31 23495.34 20847.62
1995/09/30 23778.08 21089.90
1995/10/31 24088.19 21268.17
1995/11/30 24218.78 21478.96
1995/12/31 24582.49 21838.83
1996/01/31 25160.90 22203.65
1996/02/29 25500.22 22271.49
1996/03/31 25326.01 22180.45
1996/04/30 25623.49 22211.54
1996/05/31 25816.22 22371.62
1996/06/30 25855.43 22460.76
1996/07/31 25859.09 22608.40
1996/08/31 26228.89 22884.17
1996/09/30 27097.43 23422.07
1996/10/31 27162.63 23625.36
1996/11/30 27487.14 24094.14
1996/12/31 27806.41 24300.14
1997/01/31 28078.27 24482.71
1997/02/28 28624.93 24859.09
1997/03/31 27858.63 24517.15
1997/04/30 28053.29 24831.50
1997/05/31 28879.98 25354.33
1997/06/30 29404.37 25746.18
1997/07/31 30384.46 26428.61
1997/08/31 30533.47 26396.80
1997/09/30 31610.11 26871.64
1997/10/31 31286.45 27008.84
1997/11/30 31577.40 27249.45
1997/12/31 31997.91 27523.86
1998/01/31 32856.56 27962.50
1998/02/28 33239.54 28075.79
1998/03/31 33907.06 28342.46
1998/04/30 33925.94 28464.20
1998/05/31 33689.67 28635.37
1998/06/30 33740.96 28783.25
1998/07/31 34010.15 28966.70
1998/08/31 30322.65 27504.48
1998/09/30 30461.00 27576.08
1998/10/31 29863.56 26981.02
1998/11/30 31950.27 28387.43
1998/12/31 31862.31 28336.56
1999/01/31 32946.07 28713.66
1999/02/28 32735.07 28523.59
1999/03/31 33717.07 28854.93
1999/04/30 35095.29 29382.86
IMATRL PRASUN SHR__CHT 19990430 19990518 160613 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class A on April 30,
1989, and the current 4.75% sales charge was paid. As the chart shows,
by April 30, 1999, the value of the investment would have grown to
$35,095 - a 250.95% increase on the initial investment. For
comparison, look at how the Merrill Lynch High Yield Master II Index
did over the same period. With dividends reinvested, the same $10,000
would have grown to $29,383 - a 193.83% increase. Beginning with this
report, the fund will compare its performance to that of the Merrill
Lynch High Yield Master II Index rather than the Merrill Lynch High
Yield Master Index. The Merrill Lynch High Yield Master II Index
contains deferred interest bonds and payment-in-kind securities and is
therefore a better representation of the high yield bond universe.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 6.63% 7.65% 9.54% 1.17%
Capital returns 10.89% -12.20% 5.64% 2.41%
Total returns 17.52% -4.55% 15.18% 3.58%
</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 effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.03(cents) 67.70(cents) 111.04(cents)
Annualized dividend rate 7.09% 11.73% 9.30%
30-day annualized yield 8.33% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.07 over the past one
month, $11.64 over the past six months and $11.94 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class A's
current 4.75% sales charge.
FIDELITY ADVISOR HIGH YIELD 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. If Fidelity had not reimbursed certain
class expenses during the periods shown, the past 10 years total
returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL T 17.40% 3.32% 70.88% 268.69%
FIDELITY ADV HIGH YIELD - CL 13.29% -0.30% 64.90% 255.78%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master 7.37% 3.05% 62.93% 186.76%
ML High Yield Master II 8.88% 3.23% 65.44% 193.83%
High Current Yield Funds 10.17% -0.03% 54.12% 155.67%
Average
</TABLE>
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
Merrill Lynch High Yield Master Index - a market-value weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. You can also compare
Class T's returns to those of the Merrill Lynch High Yield Master II
Index - a market value-weighted index of all domestic and yankee
high-yield bonds, including deferred interest bonds and
payment-in-kind securities. Issues included in the index have
maturities of one year or more and have a credit rating lower than
BBB-/Baa3, but are not in default. To measure how Class T's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 304 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL T 3.32% 11.31% 13.94%
FIDELITY ADV HIGH YIELD - CL -0.30% 10.52% 13.53%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master 3.05% 10.26% 11.11%
ML High Yield Master II 3.23% 10.59% 11.38%
High Current Yield Funds -0.03% 8.98% 9.77%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' cumulative return
and show you what would have happened if Class T shares 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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
FA High Yield -CL T ML High Yield Master II
00165 ML012
1989/04/30 9650.00 10000.00
1989/05/31 9893.81 10188.71
1989/06/30 10246.99 10343.85
1989/07/31 10302.95 10385.62
1989/08/31 10407.15 10434.10
1989/09/30 10101.74 10324.00
1989/10/31 9722.45 10068.00
1989/11/30 9750.80 10083.15
1989/12/31 9874.26 10042.25
1990/01/31 9731.00 9770.87
1990/02/28 9679.35 9623.23
1990/03/31 9849.85 9798.14
1990/04/30 9968.27 9865.59
1990/05/31 10303.07 10030.30
1990/06/30 10597.14 10285.01
1990/07/31 10843.68 10540.45
1990/08/31 10577.49 10058.36
1990/09/30 10310.07 9637.73
1990/10/31 10070.07 9362.21
1990/11/30 10384.48 9460.51
1990/12/31 10595.19 9604.25
1991/01/31 10838.95 9800.85
1991/02/28 11460.96 10651.10
1991/03/31 11890.91 11168.59
1991/04/30 12253.00 11564.58
1991/05/31 12383.51 11609.62
1991/06/30 12715.98 11866.10
1991/07/31 13175.34 12191.77
1991/08/31 13346.36 12469.13
1991/09/30 13526.58 12648.82
1991/10/31 14065.24 13078.06
1991/11/30 14227.61 13215.82
1991/12/31 14297.62 13366.34
1992/01/31 14953.02 13817.82
1992/02/29 15572.00 14163.18
1992/03/31 16013.41 14366.39
1992/04/30 16159.13 14440.86
1992/05/31 16335.44 14646.07
1992/06/30 16582.01 14823.21
1992/07/31 16880.99 15111.33
1992/08/31 17193.13 15303.79
1992/09/30 17377.27 15466.03
1992/10/31 17154.02 15262.81
1992/11/30 17341.46 15500.63
1992/12/31 17598.88 15697.94
1993/01/31 18069.29 16063.16
1993/02/28 18465.09 16350.48
1993/03/31 18893.54 16637.41
1993/04/30 19001.15 16751.57
1993/05/31 19259.57 16955.90
1993/06/30 19729.55 17285.88
1993/07/31 19988.60 17454.82
1993/08/31 20144.27 17619.05
1993/09/30 20182.64 17697.26
1993/10/31 20665.01 18024.92
1993/11/30 20814.74 18128.00
1993/12/31 21197.75 18318.62
1994/01/31 21806.82 18714.61
1994/02/28 21717.28 18584.58
1994/03/31 21055.20 17983.94
1994/04/30 20820.66 17760.24
1994/05/31 20949.91 17721.41
1994/06/30 20911.26 17802.41
1994/07/31 20992.19 17909.88
1994/08/31 21142.39 18051.87
1994/09/30 21249.85 18048.28
1994/10/31 21211.00 18095.88
1994/11/30 20871.71 17940.18
1994/12/31 20881.10 18129.20
1995/01/31 21060.66 18383.76
1995/02/28 21738.69 18973.00
1995/03/31 21934.37 19229.39
1995/04/30 22642.23 19716.58
1995/05/31 23149.51 20335.48
1995/06/30 23100.65 20472.20
1995/07/31 23669.55 20738.80
1995/08/31 23803.67 20847.62
1995/09/30 24090.13 21089.90
1995/10/31 24404.31 21268.17
1995/11/30 24536.61 21478.96
1995/12/31 24905.10 21838.83
1996/01/31 25491.09 22203.65
1996/02/29 25834.87 22271.49
1996/03/31 25658.38 22180.45
1996/04/30 25959.76 22211.54
1996/05/31 26155.02 22371.62
1996/06/30 26194.74 22460.76
1996/07/31 26198.44 22608.40
1996/08/31 26573.10 22884.17
1996/09/30 27465.29 23422.07
1996/10/31 27557.21 23625.36
1996/11/30 27889.50 24094.14
1996/12/31 28208.25 24300.14
1997/01/31 28506.42 24482.71
1997/02/28 29039.12 24859.09
1997/03/31 28243.81 24517.15
1997/04/30 28468.79 24831.50
1997/05/31 29288.72 25354.33
1997/06/30 29821.50 25746.18
1997/07/31 30816.23 26428.61
1997/08/31 30991.88 26396.80
1997/09/30 32082.19 26871.64
1997/10/31 31748.47 27008.84
1997/11/30 32039.11 27249.45
1997/12/31 32464.23 27523.86
1998/01/31 33331.80 27962.50
1998/02/28 33719.64 28075.79
1998/03/31 34420.14 28342.46
1998/04/30 34436.17 28464.20
1998/05/31 34168.73 28635.37
1998/06/30 34217.57 28783.25
1998/07/31 34487.55 28966.70
1998/08/31 30748.19 27504.48
1998/09/30 30885.56 27576.08
1998/10/31 30306.25 26981.02
1998/11/30 32415.79 28387.43
1998/12/31 32320.58 28336.56
1999/01/31 33413.84 28713.66
1999/02/28 33196.08 28523.59
1999/03/31 34155.44 28854.93
1999/04/30 35578.36 29382.86
IMATRL PRASUN SHR__CHT 19990430 19990518 160940 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class T on April 30,
1989, and the current 3.50% sales charge was paid. As the chart shows,
by April 30, 1999, the value of the investment would have grown to
$35,578 - a 255.78% increase on the initial investment. For
comparison, look at how the Merrill Lynch High Yield Master II Index
did over the same period. With dividends reinvested, the same $10,000
would have grown to $29,383 - a 193.83% increase. Beginning with this
report, the fund will compare its performance to that of the Merrill
Lynch High Yield Master II Index rather than the Merrill Lynch High
Yield Master Index. The Merrill Lynch High Yield Master II Index
contains deferred interest bonds and payment-in-kind securities and is
therefore a better representation of the high yield bond universe.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 6.53% 7.57% 9.57% 9.56% 8.90% 7.15%
Capital returns 10.87% -12.11% 5.64% 3.36% 6.15% -4.51%
Total returns 17.40% -4.54% 15.21% 12.92% 15.05% 2.64%
</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 effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 6.99(cents) 66.78(cents) 109.57(cents)
Annualized dividend rate 7.03% 11.56% 9.17%
30-day annualized yield 8.37% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.09 over the past one
month, $11.65 over the past six months and $11.95 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current 3.50% sales charge.
FIDELITY ADVISOR HIGH YIELD 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). Returns prior to June 30, 1994 are
those of Class T, the original class of the fund, and reflect Class T
shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six months,
past one year, past five years and past 10 years total return figures
are 5%, 5%, 2% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses during the periods shown, the past 10 years
total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL B 17.04% 2.70% 64.71% 255.37%
FIDELITY ADV HIGH YIELD - CL 12.04% -1.96% 62.71% 255.37%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 7.37% 3.05% 62.93% 186.76%
ML High Yield Master II 8.88% 3.23% 65.44% 193.83%
High Current Yield Funds 10.17% -0.03% 54.12% 155.67%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Merrill Lynch High Yield Master Index - a market value-weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. You can also compare
Class B's returns to those of the Merrill Lynch High Yield Master II
Index - a market value-weighted index of all domestic and yankee
high-yield bonds, including deferred interest bonds and
payment-in-kind securities. Issues included in the index have
maturities of one year or more and have a credit rating lower than
BBB-/Baa3, but are not in default. To measure how Class B's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 304 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL B 2.70% 10.49% 13.52%
FIDELITY ADV HIGH YIELD - CL -1.96% 10.23% 13.52%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 3.05% 10.26% 11.11%
ML High Yield Master II 3.23% 10.59% 11.38%
High Current Yield Funds -0.03% 8.98% 9.77%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' cumulative return
and show you what would have happened if Class B shares 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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
FA High Yield -CL B ML High Yield Master II
00665 ML012
1989/04/30 10000.00 10000.00
1989/05/31 10252.65 10188.71
1989/06/30 10618.65 10343.85
1989/07/31 10676.63 10385.62
1989/08/31 10784.61 10434.10
1989/09/30 10468.12 10324.00
1989/10/31 10075.08 10068.00
1989/11/30 10104.46 10083.15
1989/12/31 10232.39 10042.25
1990/01/31 10083.94 9770.87
1990/02/28 10030.41 9623.23
1990/03/31 10207.10 9798.14
1990/04/30 10329.82 9865.59
1990/05/31 10676.75 10030.30
1990/06/30 10981.49 10285.01
1990/07/31 11236.98 10540.45
1990/08/31 10961.13 10058.36
1990/09/30 10684.01 9637.73
1990/10/31 10435.30 9362.21
1990/11/30 10761.12 9460.51
1990/12/31 10979.47 9604.25
1991/01/31 11232.07 9800.85
1991/02/28 11876.64 10651.10
1991/03/31 12322.19 11168.59
1991/04/30 12697.41 11564.58
1991/05/31 12832.65 11609.62
1991/06/30 13177.18 11866.10
1991/07/31 13653.20 12191.77
1991/08/31 13830.42 12469.13
1991/09/30 14017.18 12648.82
1991/10/31 14575.38 13078.06
1991/11/30 14743.64 13215.82
1991/12/31 14816.19 13366.34
1992/01/31 15495.35 13817.82
1992/02/29 16136.79 14163.18
1992/03/31 16594.20 14366.39
1992/04/30 16745.21 14440.86
1992/05/31 16927.91 14646.07
1992/06/30 17183.43 14823.21
1992/07/31 17493.26 15111.33
1992/08/31 17816.72 15303.79
1992/09/30 18007.53 15466.03
1992/10/31 17776.19 15262.81
1992/11/30 17970.43 15500.63
1992/12/31 18237.18 15697.94
1993/01/31 18724.65 16063.16
1993/02/28 19134.80 16350.48
1993/03/31 19578.80 16637.41
1993/04/30 19690.31 16751.57
1993/05/31 19958.10 16955.90
1993/06/30 20445.13 17285.88
1993/07/31 20713.57 17454.82
1993/08/31 20874.89 17619.05
1993/09/30 20914.66 17697.26
1993/10/31 21414.52 18024.92
1993/11/30 21569.68 18128.00
1993/12/31 21966.59 18318.62
1994/01/31 22597.74 18714.61
1994/02/28 22504.95 18584.58
1994/03/31 21818.86 17983.94
1994/04/30 21575.81 17760.24
1994/05/31 21709.75 17721.41
1994/06/30 21669.70 17802.41
1994/07/31 21717.19 17909.88
1994/08/31 21853.08 18051.87
1994/09/30 21947.14 18048.28
1994/10/31 21872.31 18095.88
1994/11/30 21527.26 17940.18
1994/12/31 21502.63 18129.20
1995/01/31 21673.95 18383.76
1995/02/28 22358.48 18973.00
1995/03/31 22546.03 19229.39
1995/04/30 23240.00 19716.58
1995/05/31 23766.45 20335.48
1995/06/30 23700.89 20472.20
1995/07/31 24249.95 20738.80
1995/08/31 24394.28 20847.62
1995/09/30 24653.36 21089.90
1995/10/31 24961.39 21268.17
1995/11/30 25061.83 21478.96
1995/12/31 25445.55 21838.83
1996/01/31 26008.34 22203.65
1996/02/29 26344.10 22271.49
1996/03/31 26148.49 22180.45
1996/04/30 26443.03 22211.54
1996/05/31 26650.88 22371.62
1996/06/30 26654.03 22460.76
1996/07/31 26664.53 22608.40
1996/08/31 27008.60 22884.17
1996/09/30 27902.59 23422.07
1996/10/31 27981.53 23625.36
1996/11/30 28282.20 24094.14
1996/12/31 28614.52 24300.14
1997/01/31 28902.77 24482.71
1997/02/28 29428.26 24859.09
1997/03/31 28604.33 24517.15
1997/04/30 28817.02 24831.50
1997/05/31 29608.91 25354.33
1997/06/30 30157.03 25746.18
1997/07/31 31147.95 26428.61
1997/08/31 31284.93 26396.80
1997/09/30 32371.94 26871.64
1997/10/31 31995.11 27008.84
1997/11/30 32299.28 27249.45
1997/12/31 32711.43 27523.86
1998/01/31 33570.56 27962.50
1998/02/28 33943.53 28075.79
1998/03/31 34606.14 28342.46
1998/04/30 34603.42 28464.20
1998/05/31 34340.58 28635.37
1998/06/30 34371.71 28783.25
1998/07/31 34625.02 28966.70
1998/08/31 30867.78 27504.48
1998/09/30 30963.09 27576.08
1998/10/31 30362.38 26981.02
1998/11/30 32467.47 28387.43
1998/12/31 32360.23 28336.56
1999/01/31 33413.15 28713.66
1999/02/28 33178.97 28523.59
1999/03/31 34158.26 28854.93
1999/04/30 35536.91 29382.86
IMATRL PRASUN SHR__CHT 19990430 19990518 160624 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class B on April 30,
1989. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $35,537 - a 255.37% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index did over the same period. With dividends
reinvested, the same $10,000 would have grown to $29,383 - a 193.83%
increase. Beginning with this report, the fund will compare its
performance to that of the Merrill Lynch High Yield Master II Index
rather than the Merrill Lynch High Yield Master Index. The Merrill
Lynch High Yield Master II Index contains deferred interest bonds and
payment-in-kind securities and is therefore a better representation of
the high yield bond universe.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JUNE 30, 1994 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 6.22% 6.98% 8.85% 8.82% 8.05% 1.73%
Capital returns 10.82% -12.08% 5.49% 3.28% 6.07% -0.80%
Total returns 17.04% -5.10% 14.34% 12.10% 14.12% 0.93%
</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 effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 6.30(cents) 63.53(cents) 102.28(cents)
Annualized dividend rate 6.37% 11.03% 8.59%
30-day annualized yield 8.10% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.04 over the past one
month, $11.61 over the past six months, and $11.91 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge.
FIDELITY ADVISOR HIGH YIELD 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.
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 prior to June 30, 1994 are those of Class T and
reflect Class T shares' 0.25% 12b-1 fee. Had Class C shares' 12b-1 fee
been reflected, returns between January 1, 1996 and November 3, 1997
and prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past six months, one
year, past five years and past 10 years total return figures are 1%
1%, 0% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses during the period shown, the past 10 years total
returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL C 16.99% 2.60% 64.26% 254.41%
FIDELITY ADV HIGH YIELD - CL 15.99% 1.67% 64.26% 254.41%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 7.37% 3.05% 62.93% 186.76%
ML High Yield Master II 8.88% 3.23% 65.44% 193.83%
High Current Yield Funds 10.17% -0.03% 54.12% 155.67%
Average
</TABLE>
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
Merrill Lynch High Yield Master Index - a market value-weighted index
of all domestic and yankee high-yield bonds. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. You can also compare
Class C's returns to those of the Merrill Lynch High Yield Master II
Index - a market value-weighted index of all domestic and yankee
high-yield bonds, including deferred interest bonds and
payment-in-kind securities. Issues included in the index have
maturities of one year or more and have a credit rating lower than
BBB-/Baa3, but are not in default. To measure how Class C's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 304 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL C 2.60% 10.44% 13.49%
FIDELITY ADV HIGH YIELD - CL 1.67% 10.44% 13.49%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 3.05% 10.26% 11.11%
ML High Yield Master II 3.23% 10.59% 11.38%
High Current Yield Funds -0.03% 8.98% 9.77%
Average
AVERAGE ANNUAL TOTAL RETURNS take Class C shares' cumulative return
and show you what would have happened if Class C shares 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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
FA High Yield -CL C ML High Yield Master II
00521 ML012
1989/04/30 10000.00 10000.00
1989/05/31 10252.65 10188.71
1989/06/30 10618.65 10343.85
1989/07/31 10676.63 10385.62
1989/08/31 10784.61 10434.10
1989/09/30 10468.12 10324.00
1989/10/31 10075.08 10068.00
1989/11/30 10104.46 10083.15
1989/12/31 10232.39 10042.25
1990/01/31 10083.94 9770.87
1990/02/28 10030.41 9623.23
1990/03/31 10207.10 9798.14
1990/04/30 10329.82 9865.59
1990/05/31 10676.75 10030.30
1990/06/30 10981.49 10285.01
1990/07/31 11236.98 10540.45
1990/08/31 10961.13 10058.36
1990/09/30 10684.01 9637.73
1990/10/31 10435.30 9362.21
1990/11/30 10761.12 9460.51
1990/12/31 10979.47 9604.25
1991/01/31 11232.07 9800.85
1991/02/28 11876.64 10651.10
1991/03/31 12322.19 11168.59
1991/04/30 12697.41 11564.58
1991/05/31 12832.65 11609.62
1991/06/30 13177.18 11866.10
1991/07/31 13653.20 12191.77
1991/08/31 13830.42 12469.13
1991/09/30 14017.18 12648.82
1991/10/31 14575.38 13078.06
1991/11/30 14743.64 13215.82
1991/12/31 14816.19 13366.34
1992/01/31 15495.35 13817.82
1992/02/29 16136.79 14163.18
1992/03/31 16594.20 14366.39
1992/04/30 16745.21 14440.86
1992/05/31 16927.91 14646.07
1992/06/30 17183.43 14823.21
1992/07/31 17493.26 15111.33
1992/08/31 17816.72 15303.79
1992/09/30 18007.53 15466.03
1992/10/31 17776.19 15262.81
1992/11/30 17970.43 15500.63
1992/12/31 18237.18 15697.94
1993/01/31 18724.65 16063.16
1993/02/28 19134.80 16350.48
1993/03/31 19578.80 16637.41
1993/04/30 19690.31 16751.57
1993/05/31 19958.10 16955.90
1993/06/30 20445.13 17285.88
1993/07/31 20713.57 17454.82
1993/08/31 20874.89 17619.05
1993/09/30 20914.66 17697.26
1993/10/31 21414.52 18024.92
1993/11/30 21569.68 18128.00
1993/12/31 21966.59 18318.62
1994/01/31 22597.74 18714.61
1994/02/28 22504.95 18584.58
1994/03/31 21818.86 17983.94
1994/04/30 21575.81 17760.24
1994/05/31 21709.75 17721.41
1994/06/30 21669.70 17802.41
1994/07/31 21717.19 17909.88
1994/08/31 21853.08 18051.87
1994/09/30 21947.14 18048.28
1994/10/31 21872.31 18095.88
1994/11/30 21527.26 17940.18
1994/12/31 21502.63 18129.20
1995/01/31 21673.95 18383.76
1995/02/28 22358.48 18973.00
1995/03/31 22546.03 19229.39
1995/04/30 23240.00 19716.58
1995/05/31 23766.45 20335.48
1995/06/30 23700.89 20472.20
1995/07/31 24249.95 20738.80
1995/08/31 24394.28 20847.62
1995/09/30 24653.36 21089.90
1995/10/31 24961.39 21268.17
1995/11/30 25061.83 21478.96
1995/12/31 25445.55 21838.83
1996/01/31 26008.34 22203.65
1996/02/29 26344.10 22271.49
1996/03/31 26148.49 22180.45
1996/04/30 26443.03 22211.54
1996/05/31 26650.88 22371.62
1996/06/30 26654.03 22460.76
1996/07/31 26664.53 22608.40
1996/08/31 27008.60 22884.17
1996/09/30 27902.59 23422.07
1996/10/31 27981.53 23625.36
1996/11/30 28282.20 24094.14
1996/12/31 28614.52 24300.14
1997/01/31 28902.77 24482.71
1997/02/28 29428.26 24859.09
1997/03/31 28604.33 24517.15
1997/04/30 28817.02 24831.50
1997/05/31 29608.91 25354.33
1997/06/30 30157.03 25746.18
1997/07/31 31147.95 26428.61
1997/08/31 31284.93 26396.80
1997/09/30 32371.94 26871.64
1997/10/31 31995.11 27008.84
1997/11/30 32288.12 27249.45
1997/12/31 32667.38 27523.86
1998/01/31 33543.33 27962.50
1998/02/28 33888.93 28075.79
1998/03/31 34575.70 28342.46
1998/04/30 34541.18 28464.20
1998/05/31 34268.33 28635.37
1998/06/30 34296.33 28783.25
1998/07/31 34546.52 28966.70
1998/08/31 30775.61 27504.48
1998/09/30 30893.91 27576.08
1998/10/31 30294.07 26981.02
1998/11/30 32390.08 28387.43
1998/12/31 32285.69 28336.56
1999/01/31 33333.37 28713.66
1999/02/28 33126.94 28523.59
1999/03/31 34071.97 28854.93
1999/04/30 35440.84 29382.86
IMATRL PRASUN SHR__CHT 19990430 19990518 161007 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class C on April 30,
1989. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $35,441 - a 254.41% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index did over the same period. With dividends
reinvested, the same $10,000 would have grown to $29,383 - a 193.83%
increase. Beginning with this report, the fund will compare its
performance to that of the Merrill Lynch High Yield Master II Index
rather than the Merrill Lynch High Yield Master Index. The Merrill
Lynch High Yield Master II Index contains deferred interest bonds and
payment-in-kind securities and is therefore a better representation of
the high yield bond universe.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 6.19% 6.74%
Capital returns 10.80% -12.47%
Total returns 16.99% -5.73%
</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 effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 6.17(cents) 63.31(cents) 101.23(cents)
Annualized dividend rate 6.22% 10.98% 8.49%
30-day annualized yield 7.93% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $12.06 over the past one
month, $11.63 over the past six months and $11.93 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class C's
contingent deferred sales charge.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A dramatic turnaround in the
worldwide economy triggered a
considerable rally in the high-yield
bond market during the six-month
period ending April 30, 1999. As
the period opened, high-yield
investors were still feeling the
aftershocks of Russia's debt defaults
and the subsequent devaluation of
its currency. Credit spreads -
which reflect the premium that
investors demand for higher
perceived levels of risk versus
Treasury securities - widened to
levels not seen since the high-yield
bear market in 1990-1991. In
November, however, the third in a
series of 0.25 percentage point
interest-rate cuts by the Federal
Reserve Board seemed to stem the
tide of global unease and restore
confidence and liquidity to the
markets. By January, lower interest
rates worldwide, reports of a
stronger-than-expected domestic
economy, and signs that Asia and
other emerging markets might have
bottomed set the stage for a
sustained rally in the high-yield
market. As the period closed, credit
spreads had narrowed
substantially and high-yield bonds
were outperforming many
fixed-income alternatives. To
illustrate, the Merrill Lynch High
Yield Master II Index - a broad
measure of the high-yield market -
returned 8.88% during the
six-month period. Meanwhile, the
overall U.S. taxable bond market,
as measured by the Lehman
Brothers Aggregate Bond Index,
returned 0.69% for the six months
ending April 30, 1999.
(photograph of Margaret Eagle)
An interview with Margaret Eagle, Portfolio Manager of Fidelity
Advisor High Yield Fund
Q. HOW DID THE FUND PERFORM, MARGARET?
A. For the six-month period that ended April 30, 1999, the fund's
Class A, Class T, Class B and Class C shares provided total returns of
17.52%, 17.40%, 17.04% and 16.99%, respectively. To get a sense of how
the fund did relative to its competitors, the high current yield funds
average returned 10.17% for the same six-month period, according to
Lipper Inc. The Merrill Lynch High Yield Master Index returned 7.37%.
Also, the fund's new benchmark, the Merrill Lynch High Yield Master II
Index, returned 8.88%. For the 12-month period that ended April 30,
1999, the fund's Class A, Class T, Class B and Class C shares returned
3.45%, 3.32%, 2.70% and 2.60%, respectively. Those returns compared to
the -0.03% return of the high current yield funds average. For the
same 12-month period, the Merrill Lynch High Yield Master Index and
the Merrill Lynch High Yield Master II Index returned 3.05% and 3.23%,
respectively.
Q. WHY DID THE FUND'S BENCHMARK INDEX CHANGE?
A. The fund changed its benchmark because the Merrill Lynch High Yield
Master Index does not include deferred-interest bonds (DIBs) and
pay-in-kind securities (PIKs), which have emerged as an important
component of the market in recent years. Deferred-interest bonds do
not pay cash interest for a set period of the bond's life, typically
for three to five years, and therefore sell at a significant discount.
At the end of the deferred-interest period the interest accrues and
begins to be paid (it is a variation on the zero coupon bond
structure). PIKs pay interest in the form of additional bonds or
preferred stock. As of March 31, 1999, DIBs and PIKs represented
approximately 11% of the fund's new benchmark, the Merrill Lynch High
Yield Master II Index.
Q. WHY DID THE FUND OUTPACE THE NEW BENCHMARK INDEX AND ITS LIPPER
PEER GROUP DURING THE PAST SIX MONTHS?
A. The fund's relatively large weighting in telecommunications
holdings - many of which are in the form of zero-coupon bonds and PIKs
- - were the main contributors to its outperformance. Zeros and PIKs
don't perform well in market sell-offs because they don't pay a high
current income to cushion price declines. Conversely, zeros and PIKs
tend to lead in market rallies, as they proved during the past six
months. Another factor that helped the sector was that investors
became increasingly more optimistic that telecom companies would be
able to access the additional capital needed to fund their growth.
And, despite fears to the contrary, most telecom companies continued
to build out their infrastructure and attract new customers. Those
trends, coupled with company-specific events, boosted some of our best
performers. MetroNet, for example, posted strong gains on news of a
planned takeover of the company by AT&T. The fund's holdings in Global
Crossing appreciated significantly when it announced plans to purchase
U.S. long-distance provider Frontier.
Q. OUTSIDE THE TELECOMMUNICATIONS SECTOR, WHERE WERE THE OTHER
WINNERS?
A. Many of the fund's cable company holdings also did quite well. The
entire sector benefited from continued investments in the cable
industry by telephone companies and Microsoft. Additionally, companies
such as EchoStar continued to thrive by growing their subscriber base
and expanding distribution channels. The company also tendered for -
meaning it bought back - some of the fund's EchoStar holdings at a
significant profit to the fund.
Q. DESPITE THE STRONG BACKDROP, THERE MUST HAVE BEEN SOME
DISAPPOINTMENTS . . .
A. That's true, but they were relatively limited. The most
disappointing of the fund's holdings was Iridium, which performed
poorly when the company failed to meet subscriber growth targets. That
disappointing news ultimately translated into a loss of confidence in
the company's services.
Q. WHAT'S YOUR OUTLOOK?
A. A large amount of new high-yield bonds coming to market at the end
of the period may cause the market to move sideways for a bit. But in
my view, high-yield bonds represent good value, more than compensating
investors for their risk. At the end of April, high-yield bonds
offered yields almost double those of comparable-maturity Treasury
securities. To the extent that investors recognize the attractive
value they offer, and if the economy remains strong, I believe that
high-yield bonds could continue to do well.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a combination of
a high level of income and
potential for capital gains
START DATE: January 5, 1987
SIZE: as of April 30, 1999,
more than $4.4 billion
MANAGER: Margaret Eagle,
since 1987; joined Fidelity
in 1980
MARGARET EAGLE ON THE RATE
OF DEFAULTS IN THE
HIGH-YIELD MARKET:
"There's been some media
attention paid recently to the fact
that the default rate - which
measures the percentage of
high-yield companies that fail to
make timely payments of interest
and principal or meet some other
provision of a bond indenture - is
on the rise. While it's true that the
default rate had doubled to about
3.8% at the end of the period from
its mid-1998 low, it continued to
hover around its historic norm.
"While I think it's important to
monitor the default rate, I don't
believe it's all that troubling right
now given the U.S. economy's
continued strength. If the economy
weakens and the default rate moves
higher, I'll be much more concerned.
I think it's also important to point
out that the defaults we've seen
recently are mainly due to
company-specific failures, not due
to some industry-wide or
market-wide problem. That's why I
believe that careful security
analysis and selection can
mitigate the slightly increased
rate of defaults."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
EQUIVALENTS) THESE HOLDINGS 6 MONTHS AGO
NTL, Inc. 3.7 3.1
Adelphia Communications Corp. 3.3 3.7
Nextel Communications, Inc. 2.7 3.1
CSC Holdings, Inc. 2.5 2.0
EchoStar DBS Corp. 2.1 0.8
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
UTILITIES 35.0 31.4
MEDIA & LEISURE 33.4 30.6
BASIC INDUSTRIES 3.6 3.5
RETAIL & WHOLESALE 3.5 5.2
TECHNOLOGY 3.1 6.8
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.0 0.0
Baa 0.2 0.0
Ba 9.1 9.3
B 43.2 41.1
Caa, Ca, C 13.0 14.4
Not Rated 10.6 11.5
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 1999 AND OCTOBER 31, 1998
ACCOUNT FOR 10.6% AND 11.5% RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999*
Nonconvertible
bonds 74.9%
Convertible bonds,
preferred stocks 15.0%
Common stocks 3.7%
Short-term
investments 5.0%
Other investments 1.4%
*FOREIGN
INVESTMENTS 9.8%
Row: 1, Col: 1, Value: 74.90000000000001
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 3.7
Row: 1, Col: 4, Value: 5.0
Row: 1, Col: 5, Value: 1.4
AS OF OCTOBER 31, 1998**
Nonconvertible
bonds 74.7%
Convertible bonds,
preferred stocks 13.4%
Common stocks 6.3%
Short-term
investments 4.5%
Other investments 1.1%
**FOREIGN
INVESTMENTS 9.9%
Row: 1, Col: 1, Value: 74.7
Row: 1, Col: 2, Value: 13.4
Row: 1, Col: 3, Value: 6.3
Row: 1, Col: 4, Value: 4.5
Row: 1, Col: 5, Value: 1.1
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 75.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 0.3%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
Rockefeller Center - $ 4,500 $ 3,690
Properties, Inc. 0% 12/31/00
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Total Renal Care Holdings, B1 13,060 10,579
Inc. 7% 5/15/09 (d)
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc. - 110 110
0% 12/15/05 (c)(d)
TOTAL CONVERTIBLE BONDS 14,379
NONCONVERTIBLE BONDS - 74.7%
BASIC INDUSTRIES - 3.4%
CHEMICALS & PLASTICS - 0.6%
Huntsman Corp.:
9.5% 7/1/07 (d) B+ 9,210 9,072
9.5% 7/1/07 (d) - 16,270 16,026
Pioneer Americas Acquisition B2 500 425
Corp. 9.25% 6/15/07
Sterling Chemicals, Inc. B3 290 276
11.75% 8/15/06
25,799
PACKAGING & CONTAINERS - 1.1%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 17,510 16,722
9.75% 6/15/07 Caa1 6,340 6,166
9.875% 2/15/08 Caa2 21,985 19,457
Packaging Corp. of America B3 6,090 6,273
9.625% 4/1/09 (d)
48,618
PAPER & FOREST PRODUCTS - 1.7%
APP Finance II Mauritius Ltd.:
12% 2/15/04 B3 9,800 5,121
12% 3/15/04 B3 10,090 5,272
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS -
CONTINUED
Container Corp. of America:
gtd.:
9.75% 4/1/03 B2 $ 8,490 $ 8,978
11.25% 5/1/04 B2 4,550 4,800
10.75% 5/1/02 B2 3,240 3,459
Florida Coast Paper Co. Ca 35,780 16,459
LLC/Florida Coast Paper
Finance Corp. Series B,
12.75% 6/1/03 (g)
Repap New Brunswick, Inc. Caa1 14,040 11,372
yankee 10.625% 4/15/05
Stone Container Corp. 12.58% B2 18,740 20,427
8/1/16 (e)
75,888
TOTAL BASIC INDUSTRIES 150,305
CONSTRUCTION & REAL ESTATE -
0.6%
REAL ESTATE INVESTMENT TRUSTS
- - 0.6%
Ocwen Asset Investment Corp. - 31,800 27,666
11.5% 7/1/05
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
0.6%
Blue Bird Body Co. 10.75% B2 5,760 6,120
11/15/06
Federal-Mogul Corp. 7.5% Ba2 21,090 20,550
1/15/09 (d)
26,670
HOME FURNISHINGS - 0.5%
Sealy Corp., Inc. 10% - 11,880 11,642
12/18/08 pay-in-kind (f)
Sealy Mattress Co.:
0% 12/15/07 (c) B3 5,230 3,400
9.875% 12/15/07 B3 5,550 5,578
Simmons Co. 10.25% 3/15/09 (d) B3 2,370 2,477
23,097
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.4%
WestPoint Stevens, Inc. Ba3 $ 10,705 $ 10,946
7.875% 6/15/08
Worldtex, Inc. 9.625% 12/15/07 B1 5,020 4,367
15,313
TOTAL DURABLES 65,080
ENERGY - 2.0%
COAL - 0.3%
P&L Coal Holdings Corp. B2 15,310 15,884
9.625% 5/15/08
ENERGY SERVICES - 0.4%
R&B Falcon Corp.:
9.5% 12/15/08 (d) Ba3 10,060 9,456
12.25% 3/15/06 (d) Ba3 7,940 8,297
17,753
OIL & GAS - 1.3%
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 2,580 2,232
8.5% 3/15/12 B3 1,340 1,072
9.125% 4/15/06 B3 2,320 2,018
9.625% 5/1/05 B3 17,510 15,934
Cross Timbers Oil Co.:
8.75% 11/1/09 B2 9,000 8,730
9.25% 4/1/07 B2 830 838
Flores & Rucks, Inc. 9.75% B1 3,680 3,873
10/1/06
Ocean Energy, Inc.:
7.875% 8/1/03 Ba1 1,940 1,940
8.375% 7/1/08 B1 5,280 5,174
8.625% 8/1/05 Ba3 4,310 4,310
8.875% 7/15/07 B1 760 775
10.375% 10/15/05 B2 590 633
Seven Seas Petroleum, Inc. Caa1 6,780 3,526
12.5% 5/15/05
Snyder Oil Corp. 8.75% 6/15/07 B2 4,090 4,131
Vintage Petroleum, Inc. 9% B1 1,620 1,636
12/15/05
56,822
TOTAL ENERGY 90,459
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 2.8%
CREDIT & OTHER FINANCE - 2.7%
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 $ 3,490 $ 2,914
10% 3/15/04 Caa3 1,510 1,261
ContiFinancial Corp.:
7.5% 3/15/02 B3 5,950 4,760
8.125% 4/1/08 B3 27,830 20,873
8.375% 8/15/03 B3 13,680 10,944
Denbury Management, Inc. 9% B3 7,910 7,040
3/1/08
Digital Television Services B3 12,450 13,944
LLC/ DTS Capital, Inc. 12.5%
8/1/07
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,700 9,774
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba1 4,610 3,550
7.6% 8/1/07 Ba1 2,990 2,123
7.875% 8/1/03 Ba1 8,890 6,579
Ocwen Capital Trust 10.875% B2 4,780 3,681
8/1/27
RBF Finance Co.:
11% 3/15/06 (d) Ba3 6,050 6,322
11.375% 3/15/09 (d) Ba3 6,050 6,383
Stone Container Finance Co. B2 8,330 9,080
11.5% 8/15/06 (d)
Transwestern Pub Co. B2 3,475 3,631
LP/Township Capital 9.625%
11/15/07
Winstar Equipment II Corp. - 5,450 5,614
12.5% 3/15/04
118,473
INSURANCE - 0.1%
ITT Corp. 6.75% 11/15/03 Ba1 4,240 4,109
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (d) - 22 22
TOTAL FINANCE 122,604
HEALTH - 2.0%
DRUGS & PHARMACEUTICALS - 0.6%
Global Health Sciences, Inc. Caa1 37,460 24,349
11% 5/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 0.2%
Graham-Field Health Products, Caa1 $ 14,270 $ 8,847
Inc. 9.75% 8/15/07
MEDICAL FACILITIES MANAGEMENT
- - 1.2%
Everest Healthcare Services, B3 3,740 3,796
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 9,470 7,884
4/15/08
Harborside Healthcare Corp. B3 24,000 10,320
0% 8/1/08 (c)
Oxford Health Plans, Inc. 11% Caa1 24,720 25,338
5/15/05 (d)
Tenet Healthcare Corp.:
8.125% 12/1/08 (d) Ba3 4,900 4,827
8.625% 1/15/07 Ba3 1,270 1,280
53,445
TOTAL HEALTH 86,641
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
ELECTRICAL EQUIPMENT - 0.4%
L-3 Communications Corp.:
8% 8/1/08 B2 10,600 10,786
10.375% 5/1/07 B2 2,600 2,867
Omnipoint Corp.:
Series A, 11.625% 8/15/06 B3 5,090 4,734
11.625% 8/15/06 B3 1,680 1,562
19,949
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
Bucyrus International, Inc. B1 530 511
9.75% 9/15/07
TOTAL INDUSTRIAL MACHINERY & 20,460
EQUIPMENT
MEDIA & LEISURE - 25.2%
BROADCASTING - 18.8%
ACME Television LLC/ACME B3 11,102 9,603
Financial Corp. 0% 9/30/04
(c)
Adelphia Communications Corp.:
7.75% 1/15/09 (d) B1 33,030 32,700
8.375% 2/1/08 B1 15,640 15,914
9.25% 10/1/02 B1 20,200 21,059
9.875% 3/1/07 B1 36,755 40,247
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Ascent Entertainment Group, B3 $ 11,280 $ 8,009
Inc. 0% 12/15/04 (c)
Avalon Cable Michigan, B3 3,830 4,060
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08 (d)
Benedek Communications Corp. B3 12,680 10,271
0% 5/15/06 (c)
Bresnan Communications Group
LLC/Bresnan Capital Corp.:
0% 2/1/09 (c)(d) B2 7,500 5,119
8% 2/1/09 (d) B2 2,400 2,442
CapStar Broadcasting
Partners, Inc.:
0% 2/1/09 (c) B3 9,910 8,473
9.25% 7/1/07 B2 4,570 4,838
Century Communications Corp.:
Series B, 0% 1/15/08 Ba3 20,600 9,785
8.375% 12/15/07 Ba3 620 639
8.75% 10/1/07 Ba3 2,250 2,351
9.5% 3/1/05 Ba3 1,770 1,898
Chancellor Media Corp.:
8% 11/1/08 (d) Ba2 31,890 32,847
8.125% 12/15/07 B1 9,935 10,034
9% 10/1/08 B1 27,475 29,295
Charter Communications B2 12,210 12,454
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
(d)
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 6,800 7,327
10.25% 7/1/07 B3 14,040 15,532
Classic Cable, Inc. 9.875% B3 3,620 3,873
8/1/08 (d)
Classic Communications, Inc. Caa1 9,500 6,460
0% 8/1/09 unit (c)(d)
Comcast UK Cable Partners B2 7,370 6,817
Ltd. 0% 11/15/07 (c)
CSC Holdings, Inc. 7.625% Ba2 20,970 20,892
7/15/18
Diamond Cable Communications B3 22,410 20,169
PLC yankee 0% 12/15/05 (c)
EchoStar DBS Corp. 9.375% B2 90,160 94,202
2/1/09 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Emmis Broadcasting B2 $ 8,140 $ 8,109
Communications Corp. 8.125%
3/15/09 (d)
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (c) B2 36,175 25,865
8.375% 4/15/10 B2 12,500 12,688
FrontierVision Holdings Caa1 29,290 25,775
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (c)
FrontierVision Holdings Caa1 17,220 15,154
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(c)(d)
Golden Sky DBS, Inc. 0% Caa1 18,240 10,898
3/1/07 (c)(d)
Intermedia Capital Partners B2 3,868 4,361
IV LP / Intermedia Partners
IV Capital Corp. 11.25%
8/1/06
International Cabletel, Inc. B3 43,087 39,209
0% 2/1/06 (c)
Iridium Operating LLC/Iridium B3 16,740 5,357
Capital Corp. 10.875% 7/15/05
Lenfest Communications, Inc.:
8.25% 2/15/08 B2 3,440 3,578
8.375% 11/1/05 Ba3 1,830 1,949
10.5% 6/15/06 B2 820 947
LIN Holdings Corp. 0% 3/1/08 B3 17,190 11,947
(c)
NTL, Inc.:
0% 4/1/08 (c) B3 35,870 25,199
0% 10/1/08 (c)(d) B3 30,780 21,546
10% 2/15/07 B3 28,600 30,745
11.5% 10/1/08 (d) B3 35,980 41,017
Pegasus Communications Corp.:
9.625% 10/15/05 B3 640 664
9.75% 12/1/06 B3 2,100 2,184
Renaissance Media Group B3 24,570 17,322
LLC/Renaissance Media
Capital Corp. 0% 4/15/08 (c)
Satelites Mexicanos SA de CV:
8.75% 6/30/04 (d)(e) B1 13,560 12,882
10.125% 11/1/04 B3 34,710 29,851
Telewest PLC:
yankee 9.625% 10/1/06 B1 9,260 9,746
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Telewest PLC: - continued
0% 10/1/07 (c) B1 $ 29,550 $ 26,300
United International B3 9,490 6,429
Holdings, Inc. 0% 2/15/08 (c)
827,032
ENTERTAINMENT - 2.5%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 19,370 19,031
9.5% 2/1/11 (d) B3 4,310 4,213
Cinemark USA, Inc. 8.5% 8/1/08 B2 10,960 10,946
IMAX Corp. 7.875% 12/1/05 Ba2 5,120 5,094
Livent, Inc. 9.375% 10/15/04 B1 11,100 4,995
Mohegan Tribal Gaming Ba3 7,020 7,248
Authority 8.75% 1/1/09 (d)
Premier Parks, Inc.:
0% 4/1/08 (c) B3 28,340 20,157
9.25% 4/1/06 B3 22,070 23,091
Waterford Gaming B1 13,510 13,915
LLC/Waterford Gaming Finance
Corp. 9.5% 3/15/10 (d)
108,690
LODGING & GAMING - 2.9%
Circus Circus Enterprises,
Inc.:
6.7% 11/15/96 Baa3 4,300 4,107
7% 11/15/36 Baa3 4,330 3,940
7.625% 7/15/13 Ba2 5,920 5,565
9.25% 12/1/05 Ba2 5,180 5,426
Florida Panthers Holdings, B2 10,020 10,070
Inc. 9.875% 4/15/09 (d)
HMH Properties, Inc. 8.45% Ba2 11,590 11,590
12/1/08
ITT Corp.:
6.75% 11/15/05 Ba1 6,420 5,987
7.375% 11/15/15 Ba1 11,015 10,061
KSL Recreation Group, Inc. B3 11,080 11,412
10.25% 5/1/07
Signature Resorts, Inc. 9.75% B3 24,120 21,949
10/1/07
Station Casinos, Inc. 8.875% B2 15,820 16,334
12/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Sun International Hotels
Ltd./Sun International North
America, Inc.:
yankee 9% 3/15/07 Ba3 $ 2,800 $ 2,912
8.625% 12/15/07 Ba3 17,690 18,221
127,574
PUBLISHING - 0.4%
Sun Media Corp.:
9.5% 5/15/07 B1 615 670
yankee 9.5% 2/15/07 B1 1,437 1,566
Transwestern Holding LP/TWP B3 1,870 1,346
Capital Corp. 0% 11/15/08 (c)
World Color Press, Inc. B1 16,330 16,493
8.375% 11/15/08
20,075
RESTAURANTS - 0.6%
Host Marriott Travel Plazas, Ba3 13,430 14,034
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 13,570 13,163
7/15/08
27,197
TOTAL MEDIA & LEISURE 1,110,568
NONDURABLES - 2.0%
FOODS - 0.9%
Aurora Foods, Inc. 8.75% B1 6,470 6,761
7/1/08
Del Monte Corp. 12.25% 4/15/07 B3 7,225 8,453
Del Monte Foods Co. 0% Caa2 19,104 14,567
12/15/07 (c)
Gorges/Quik-To-Fix Foods, Caa1 18,290 8,231
Inc. 11.5% 12/1/06
38,012
HOUSEHOLD PRODUCTS - 1.1%
AKI Holding Corp. 0% 7/1/09 Caa1 17,080 6,832
(c)
AKI, Inc. 10.5% 7/1/08 B2 13,150 12,953
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - CONTINUED
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 $ 23,065 $ 22,142
9% 11/1/06 B2 7,470 7,563
49,490
TOTAL NONDURABLES 87,502
RETAIL & WHOLESALE - 3.3%
GENERAL MERCHANDISE STORES -
0.1%
K mart Corp. 7.95% 2/1/23 Ba1 5,170 5,299
GROCERY STORES - 2.8%
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 6,420 6,227
10.5% 12/1/04 B3 3,580 3,508
Jitney-Jungle Stores America, B3 52,089 48,443
Inc. 10.375% 9/15/07
Pathmark Stores, Inc.:
9.625% 5/1/03 Caa1 6,220 6,407
11.625% 6/15/02 Caa2 29,855 30,751
12.625% 6/15/02 Caa2 10,220 10,527
Smiths Food & Drug Centers,
Inc. 1994 Pass Through Trust:
8.64% 7/2/12 BB+ 5,000 5,281
9.2% 7/2/18 BB+ 3,700 4,033
Star Market Co., Inc. 13% B3 8,490 9,275
11/1/04
124,452
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
U.S. Office Products Co. B3 21,485 14,717
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 144,468
SERVICES - 1.8%
ADVERTISING - 0.2%
Ackerly Group, Inc. 9% 1/15/09 B2 7,440 7,663
LEASING & RENTAL - 0.3%
Anthony Crane Rentals B3 8,210 8,333
LP/Anthony Credit Capital
Corp. 10.375% 8/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - CONTINUED
LEASING & RENTAL - CONTINUED
AP Holdings, Inc. 0% 3/15/08 Caa2 $ 2,360 $ 1,310
(c)
Apcoa, Inc. 9.25% 3/15/08 Caa1 3,520 3,274
12,917
PRINTING - 0.4%
Sullivan Graphics, Inc. Caa1 15,420 16,230
12.75% 8/1/05
SERVICES - 0.9%
Iron Mountain, Inc. 8.75% B2 10,990 11,265
9/30/09
Medaphis Corp. 9.5% 2/15/05 Caa1 7,330 4,838
SITEL Corp. 9.25% 3/15/06 B2 10,070 9,567
Spin Cycle, Inc. 0% 5/1/05 (c) - 18,880 6,986
Young American Corp. 11.625% Caa1 15,920 8,597
2/15/06
41,253
TOTAL SERVICES 78,063
TECHNOLOGY - 2.7%
COMPUTER SERVICES & SOFTWARE
- - 1.5%
Amazon.com, Inc. 0% 5/1/08 (c) Caa2 20,610 14,891
Concentric Network Corp. - 27,280 30,690
12.75% 12/15/07
DecisionOne Corp. 9.75% 8/1/07 B3 26,350 659
DecisionOne Holdings Corp. 0% Caa1 10,835 27
8/1/08 unit (c)
Federal Data Corp. 10.125% B3 4,270 4,206
8/1/05
Splitrock Services, Inc. - 16,000 16,240
11.75% 7/15/08
66,713
ELECTRONIC INSTRUMENTS - 1.0%
Fisher Scientific B3 21,815 22,088
International, Inc. 9% 2/1/08
Telecommunications Techniques B3 23,655 23,892
Co. LLC 9.75% 5/15/08
45,980
ELECTRONICS - 0.2%
Stellex Industries, Inc. 9.5% B3 9,750 8,775
11/1/07
TOTAL TECHNOLOGY 121,468
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - 1.1%
AIR TRANSPORTATION - 0.7%
Atlas Air, Inc. 9.375% B3 $ 9,410 $ 9,410
11/15/06
Kitty Hawk, Inc. 9.95% B1 21,380 21,701
11/15/04
31,111
RAILROADS - 0.3%
TFM SA de CV:
0% 6/15/09 (c) B2 9,380 6,003
10.25% 6/15/07 B2 4,610 4,333
10,336
SHIPPING - 0.1%
International Shipholding Ba3 5,810 5,607
Corp. 7.75% 10/15/07
TOTAL TRANSPORTATION 47,054
UTILITIES - 25.9%
CELLULAR - 6.2%
Clearnet Communications, Inc. B3 8,940 5,655
0% 5/1/09 (c)
ESAT Holdings Ltd. 0% 2/1/07 Caa1 15,520 11,485
(c)
Intercel, Inc. 0% 2/1/06 (c) B2 4,250 3,554
McCaw International Ltd. 0% Caa1 41,840 27,614
4/15/07 (c)
Millicom International Caa1 55,010 42,633
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 9/15/07 (c) B2 15,301 11,935
0% 2/15/08 (c) B2 6,350 4,810
9.75% 8/15/04 B2 9,810 10,190
12% 11/1/08 (d) B2 22,320 26,338
Nextel International, Inc. 0% Caa1 1,730 973
4/15/08 (c)
Orbital Imaging Corp.:
11.625% 3/1/05 - 35,250 33,664
11.625% 3/1/05 (d) - 5,910 5,644
Rogers Cantel, Inc. 8.8% B2 7,220 7,617
10/1/07
Rogers Communications, Inc. B2 16,400 17,138
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 38,320 21,555
(c)(d)
Teligent, Inc.:
0% 3/1/08 (c) Caa1 2,900 1,682
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Teligent, Inc.: - continued
11.5% 12/1/07 Caa1 $ 27,410 $ 27,410
Triton PCS, Inc. 0% 5/1/08 (c) Caa1 19,720 12,473
272,370
ELECTRIC UTILITY - 1.1%
CMS Energy Corp. 6.75% Ba3 12,240 11,995
1/15/04 (d)
Niagara Mohawk Power Corp.:
0% 7/1/10 (c) Ba2 36,610 28,007
7.625% 10/1/05 Ba2 8,360 8,615
48,617
TELEPHONE SERVICES - 18.6%
Allegiance Telecom, Inc.:
0% 2/15/08 (c) - 3,440 2,288
12.875% 5/15/08 - 19,580 22,174
Covad Communications Group, B3 28,270 16,679
Inc. 0% 3/15/08 (c)
DTI Holdings, Inc. 0% 3/1/08 - 25,790 10,058
(c)
e.spire Communications, Inc.:
0% 11/1/05 (c) - 6,855 5,141
0% 4/1/06 (c) - 14,790 10,205
13.75% 7/15/07 - 15,200 14,744
ESAT Telecom Group PLC 0% Caa1 7,530 5,572
2/1/07 (c)
Firstworld Communications, - 19,020 9,700
Inc. 0% 4/15/08 (c)
Global Crossing Holdings Ltd. B1 31,640 35,200
9.625% 5/15/08
GST Network Funding, Inc. 0% - 35,110 21,505
5/1/08 (c)(d)
GST Equipment Funding, Inc. - 13,760 15,136
13.25% 5/1/07
GST Telecommunications, Inc. - 26,920 29,208
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (c) - 24,990 20,742
Hermes Europe Railtel BV B3 18,200 19,838
11.5% 8/15/07
ICG Services, Inc.:
0% 2/15/08 (c) - 95,400 59,864
0% 5/1/08 (c) - 6,390 3,914
Intermedia Communications,
Inc.:
8.5% 1/15/08 B2 2,490 2,478
8.6% 6/1/08 B2 11,320 11,320
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Intermedia Communications,
Inc.: - continued
8.875% 11/1/07 B2 $ 2,070 $ 2,091
9.5% 3/1/09 (d) B2 11,250 11,700
KMC Telecom Holdings, Inc. 0% - 28,410 15,910
2/15/08 (c)
Level 3 Communications, Inc. B3 41,000 41,820
9.125% 5/1/08
Logix Communications - 17,455 17,106
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
0% 3/1/07 (c) B2 7,210 5,804
8.375% 3/15/08 B2 5,140 5,153
9.25% 7/15/07 B2 12,240 12,760
9.5% 11/1/08 B2 13,730 14,691
Metromedia Fiber Network, B2 8,260 8,921
Inc. 10% 11/15/08 (d)
MetroNet Communications Corp.:
0% 11/1/07 (c) B3 11,190 9,036
0% 6/15/08 (c) B3 37,320 29,016
10.625% 11/1/08 (d) B3 14,780 17,330
MGC Communications, Inc. 13% Caa2 5,340 4,966
10/1/04
Netia Holdings BV 10.25% B3 32,125 30,519
11/1/07
NEXTLINK Communications LLC B3 28,040 30,914
12.5% 4/15/06
Pathnet, Inc. 12.25% 4/15/08 - 10,610 5,942
Qwest Communications
International, Inc.:
0% 10/15/07 (c) Ba1 25,620 20,304
7.25% 11/1/08 (d) Ba1 8,330 8,559
7.5% 11/1/08 Ba1 12,520 13,083
10.875% 4/1/07 Ba1 8,945 10,264
Rhythms NetConnections, Inc.:
0% 5/15/08 (c) - 16,270 9,193
12.75% 4/15/09 (d) - 16,860 16,776
RSL Communications Ltd./RSL B2 14,575 15,850
Communications PLC 12.25%
11/15/06
Telegroup, Inc. 0% 11/1/04 (c) - 5,820 1,921
TeleWest Communications PLC B1 5,360 6,177
11.25% 11/1/08 (d)
Transtel Pass Through Trust B2 12,030 5,323
12.5% 11/1/07 (d)
Versatel Telecom BV 13.25% - 7,060 7,625
5/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Viatel, Inc.:
0% 4/15/08 (c) Caa1 $ 24,860 $ 16,035
11.25% 4/15/08 Caa1 32,660 33,803
WinStar Communications, Inc.:
0% 10/15/05 (c) Caa1 2,560 2,202
0% 10/15/05 (c) Caa1 2,030 2,741
0% 3/15/08 (c) CCC 29,240 24,854
10% 3/15/08 CCC 33,310 28,980
Winstar Equipment Corp. 12.5% B3 16,020 16,501
3/15/04
819,636
TOTAL UTILITIES 1,140,623
TOTAL NONCONVERTIBLE BONDS 3,292,961
TOTAL CORPORATE BONDS 3,307,340
(Cost $3,365,185)
ASSET-BACKED SECURITIES - 0.4%
Airplanes Pass Through Trust Ba2 18,415 18,047
10.875% 3/15/19 (Cost
$19,398)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bardell Associates Note Trust - 1,660 1,764
12.5%, 11/1/08 (f)
First Chicago/Lennar Trust I - 10,700 7,905
Series 1997-CHL1 Class E,
8.0531% 4/1/39 (e)
Resolution Trust Corp. Series Ba3 3,636 2,945
1991 M2 Class A3, 7.2498%
9/25/20 (e)
Structured Asset Securities
Corp.:
Series 1995-C1 Class F, - 2,500 1,958
7.375% 9/25/24 (d)
Series 1995-C1 Class E, BB 4,000 3,743
7.375% 9/25/24 (d)
Series 1996-CFL Class G, B 9,260 8,301
7.75% 2/25/28 (d)
TOTAL COMMERCIAL MORTGAGE 26,616
SECURITIES
(Cost $24,993)
</TABLE>
COMMON STOCKS - 6.3%
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Foamex-JPS Automotive 15,350 $ 230
LP/Foamex JPS Capital Corp.
warrants 7/1/99 (a)
Trivest 1992 Special Fund 3 348
Ltd. (a)(h)
578
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd. 2,010 1
warrants 10/15/03 (a)
Gaylord Container Corp. Class 512,500 4,292
A (a)
4,293
TOTAL BASIC INDUSTRIES 4,871
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
Capital Pacific Holdings, 24,095 8
Inc. warrants 5/1/02 (a)(d)
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Ocwen Asset Investment Corp. 164,450 791
TOTAL CONSTRUCTION & REAL 799
ESTATE
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Arena Brands Holdings Corp. 42,253 1,056
Class B
ENERGY - 0.1%
OIL & GAS - 0.1%
Pioneer Natural Resources Co. 75,769 886
Plains Resources, Inc. (a) 70,500 1,203
2,089
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
AMRESCO, Inc. 118,000 767
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(d) 900 $ 81
TOTAL FINANCE 848
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
XRC Corp. (a) 84,961 1
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Oxford Health Plans, Inc. (a) 180,000 3,589
TOTAL HEALTH 3,590
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. Class A (a) 67,040 306
POLLUTION CONTROL - 0.3%
Allied Waste Industries, Inc. 757,000 13,389
(a)
TOTAL INDUSTRIAL MACHINERY & 13,695
EQUIPMENT
MEDIA & LEISURE - 2.6%
BROADCASTING - 2.3%
Adelphia Communications Corp. 156,800 10,702
Class A (a)
Cablevision Systems Corp. 52,700 4,078
Class A (a)
CS Wireless Systems, Inc. 439 0
(a)(d)
EchoStar Communications Corp. 492,537 49,408
Class A (a)
MediaOne Group, Inc. 250,000 20,391
NTL, Inc. (a) 100,000 7,625
NTL, Inc. warrants 12/31/08 53,424 2,671
(a)
Pegasus Communications Corp. 6,509 7,632
unit (a)
UIH Australia/Pacific, Inc. 19,690 20
warrants 5/15/06 (a)
102,527
ENTERTAINMENT - 0.0%
Livent, Inc. (a) 125,200 9
LEISURE DURABLES & TOYS - 0.0%
IHF Capital, Inc. Series I 1,460 0
warrants 11/14/99 (a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.3%
Station Casinos, Inc. (a) 244,800 $ 4,024
Sunterra Corp. (a) 580,100 6,236
10,260
TOTAL MEDIA & LEISURE 112,796
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Meyer (Fred), Inc. (a) 29,700 1,608
SERVICES - 0.0%
Spin Cycle, Inc. warrants 18,880 0
5/1/05 (a)(d)
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. (a) 76,300 6,371
Concentric Network Corp. 8,680 2,673
warrants 12/15/07 (a)(d)
Splitrock Services, Inc. 7,500 638
warrants 7/15/08 (a)
9,682
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. Class A 5,520 0
warrants 12/15/00 (a)
UTILITIES - 2.8%
CELLULAR - 0.2%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 19,560 147
.47) (a)
warrants 1/15/07 (CV ratio 18,480 176
.6) (a)
McCaw International Ltd. 66,290 166
warrants 4/15/07 (a)(d)
Microcell Telecommunications, 183,560 3,053
Inc. warrants 6/1/06 (a)(d)
Nextel Communications, Inc. 125,087 5,121
Class A (a)
Orbital Imaging Corp. 28,510 855
warrants 3/1/05 (a)(d)
Powertel, Inc. warrants 85,408 363
2/1/06 (a)
9,881
ELECTRIC UTILITY - 0.0%
Niagara Mohawk Holdings, Inc. 93,300 1,248
(a)
GAS - 0.1%
Ocean Energy, Inc. (a) 211,410 1,969
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 2.5%
Covad Communications Group, 32,410 $ 41,874
Inc. warrants 3/15/08 (a)(d)
DTI Holdings, Inc. warrants 136,150 1
3/1/08 (a)(d)
e.spire Communications, Inc. 206,400 2,580
(a)
Firstworld Communications, 19,020 951
Inc. warrants 4/15/08 (a)(d)
GST Telecommunications, Inc. 425,000 5,206
(a)
ICG Communications, Inc. (a) 252,500 5,571
Intermedia Communications, 102,200 3,290
Inc. (a)
Intermedia Communications, 2,500 310
Inc. warrants 6/1/00 (a)
KMC Telecom Holdings, Inc. 37,830 95
warrants 4/15/08 (a)(d)
MCI WorldCom, Inc. (a) 125,300 10,298
McLeodUSA, Inc. Class A (a) 260,000 14,576
MGC Communications, Inc. 5,340 828
warrants 10/1/04 (a)(d)
Pathnet, Inc. warrants 10,610 106
4/15/08 (a)(d)
Rhythms NetConnections, Inc. 57,520 12,916
warrants 5/15/08 (a)(d)
RSL Communications Ltd./RSL 25,710 3,394
Communications PLC warrants
11/15/06 (a)(d)
Source Media, Inc. warrants 48,052 565
11/1/07 (a)(d)
TeleWest Communications PLC 75,000 3,488
sponsored ADR (a)
Versatel Telecom BV warrants 7,060 494
5/15/08 (a)(d)
WinStar Communications, Inc. 100,000 4,863
(a)
111,406
TOTAL UTILITIES 124,504
TOTAL COMMON STOCKS 275,538
(Cost $124,619)
PREFERRED STOCKS - 13.1%
CONVERTIBLE PREFERRED STOCKS
- - 0.8%
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Host Marriott Financial Trust 146,600 6,698
$3.375 QUIPS
Station Casinos, Inc. $3.50 7,600 429
7,127
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
UTILITIES - 0.6%
TELEPHONE SERVICES - 0.6%
IXC Communications, Inc. 179,000 $ 6,914
$3.375 (d)
NEXTLINK Communications, Inc. 240,000 21,360
$3.25 (d)
28,274
TOTAL CONVERTIBLE PREFERRED 35,401
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 12.3%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 32,780 3,409
$12.375 pay-in-kind (d)
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
California Federal Preferred 533,897 13,881
Capital Corp. $2.28
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 33,881 62
Series 1
FINANCE - 0.3%
INSURANCE - 0.3%
American Annuity Group 10,340 10,828
Capital Trust II 8.875%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fresenius Medical Care 9,847 10,347
Capital Trust 9%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. 8% non-cumulative 182 284
MEDIA & LEISURE - 5.4%
BROADCASTING - 4.5%
Adelphia Communications Corp. 228,536 26,167
$13.00
Benedek Communications Corp. 11,712 8,784
11.5% pay-in-kind
Citadel Broadcasting Co. 115,033 13,890
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 548,732 63,927
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
CSC Holdings, Inc.: - continued
Series H, 11.75% pay-in-kind 175,393 $ 20,346
Granite Broadcasting Corp. 27,007 27,817
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 32,251 36,524
Pegasus Communications Corp. 1,322 1,471
12.75% pay-in-kind
198,926
PUBLISHING - 0.9%
PRIMEDIA, Inc.:
$9.20 76,000 7,638
8.625% 6,185 597
Series D, $10.00 309,863 32,574
40,809
TOTAL MEDIA & LEISURE 239,735
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Supermarkets General Holdings 116,319 4,217
Corp. $3.52 pay-in-kind
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. 7,366 7,918
13.5% pay-in-kind
UTILITIES - 5.7%
CELLULAR - 1.4%
Nextel Communications, Inc.:
11.125% pay-in-kind 17,086 18,795
Series D, 13% pay-in-kind 38,920 44,369
63,164
TELEPHONE SERVICES - 4.3%
e.spire Communications, Inc.:
$127.50 pay-in-kind 29,023 15,382
14.75% pay-in-kind 9,948 5,869
Hyperion Telecommunication, 18,143 17,054
Inc. 12.875% pay-in-kind
ICG Holdings, Inc. 14.25% 10,695 11,230
pay-in-kind
Intermedia Communications, 56,575 60,818
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 39,548 38,955
12.5% pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
NEXTLINK Communications, Inc. 298,749 $ 16,431
14% pay-in-kind
Source Media, Inc. 13.50% 104,953 1,889
pay-in-kind
Viatel, Inc. 10% pay-in-kind 28,848 7,097
(d)
WinStar Communications, Inc. 16,106 12,080
14.25% (a)
186,805
TOTAL UTILITIES 249,969
TOTAL NONCONVERTIBLE 540,650
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 576,051
(Cost $583,435)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
Oxford Health Plans, Inc. B3 $ 3,000 3,030
term loan 9.335% 5/13/03 (e)
(Cost $3,000)
</TABLE>
CASH EQUIVALENTS - 4.5%
MATURITY AMOUNT (000S)
Investments in repurchase $ 200,641 200,559
agreements (U.S. Treasury
obligations), in a joint
trading account at 4.89%,
dated 4/30/99 due 5/3/99
(Cost $200,559)
TOTAL INVESTMENT IN $ 4,407,181
SECURITIES - 100%
(Cost $4,321,189)
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred Securities
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(d) 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 $756,686,000 or 16.9% of net assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Bardell Associates Note Trust 4/19/94 $ 1,687
12.5% 11/1/08
Sealy Corp., Inc. 10% 2/23/98 - 3/31/99 $ 11,165
12/18/08 pay-in-kind
(g) Non-income producing issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(h) Share amount represents number of units held.
OTHER INFORMATION
The composition of long-term debt
holdings as a percentage of total value of investments in securities,
is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.2% BBB 0.2%
Ba 8.8% BB 8.4%
B 42.8% B 45.7%
Caa 11.4% CCC 7.7%
Ca, C 0.4% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 10.6%. FMR has
determined that unrated debt securities that are lower quality account
for 10.6% of the total value of investment in securities.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $4,322,387,000. Net unrealized appreciation
aggregated $84,794,000, of which $338,188,000 related to appreciated
investment securities and $253,394,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) APRIL 30,
1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 4,407,181
value (including repurchase
agreements of $200,559)
(cost $4,321,189) - See
accompanying schedule
Receivable for investments 28,484
sold
Receivable for fund shares 18,651
sold
Dividends receivable 3,539
Interest receivable 68,235
Other receivables 208
TOTAL ASSETS 4,526,298
LIABILITIES
Payable for investments $ 18,651
purchased
Payable for fund shares 15,996
redeemed
Distributions payable 5,820
Accrued management fee 2,110
Other payables and accrued 2,511
expenses
TOTAL LIABILITIES 45,088
NET ASSETS $ 4,481,210
Net Assets consist of:
Paid in capital $ 4,464,377
Undistributed net investment 24,209
income
Accumulated undistributed net (93,368)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 85,992
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 4,481,210
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) APRIL 30,
1999 (UNAUDITED)
CALCULATION OF MAXIMUM $12.16
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($180,582
(divided by) 14,856 shares)
Maximum offering price per $12.77
share (100/95.25 of $12.16)
CLASS T: NET ASSET VALUE and $12.18
redemption price per share
($2,715,765 (divided by)
223,054 shares)
Maximum offering price per $12.62
share (100/96.50 of $12.18)
CLASS B: NET ASSET VALUE and $12.13
offering price per share
($1,208,523 (divided by)
99,646 shares) A
CLASS C: NET ASSET VALUE and $12.15
offering price per share
($236,974 (divided by)
19,504 shares) A
INSTITUTIONAL CLASS: NET $11.92
ASSET VALUE, offering price
and redemption price per
share ($139,366 (divided by)
11,687 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED APRIL 30, 1999
(UNAUDITED)
INVESTMENT INCOME $ 32,231
Dividends
Interest 169,052
TOTAL INCOME 201,283
EXPENSES
Management fee $ 11,780
Transfer agent fees 3,390
Distribution fees 8,980
Accounting fees and expenses 450
Non-interested trustees' 7
compensation
Custodian fees and expenses 59
Registration fees 240
Audit 23
Legal 74
Total expenses before 25,003
reductions
Expense reductions (20) 24,983
NET INVESTMENT INCOME 176,300
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (89,532)
Foreign currency transactions 2 (89,530)
Change in net unrealized 552,806
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 463,276
NET INCREASE (DECREASE) IN $ 639,576
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 176,300 $ 313,431
income
Net realized gain (loss) (89,530) 61,426
Change in net unrealized 552,806 (597,544)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 639,576 (222,687)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (226,691) (282,288)
From net investment income
From net realized gain (44,511) (70,360)
TOTAL DISTRIBUTIONS (271,202) (352,648)
Share transactions - net 507,577 1,259,000
increase (decrease)
TOTAL INCREASE (DECREASE) 875,951 683,665
IN NET ASSETS
NET ASSETS
Beginning of period 3,605,259 2,921,594
End of period (including $ 4,481,210 $ 3,605,259
undistributed net investment
income of $24,209 and
$74,600, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 12.930 $ 12.300 $ 12.010
period
Income from Investment
Operations
Net investment income D .517 1.111 1.058 .163
Net realized and unrealized 1.360 (1.603) .710 .267
gain (loss)
Total from investment 1.877 (.492) 1.768 .430
operations
Less Distributions
From net investment income (.677) (1.048) (1.078) (.140)
From net realized gain (.130) (.300) (.060) -
Total distributions (.807) (1.348) (1.138) (.140)
Net asset value, end of period $ 12.160 $ 11.090 $ 12.930 $ 12.300
TOTAL RETURNB, C 17.52% (4.55)% 15.18% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 181 $ 117 $ 44 $ 4
millions)
Ratio of expenses to average .96% A 1.01% 1.15% 1.25% A, F
net assets
Ratio of expenses to average .96% A 1.00% G 1.14% G 1.25% A
net assets after expense
reductions
Ratio of net investment 9.02% A 9.03% 8.58% 9.06% A
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220 $ 12.010
period
Income from Investment
Operations
Net investment income .518 D 1.119 D 1.086 D 1.105 D .930 D .848
Net realized and unrealized 1.350 (1.612) .686 .364 .680 (.537)
gain (loss)
Total from investment 1.868 (.493) 1.772 1.469 1.610 .311
operations
Less Distributions
From net investment income (.668) (1.037) (1.082) (1.069) (.920) (.851)
From net realized gain (.130) (.300) (.060) - - (.250)
Total distributions (.798) (1.337) (1.142) (1.069) (.920) (1.101)
Net asset value, end of period $ 12.180 $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220
TOTAL RETURN B, C 17.40% (4.54)% 15.21% 12.92% 15.05% 2.64%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 2,716 $ 2,322 $ 2,208 $ 1,709 $ 1,200 $ 680
millions)
Ratio of expenses to average 1.05% A 1.07% 1.09% 1.12% 1.15% 1.20%
net assets
Ratio of expenses to average 1.05% A 1.07% 1.08% E 1.11% E 1.15% 1.20%
net assets after expense
reductions
Ratio of net investment 8.98% A 8.91% 8.72% 9.20% 8.32% 6.92%
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121% 112% 118%
</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 OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210 $ 11.300
of period
Income from Investment
Operations
Net investment income .476 D 1.024 D .998 D 1.017 D .794 D .223
Net realized and unrealized 1.349 (1.588) .674 .361 .721 (.118)
gain (loss)
Total from investment 1.825 (.564) 1.672 1.378 1.515 .105
operations
Less Distributions
From net investment income (.635) (.956) (1.002) (.988) (.835) (.195)
From net realized gain (.130) (.300) (.060) - - -
Total distributions (.765) (1.256) (1.062) (.988) (.835) (.195)
Net asset value, end of period $ 12.130 $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210
TOTAL RETURN B, C 17.04% (5.10)% 14.34% 12.10% 14.12% .93%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,208 $ 923 $ 593 $ 344 $ 156 $ 17
(in millions)
Ratio of expenses to average 1.71% A 1.74% 1.74% 1.79% 2.01% 2.20% A
net assets
Ratio of net invest- ment 8.30% A 8.25% 8.04% 8.52% 7.46% 5.92% A
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121% 112% 118%
</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 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 OCTOBER 31, 1994.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 12.970
period
Income from Investment
Operations
Net investment income D .467 .988
Net realized and unrealized 1.356 (1.639)
gain (loss)
Total from investment 1.823 (.651)
operations
Less Distributions
From net investment income (.633) (.929)
From net realized gain (.130) (.300)
Total distributions (.763) (1.229)
Net asset value, end of period $ 12.150 $ 11.090
TOTAL RETURNB, C 16.99% (5.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 237 $ 130
millions)
Ratio of expenses to average 1.80% A 1.86% A
net assets
Ratio of net investment 8.16% A 8.21% A
income to average net assets
Portfolio turnover rate 67% A 75%
</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 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 OCTOBER 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.900 $ 12.710 $ 12.120 $ 11.760 $ 11.560
of period
Income from Investment
Operations
Net investment income D .518 1.123 1.094 1.070 .390
Net realized and unrealized 1.315 (1.562) .671 .368 .193
gain (loss)
Total from investment 1.833 (.439) 1.765 1.438 .583
operations
Less Distributions
From net investment income (.683) (1.071) (1.115) (1.078) (.383)
From net realized gain (.130) (.300) (.060) - -
Total distributions (.813) (1.371) (1.175) (1.078) (.383)
Net asset value, end of period $ 11.920 $ 10.900 $ 12.710 $ 12.120 $ 11.760
TOTAL RETURNB, C 17.42% (4.21)% 15.42% 12.81% 5.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 139 $ 113 $ 76 $ 38 $ 0.1
(in millions)
Ratio of expenses to average .82% A .83% .85% 1.10% .70% A
net assets
Ratio of expenses to average .82% A .83% .85% 1.05% F .70% A
net assets after expense
reductions
Ratio of net investment 9.17% A 9.12% 8.96% 9.26% 8.77% A
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121% 112%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor High Yield Fund (the fund) is a fund of Fidelity
Advisor Series II (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. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. 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 for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
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.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
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, foreign
currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
transactions, market discount, partnerships, non-taxable dividends and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
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.
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 SEC), 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.
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
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
prompt sale at an acceptable price may be difficult. At the end of the
period, restricted securities (excluding 144A issues) amounted to
$13,406,000 or 0.3% of net assets.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $3,030,000 or 0.1% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,566,959,000 and $1,285,906,000, 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 .45%. 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 .58% of average net
assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .15%
CLASS T .25%
CLASS B .90% *
CLASS C 1.00% **
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 107,000 $ 1,000
CLASS T 3,158,000 67,000
CLASS B 4,801,000 3,479,000
CLASS C 914,000 805,000
$ 8,980,000 $ 4,352,000
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six 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 5% 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 - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 434,000 $ 164,000
CLASS T 966,000 457,000
CLASS B 1,516,000 1,516,000*
CLASS C 90,000 90,000*
$ 3,006,000 $ 2,227,000
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the fund.
FIIOC receives account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For
the period, the following amounts were paid to FIIOC:
AMOUNT % OF AVERAGE NET ASSETS
CLASS A $ 127,000 .18 *
CLASS T 2,079,000 .17 *
CLASS B 913,000 .17 *
CLASS C 144,000 .16 *
INSTITUTIONAL CLASS 127,000 .19 *
$ 3,390,000
* ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $4,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $15,000 under this arrangement.
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 $5,000 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998 A
FROM NET INVESTMENT INCOME
Class A $ 8,153 $ 6,814
Class T 143,596 201,133
Class B 57,699 60,100
Class C 9,493 4,494
Institutional Class 7,750 9,747
Total $ 226,691 $ 282,288
FROM NET REALIZED GAIN
Class A $ 1,459 $ 1,152
Class T 28,145 52,313
Class B 11,487 14,488
Class C 1,805 165
Institutional Class 1,615 2,242
Total $ 44,511 $ 70,360
$ 271,202 $ 352,648
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
AMOUNTS IN THOUSANDS 1999 1998 A 1999
CLASS A Shares sold 6,186 8,996 $ 72,474
Reinvestment of distributions 673 520 7,784
Shares redeemed (2,564) (2,377) (29,961)
Net increase (decrease) 4,295 7,139 $ 50,297
CLASS T Shares sold 58,774 100,128 $ 682,595
Reinvestment of distributions 11,894 16,088 137,616
Shares redeemed (56,669) (77,873) (657,389)
Net increase (decrease) 13,999 38,343 $ 162,822
CLASS B Shares sold 24,852 47,554 $ 288,287
Reinvestment of distributions 4,002 3,879 46,116
Shares redeemed (12,618) (14,038) (145,832)
Net increase (decrease) 16,236 37,395 $ 188,571
CLASS C Shares sold 10,656 15,155 $ 123,734
Reinvestment of distributions 557 210 6,437
Shares redeemed (3,412) (3,662) (39,624)
Net increase (decrease) 7,801 11,703 $ 90,547
INSTITUTIONAL CLASS Shares 8,269 10,756 $ 94,000
sold
Reinvestment of distributions 622 822 7,054
Shares redeemed (7,540) (7,206) (85,714)
Net increase (decrease) 1,351 4,372 $ 15,340
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
AMOUNTS IN THOUSANDS 1998 A
CLASS A Shares sold $ 113,312
Reinvestment of distributions 6,429
Shares redeemed (29,080)
Net increase (decrease) $ 90,661
CLASS T Shares sold $ 1,257,106
Reinvestment of distributions 201,460
Shares redeemed (968,795)
Net increase (decrease) $ 489,771
CLASS B Shares sold $ 598,852
Reinvestment of distributions 48,184
Shares redeemed (172,228)
Net increase (decrease) $ 474,808
CLASS C Shares sold $ 191,117
Reinvestment of distributions 2,549
Shares redeemed (45,190)
Net increase (decrease) $ 148,476
INSTITUTIONAL CLASS Shares $ 133,230
sold
Reinvestment of distributions 10,139
Shares redeemed (88,085)
Net increase (decrease) $ 55,284
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Advisor
High Yield Fund, the Board of Trustees has determined not to retain
PricewaterhouseCoopers LLP as the fund's independent auditor and voted
to appoint Deloitte & Touche LLP for the fiscal year ended October 31,
1999. For the fiscal years ended October 31, 1998 and October 31,
1997, PricewaterhouseCooper's LLP audit reports contained no adverse
opinion or disclaimer of opinion; nor were their reports qualified as
to uncertainty, audit scope, or accounting principles. Further, there
were no disagreements between the fund and PricewaterhouseCoopers LLP
on accounting principles, financial statement disclosure or audit
scope, which if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference to
the disagreement in their report.
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
Bart A. Grenier, Vice President
Margaret L. Eagle, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy 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 *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
HY-SANN-0699 77843
1.703458.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
HIGH YIELD
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 9 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 12 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 13 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 36 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 45 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR HIGH YIELD 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. The initial offering of Institutional
Class shares took place on July 3, 1995. Institutional Class shares
are sold to eligible investors without a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T, the original class
of the fund, and reflect Class T shares' 0.25% 12b-1 fee. If Fidelity
had not reimbursed certain class expenses, the past 10 years total
returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - 17.42% 3.48% 70.84% 268.59%
INST CL
ML High Yield Master 7.37% 3.05% 62.93% 186.76%
ML High Yield Master II 8.88% 3.23% 65.44% 193.83%
High Current Yield Funds 10.17% -0.03% 54.12% 155.67%
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 Merrill Lynch High Yield Master Index - a
market value-weighted index of all domestic and yankee high-yield
bonds. Issues included in the index have maturities of one year or
more and have a credit rating lower than BBB-/Baa3, but are not in
default. You can also compare Institutional Class' returns to those of
the Merrill Lynch High Yield Master II Index - a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the high current yield funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 304 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - 3.48% 11.31% 13.93%
INST CL
ML High Yield Master 3.05% 10.26% 11.11%
ML High Yield Master II 3.23% 10.59% 11.38%
High Current Yield Funds -0.03% 8.98% 9.77%
Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class' cumulative
return and show you what would have happened if Institutional Class
shares 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
different figure than that obtained by averaging the cumulative total
returns and annualizing the result.)
$10,000 OVER 10 YEARS
FA High Yield -CL I ML High Yield Master II
00644 ML012
1989/04/30 10000.00 10000.00
1989/05/31 10252.65 10188.71
1989/06/30 10618.65 10343.85
1989/07/31 10676.63 10385.62
1989/08/31 10784.61 10434.10
1989/09/30 10468.12 10324.00
1989/10/31 10075.08 10068.00
1989/11/30 10104.46 10083.15
1989/12/31 10232.39 10042.25
1990/01/31 10083.94 9770.87
1990/02/28 10030.41 9623.23
1990/03/31 10207.10 9798.14
1990/04/30 10329.82 9865.59
1990/05/31 10676.75 10030.30
1990/06/30 10981.49 10285.01
1990/07/31 11236.98 10540.45
1990/08/31 10961.13 10058.36
1990/09/30 10684.01 9637.73
1990/10/31 10435.30 9362.21
1990/11/30 10761.12 9460.51
1990/12/31 10979.47 9604.25
1991/01/31 11232.07 9800.85
1991/02/28 11876.64 10651.10
1991/03/31 12322.19 11168.59
1991/04/30 12697.41 11564.58
1991/05/31 12832.65 11609.62
1991/06/30 13177.18 11866.10
1991/07/31 13653.20 12191.77
1991/08/31 13830.42 12469.13
1991/09/30 14017.18 12648.82
1991/10/31 14575.38 13078.06
1991/11/30 14743.64 13215.82
1991/12/31 14816.19 13366.34
1992/01/31 15495.35 13817.82
1992/02/29 16136.79 14163.18
1992/03/31 16594.20 14366.39
1992/04/30 16745.21 14440.86
1992/05/31 16927.91 14646.07
1992/06/30 17183.43 14823.21
1992/07/31 17493.26 15111.33
1992/08/31 17816.72 15303.79
1992/09/30 18007.53 15466.03
1992/10/31 17776.19 15262.81
1992/11/30 17970.43 15500.63
1992/12/31 18237.18 15697.94
1993/01/31 18724.65 16063.16
1993/02/28 19134.80 16350.48
1993/03/31 19578.80 16637.41
1993/04/30 19690.31 16751.57
1993/05/31 19958.10 16955.90
1993/06/30 20445.13 17285.88
1993/07/31 20713.57 17454.82
1993/08/31 20874.89 17619.05
1993/09/30 20914.66 17697.26
1993/10/31 21414.52 18024.92
1993/11/30 21569.68 18128.00
1993/12/31 21966.59 18318.62
1994/01/31 22597.74 18714.61
1994/02/28 22504.95 18584.58
1994/03/31 21818.86 17983.94
1994/04/30 21575.81 17760.24
1994/05/31 21709.75 17721.41
1994/06/30 21669.70 17802.41
1994/07/31 21753.56 17909.88
1994/08/31 21909.21 18051.87
1994/09/30 22020.57 18048.28
1994/10/31 21980.31 18095.88
1994/11/30 21628.71 17940.18
1994/12/31 21638.45 18129.20
1995/01/31 21824.52 18383.76
1995/02/28 22527.14 18973.00
1995/03/31 22729.92 19229.39
1995/04/30 23463.45 19716.58
1995/05/31 23989.13 20335.48
1995/06/30 23938.50 20472.20
1995/07/31 24531.56 20738.80
1995/08/31 24677.10 20847.62
1995/09/30 24979.36 21089.90
1995/10/31 25168.02 21268.17
1995/11/30 25303.98 21478.96
1995/12/31 25687.53 21838.83
1996/01/31 26298.40 22203.65
1996/02/29 26638.02 22271.49
1996/03/31 26481.35 22180.45
1996/04/30 26771.10 22211.54
1996/05/31 26952.99 22371.62
1996/06/30 26997.74 22460.76
1996/07/31 27001.83 22608.40
1996/08/31 27369.46 22884.17
1996/09/30 28303.20 23422.07
1996/10/31 28392.80 23625.36
1996/11/30 28748.53 24094.14
1996/12/31 29088.79 24300.14
1997/01/31 29384.52 24482.71
1997/02/28 29950.46 24859.09
1997/03/31 29148.26 24517.15
1997/04/30 29389.12 24831.50
1997/05/31 30228.42 25354.33
1997/06/30 30792.15 25746.18
1997/07/31 31817.14 26428.61
1997/08/31 32008.16 26396.80
1997/09/30 33134.90 26871.64
1997/10/31 32769.58 27008.84
1997/11/30 33111.16 27249.45
1997/12/31 33538.72 27523.86
1998/01/31 34459.97 27962.50
1998/02/28 34875.90 28075.79
1998/03/31 35594.28 28342.46
1998/04/30 35619.71 28464.20
1998/05/31 35371.41 28635.37
1998/06/30 35402.76 28783.25
1998/07/31 35695.83 28966.70
1998/08/31 31843.92 27504.48
1998/09/30 31966.73 27576.08
1998/10/31 31390.53 26981.02
1998/11/30 33567.72 28387.43
1998/12/31 33477.68 28336.56
1999/01/31 34610.80 28713.66
1999/02/28 34387.64 28523.59
1999/03/31 35409.52 28854.93
1999/04/30 36859.12 29382.86
IMATRL PRASUN SHR__CHT 19990430 19990518 161041 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Institutional Class on
April 30, 1989. As the chart shows, by April 30, 1999, the value of
the investment would have grown to $36,859 - a 268.59% increase on the
initial investment. For comparison, look at how the Merrill Lynch High
Yield Master II Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $29,383 -
a 193.83% increase. Beginning with this report, the fund will compare
its performance to that of the Merrill Lynch High Yield Master II
Index rather than the Merrill Lynch High Yield Master Index. The
Merrill Lynch High Yield Master II Index contains deferred interest
bonds and payment-in-kind securities and is therefore a better
representation of the high yield bond universe.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL CLASS
SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 6.80% 7.97% 10.03% 9.75% 3.34%
Capital returns 10.62% -12.18% 5.39% 3.06% 1.73%
Total returns 17.42% -4.21% 15.42% 12.81% 5.07%
</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.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.16(cents) 68.28(cents) 112.57(cents)
Annualized dividend rate 7.36% 12.06% 9.60%
30-day annualized yield 9.04% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $11.84 over the past one
month, $11.42 over the past six months, and $11.72 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A dramatic turnaround in the
worldwide economy triggered a
considerable rally in the high-yield
bond market during the six-month
period ending April 30, 1999. As
the period opened, high-yield
investors were still feeling the
aftershocks of Russia's debt defaults
and the subsequent devaluation of
its currency. Credit spreads -
which reflect the premium that
investors demand for higher
perceived levels of risk versus
Treasury securities - widened to
levels not seen since the high-yield
bear market in 1990-1991. In
November, however, the third in a
series of 0.25 percentage point
interest-rate cuts by the Federal
Reserve Board seemed to stem the
tide of global unease and restore
confidence and liquidity to the
markets. By January, lower interest
rates worldwide, reports of a
stronger-than-expected domestic
economy, and signs that Asia and
other emerging markets might have
bottomed set the stage for a
sustained rally in the high-yield
market. As the period closed, credit
spreads had narrowed
substantially and high-yield bonds
were outperforming many
fixed-income alternatives. To
illustrate, the Merrill Lynch High
Yield Master II Index - a broad
measure of the high-yield market -
returned 8.88% during the
six-month period. Meanwhile, the
overall U.S. taxable bond market,
as measured by the Lehman
Brothers Aggregate Bond Index,
returned 0.69% for the six months
ending April 30, 1999.
(photograph of Magaret Eagle)
An interview with Margaret Eagle, Portfolio Manager of Fidelity
Advisor High Yield Fund
Q. HOW DID THE FUND PERFORM, MARGARET?
A. For the six-month period that ended April 30, 1999, the fund's
Institutional Class shares provided a total return of 17.42%. To get a
sense of how the fund did relative to its competitors, the high
current yield funds average returned 10.17% for the same six-month
period, according to Lipper Inc. The Merrill Lynch High Yield Master
Index returned 7.37%. Also, the fund's new benchmark, the Merrill
Lynch High Yield Master II Index, returned 8.88%. For the 12-month
period that ended April 30, 1999, the fund's Institutional Class
shares returned 3.48%, compared with the -0.03% return of the high
current yield funds average. For the same 12-month period, the Merrill
Lynch High Yield Master Index and the Merrill Lynch High Yield Master
II Index returned 3.05% and 3.23%, respectively.
Q. WHY DID THE FUND'S BENCHMARK INDEX CHANGE?
A. The fund changed its benchmark because the Merrill Lynch High Yield
Master Index does not include deferred-interest bonds (DIBs) and
pay-in-kind securities (PIKs), which have emerged as an important
component of the market in recent years. Deferred-interest bonds do
not pay cash interest for a set period of the bond's life, typically
for three to five years, and therefore sell at a significant discount.
At the end of the deferred-interest period the interest accrues and
begins to be paid (it is a variation on the zero coupon bond
structure). PIKs pay interest in the form of additional bonds or
preferred stock. As of March 31, 1999, DIBs and PIKs represented
approximately 11% of the fund's new benchmark, the Merrill Lynch High
Yield Master II Index.
Q. WHY DID THE FUND OUTPACE THE NEW BENCHMARK INDEX AND ITS LIPPER
PEER GROUP DURING THE PAST SIX MONTHS?
A. The fund's relatively large weighting in telecommunications
holdings - many of which are in the form of zero-coupon bonds and PIKs
- - were the main contributors to its outperformance. Zeros and PIKs
don't perform well in market sell-offs because they don't pay a high
current income to cushion price declines. Conversely, zeros and PIKs
tend to lead in market rallies, as they proved during the past six
months. Another factor that helped the sector was that investors
became increasingly more optimistic that telecom companies would be
able to access the additional capital needed to fund their growth.
And, despite fears to the contrary, most telecom companies continued
to build out their infrastructure and attract new customers. Those
trends, coupled with company-specific events, boosted some of our best
performers. MetroNet, for example, posted strong gains on news of a
planned takeover of the company by AT&T. The fund's holdings in Global
Crossing appreciated significantly when it announced plans to purchase
U.S. long-distance provider Frontier.
Q. OUTSIDE THE TELECOMMUNICATIONS SECTOR, WHERE WERE THE OTHER
WINNERS?
A. Many of the fund's cable company holdings also did quite well. The
entire sector benefited from continued investments in the cable
industry by telephone companies and Microsoft. Additionally, companies
such as EchoStar continued to thrive by growing their subscriber base
and expanding distribution channels. The company also tendered for -
meaning it bought back - some of the fund's EchoStar holdings at a
significant profit to the fund.
Q. DESPITE THE STRONG BACKDROP, THERE MUST HAVE BEEN SOME
DISAPPOINTMENTS . . .
A. That's true, but they were relatively limited. The most
disappointing of the fund's holdings was Iridium, which performed
poorly when the company failed to meet subscriber growth targets. That
disappointing news ultimately translated into a loss of confidence in
the company's services.
Q. WHAT'S YOUR OUTLOOK?
A. A large amount of new high-yield bonds coming to market at the end
of the period may cause the market to move sideways for a bit. But in
my view, high-yield bonds represent good value, more than compensating
investors for their risk. At the end of April, high-yield bonds
offered yields almost double those of comparable-maturity Treasury
securities. To the extent that investors recognize the attractive
value they offer, and if the economy remains strong, I believe that
high-yield bonds could continue to do well.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a combination of
a high level of income and
potential for capital gains
START DATE: January 5, 1987
SIZE: as of April 30, 1999,
more than $4.4 billion
MANAGER: Margaret Eagle,
since 1987; joined Fidelity
in 1980
MARGARET EAGLE ON THE RATE
OF DEFAULTS IN THE
HIGH-YIELD MARKET:
"There's been some media
attention paid recently to the fact
that the default rate - which
measures the percentage of
high-yield companies that fail to
make timely payments of interest
and principal or meet some other
provision of a bond indenture - is
on the rise. While it's true that the
default rate had doubled to about
3.8% at the end of the period from
its mid-1998 low, it continued to
hover around its historic norm.
"While I think it's important to
monitor the default rate, I don't
believe it's all that troubling right
now given the U.S. economy's
continued strength. If the economy
weakens and the default rate moves
higher, I'll be much more concerned.
I think it's also important to point
out that the defaults we've seen
recently are mainly due to
company-specific failures, not due
to some industry-wide or
market-wide problem. That's why I
believe that careful security
analysis and selection can
mitigate the slightly increased
rate of defaults."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
EQUIVALENTS) THESE HOLDINGS 6 MONTHS AGO
NTL, Inc. 3.7 3.1
Adelphia Communications Corp. 3.3 3.7
Nextel Communications, Inc. 2.7 3.1
CSC Holdings, Inc. 2.5 2.0
EchoStar DBS Corp. 2.1 0.8
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
UTILITIES 35.0 31.4
MEDIA & LEISURE 33.4 30.6
BASIC INDUSTRIES 3.6 3.5
RETAIL & WHOLESALE 3.5 5.2
TECHNOLOGY 3.1 6.8
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.0 0.0
Baa 0.2 0.0
Ba 9.1 9.3
B 43.2 41.1
Caa, Ca, C 13.0 14.4
Not Rated 10.6 11.5
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 1999 AND OCTOBER 31, 1998
ACCOUNT FOR 10.6% AND 11.5% RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999*
Nonconvertible
bonds 74.9%
Convertible bonds,
preferred stocks 15.0%
Common stocks 3.7%
Short-term
investments 5.0%
Other investments 1.4%
*FOREIGN
INVESTMENTS 9.8%
Row: 1, Col: 1, Value: 74.90000000000001
Row: 1, Col: 2, Value: 15.0
Row: 1, Col: 3, Value: 3.7
Row: 1, Col: 4, Value: 5.0
Row: 1, Col: 5, Value: 1.4
AS OF OCTOBER 31, 1998**
Nonconvertible
bonds 74.7%
Convertible bonds,
preferred stocks 13.4%
Common stocks 6.3%
Short-term
investments 4.5%
Other investments 1.1%
**FOREIGN
INVESTMENTS 9.9%
Row: 1, Col: 1, Value: 74.7
Row: 1, Col: 2, Value: 13.4
Row: 1, Col: 3, Value: 6.3
Row: 1, Col: 4, Value: 4.5
Row: 1, Col: 5, Value: 1.1
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 75.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 0.3%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
Rockefeller Center - $ 4,500 $ 3,690
Properties, Inc. 0% 12/31/00
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Total Renal Care Holdings, B1 13,060 10,579
Inc. 7% 5/15/09 (d)
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc. - 110 110
0% 12/15/05 (c)(d)
TOTAL CONVERTIBLE BONDS 14,379
NONCONVERTIBLE BONDS - 74.7%
BASIC INDUSTRIES - 3.4%
CHEMICALS & PLASTICS - 0.6%
Huntsman Corp.:
9.5% 7/1/07 (d) B+ 9,210 9,072
9.5% 7/1/07 (d) - 16,270 16,026
Pioneer Americas Acquisition B2 500 425
Corp. 9.25% 6/15/07
Sterling Chemicals, Inc. B3 290 276
11.75% 8/15/06
25,799
PACKAGING & CONTAINERS - 1.1%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 17,510 16,722
9.75% 6/15/07 Caa1 6,340 6,166
9.875% 2/15/08 Caa2 21,985 19,457
Packaging Corp. of America B3 6,090 6,273
9.625% 4/1/09 (d)
48,618
PAPER & FOREST PRODUCTS - 1.7%
APP Finance II Mauritius Ltd.:
12% 2/15/04 B3 9,800 5,121
12% 3/15/04 B3 10,090 5,272
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS -
CONTINUED
Container Corp. of America:
gtd.:
9.75% 4/1/03 B2 $ 8,490 $ 8,978
11.25% 5/1/04 B2 4,550 4,800
10.75% 5/1/02 B2 3,240 3,459
Florida Coast Paper Co. Ca 35,780 16,459
LLC/Florida Coast Paper
Finance Corp. Series B,
12.75% 6/1/03 (g)
Repap New Brunswick, Inc. Caa1 14,040 11,372
yankee 10.625% 4/15/05
Stone Container Corp. 12.58% B2 18,740 20,427
8/1/16 (e)
75,888
TOTAL BASIC INDUSTRIES 150,305
CONSTRUCTION & REAL ESTATE -
0.6%
REAL ESTATE INVESTMENT TRUSTS
- - 0.6%
Ocwen Asset Investment Corp. - 31,800 27,666
11.5% 7/1/05
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
0.6%
Blue Bird Body Co. 10.75% B2 5,760 6,120
11/15/06
Federal-Mogul Corp. 7.5% Ba2 21,090 20,550
1/15/09 (d)
26,670
HOME FURNISHINGS - 0.5%
Sealy Corp., Inc. 10% - 11,880 11,642
12/18/08 pay-in-kind (f)
Sealy Mattress Co.:
0% 12/15/07 (c) B3 5,230 3,400
9.875% 12/15/07 B3 5,550 5,578
Simmons Co. 10.25% 3/15/09 (d) B3 2,370 2,477
23,097
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.4%
WestPoint Stevens, Inc. Ba3 $ 10,705 $ 10,946
7.875% 6/15/08
Worldtex, Inc. 9.625% 12/15/07 B1 5,020 4,367
15,313
TOTAL DURABLES 65,080
ENERGY - 2.0%
COAL - 0.3%
P&L Coal Holdings Corp. B2 15,310 15,884
9.625% 5/15/08
ENERGY SERVICES - 0.4%
R&B Falcon Corp.:
9.5% 12/15/08 (d) Ba3 10,060 9,456
12.25% 3/15/06 (d) Ba3 7,940 8,297
17,753
OIL & GAS - 1.3%
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 2,580 2,232
8.5% 3/15/12 B3 1,340 1,072
9.125% 4/15/06 B3 2,320 2,018
9.625% 5/1/05 B3 17,510 15,934
Cross Timbers Oil Co.:
8.75% 11/1/09 B2 9,000 8,730
9.25% 4/1/07 B2 830 838
Flores & Rucks, Inc. 9.75% B1 3,680 3,873
10/1/06
Ocean Energy, Inc.:
7.875% 8/1/03 Ba1 1,940 1,940
8.375% 7/1/08 B1 5,280 5,174
8.625% 8/1/05 Ba3 4,310 4,310
8.875% 7/15/07 B1 760 775
10.375% 10/15/05 B2 590 633
Seven Seas Petroleum, Inc. Caa1 6,780 3,526
12.5% 5/15/05
Snyder Oil Corp. 8.75% 6/15/07 B2 4,090 4,131
Vintage Petroleum, Inc. 9% B1 1,620 1,636
12/15/05
56,822
TOTAL ENERGY 90,459
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 2.8%
CREDIT & OTHER FINANCE - 2.7%
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 $ 3,490 $ 2,914
10% 3/15/04 Caa3 1,510 1,261
ContiFinancial Corp.:
7.5% 3/15/02 B3 5,950 4,760
8.125% 4/1/08 B3 27,830 20,873
8.375% 8/15/03 B3 13,680 10,944
Denbury Management, Inc. 9% B3 7,910 7,040
3/1/08
Digital Television Services B3 12,450 13,944
LLC/ DTS Capital, Inc. 12.5%
8/1/07
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,700 9,774
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba1 4,610 3,550
7.6% 8/1/07 Ba1 2,990 2,123
7.875% 8/1/03 Ba1 8,890 6,579
Ocwen Capital Trust 10.875% B2 4,780 3,681
8/1/27
RBF Finance Co.:
11% 3/15/06 (d) Ba3 6,050 6,322
11.375% 3/15/09 (d) Ba3 6,050 6,383
Stone Container Finance Co. B2 8,330 9,080
11.5% 8/15/06 (d)
Transwestern Pub Co. B2 3,475 3,631
LP/Township Capital 9.625%
11/15/07
Winstar Equipment II Corp. - 5,450 5,614
12.5% 3/15/04
118,473
INSURANCE - 0.1%
ITT Corp. 6.75% 11/15/03 Ba1 4,240 4,109
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (d) - 22 22
TOTAL FINANCE 122,604
HEALTH - 2.0%
DRUGS & PHARMACEUTICALS - 0.6%
Global Health Sciences, Inc. Caa1 37,460 24,349
11% 5/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 0.2%
Graham-Field Health Products, Caa1 $ 14,270 $ 8,847
Inc. 9.75% 8/15/07
MEDICAL FACILITIES MANAGEMENT
- - 1.2%
Everest Healthcare Services, B3 3,740 3,796
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 9,470 7,884
4/15/08
Harborside Healthcare Corp. B3 24,000 10,320
0% 8/1/08 (c)
Oxford Health Plans, Inc. 11% Caa1 24,720 25,338
5/15/05 (d)
Tenet Healthcare Corp.:
8.125% 12/1/08 (d) Ba3 4,900 4,827
8.625% 1/15/07 Ba3 1,270 1,280
53,445
TOTAL HEALTH 86,641
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
ELECTRICAL EQUIPMENT - 0.4%
L-3 Communications Corp.:
8% 8/1/08 B2 10,600 10,786
10.375% 5/1/07 B2 2,600 2,867
Omnipoint Corp.:
Series A, 11.625% 8/15/06 B3 5,090 4,734
11.625% 8/15/06 B3 1,680 1,562
19,949
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
Bucyrus International, Inc. B1 530 511
9.75% 9/15/07
TOTAL INDUSTRIAL MACHINERY & 20,460
EQUIPMENT
MEDIA & LEISURE - 25.2%
BROADCASTING - 18.8%
ACME Television LLC/ACME B3 11,102 9,603
Financial Corp. 0% 9/30/04
(c)
Adelphia Communications Corp.:
7.75% 1/15/09 (d) B1 33,030 32,700
8.375% 2/1/08 B1 15,640 15,914
9.25% 10/1/02 B1 20,200 21,059
9.875% 3/1/07 B1 36,755 40,247
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Ascent Entertainment Group, B3 $ 11,280 $ 8,009
Inc. 0% 12/15/04 (c)
Avalon Cable Michigan, B3 3,830 4,060
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08 (d)
Benedek Communications Corp. B3 12,680 10,271
0% 5/15/06 (c)
Bresnan Communications Group
LLC/Bresnan Capital Corp.:
0% 2/1/09 (c)(d) B2 7,500 5,119
8% 2/1/09 (d) B2 2,400 2,442
CapStar Broadcasting
Partners, Inc.:
0% 2/1/09 (c) B3 9,910 8,473
9.25% 7/1/07 B2 4,570 4,838
Century Communications Corp.:
Series B, 0% 1/15/08 Ba3 20,600 9,785
8.375% 12/15/07 Ba3 620 639
8.75% 10/1/07 Ba3 2,250 2,351
9.5% 3/1/05 Ba3 1,770 1,898
Chancellor Media Corp.:
8% 11/1/08 (d) Ba2 31,890 32,847
8.125% 12/15/07 B1 9,935 10,034
9% 10/1/08 B1 27,475 29,295
Charter Communications B2 12,210 12,454
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
(d)
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 6,800 7,327
10.25% 7/1/07 B3 14,040 15,532
Classic Cable, Inc. 9.875% B3 3,620 3,873
8/1/08 (d)
Classic Communications, Inc. Caa1 9,500 6,460
0% 8/1/09 unit (c)(d)
Comcast UK Cable Partners B2 7,370 6,817
Ltd. 0% 11/15/07 (c)
CSC Holdings, Inc. 7.625% Ba2 20,970 20,892
7/15/18
Diamond Cable Communications B3 22,410 20,169
PLC yankee 0% 12/15/05 (c)
EchoStar DBS Corp. 9.375% B2 90,160 94,202
2/1/09 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Emmis Broadcasting B2 $ 8,140 $ 8,109
Communications Corp. 8.125%
3/15/09 (d)
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (c) B2 36,175 25,865
8.375% 4/15/10 B2 12,500 12,688
FrontierVision Holdings Caa1 29,290 25,775
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (c)
FrontierVision Holdings Caa1 17,220 15,154
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(c)(d)
Golden Sky DBS, Inc. 0% Caa1 18,240 10,898
3/1/07 (c)(d)
Intermedia Capital Partners B2 3,868 4,361
IV LP / Intermedia Partners
IV Capital Corp. 11.25%
8/1/06
International Cabletel, Inc. B3 43,087 39,209
0% 2/1/06 (c)
Iridium Operating LLC/Iridium B3 16,740 5,357
Capital Corp. 10.875% 7/15/05
Lenfest Communications, Inc.:
8.25% 2/15/08 B2 3,440 3,578
8.375% 11/1/05 Ba3 1,830 1,949
10.5% 6/15/06 B2 820 947
LIN Holdings Corp. 0% 3/1/08 B3 17,190 11,947
(c)
NTL, Inc.:
0% 4/1/08 (c) B3 35,870 25,199
0% 10/1/08 (c)(d) B3 30,780 21,546
10% 2/15/07 B3 28,600 30,745
11.5% 10/1/08 (d) B3 35,980 41,017
Pegasus Communications Corp.:
9.625% 10/15/05 B3 640 664
9.75% 12/1/06 B3 2,100 2,184
Renaissance Media Group B3 24,570 17,322
LLC/Renaissance Media
Capital Corp. 0% 4/15/08 (c)
Satelites Mexicanos SA de CV:
8.75% 6/30/04 (d)(e) B1 13,560 12,882
10.125% 11/1/04 B3 34,710 29,851
Telewest PLC:
yankee 9.625% 10/1/06 B1 9,260 9,746
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Telewest PLC: - continued
0% 10/1/07 (c) B1 $ 29,550 $ 26,300
United International B3 9,490 6,429
Holdings, Inc. 0% 2/15/08 (c)
827,032
ENTERTAINMENT - 2.5%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 19,370 19,031
9.5% 2/1/11 (d) B3 4,310 4,213
Cinemark USA, Inc. 8.5% 8/1/08 B2 10,960 10,946
IMAX Corp. 7.875% 12/1/05 Ba2 5,120 5,094
Livent, Inc. 9.375% 10/15/04 B1 11,100 4,995
Mohegan Tribal Gaming Ba3 7,020 7,248
Authority 8.75% 1/1/09 (d)
Premier Parks, Inc.:
0% 4/1/08 (c) B3 28,340 20,157
9.25% 4/1/06 B3 22,070 23,091
Waterford Gaming B1 13,510 13,915
LLC/Waterford Gaming Finance
Corp. 9.5% 3/15/10 (d)
108,690
LODGING & GAMING - 2.9%
Circus Circus Enterprises,
Inc.:
6.7% 11/15/96 Baa3 4,300 4,107
7% 11/15/36 Baa3 4,330 3,940
7.625% 7/15/13 Ba2 5,920 5,565
9.25% 12/1/05 Ba2 5,180 5,426
Florida Panthers Holdings, B2 10,020 10,070
Inc. 9.875% 4/15/09 (d)
HMH Properties, Inc. 8.45% Ba2 11,590 11,590
12/1/08
ITT Corp.:
6.75% 11/15/05 Ba1 6,420 5,987
7.375% 11/15/15 Ba1 11,015 10,061
KSL Recreation Group, Inc. B3 11,080 11,412
10.25% 5/1/07
Signature Resorts, Inc. 9.75% B3 24,120 21,949
10/1/07
Station Casinos, Inc. 8.875% B2 15,820 16,334
12/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - CONTINUED
Sun International Hotels
Ltd./Sun International North
America, Inc.:
yankee 9% 3/15/07 Ba3 $ 2,800 $ 2,912
8.625% 12/15/07 Ba3 17,690 18,221
127,574
PUBLISHING - 0.4%
Sun Media Corp.:
9.5% 5/15/07 B1 615 670
yankee 9.5% 2/15/07 B1 1,437 1,566
Transwestern Holding LP/TWP B3 1,870 1,346
Capital Corp. 0% 11/15/08 (c)
World Color Press, Inc. B1 16,330 16,493
8.375% 11/15/08
20,075
RESTAURANTS - 0.6%
Host Marriott Travel Plazas, Ba3 13,430 14,034
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 13,570 13,163
7/15/08
27,197
TOTAL MEDIA & LEISURE 1,110,568
NONDURABLES - 2.0%
FOODS - 0.9%
Aurora Foods, Inc. 8.75% B1 6,470 6,761
7/1/08
Del Monte Corp. 12.25% 4/15/07 B3 7,225 8,453
Del Monte Foods Co. 0% Caa2 19,104 14,567
12/15/07 (c)
Gorges/Quik-To-Fix Foods, Caa1 18,290 8,231
Inc. 11.5% 12/1/06
38,012
HOUSEHOLD PRODUCTS - 1.1%
AKI Holding Corp. 0% 7/1/09 Caa1 17,080 6,832
(c)
AKI, Inc. 10.5% 7/1/08 B2 13,150 12,953
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - CONTINUED
Revlon Consumer Products Corp.:
8.625% 2/1/08 B3 $ 23,065 $ 22,142
9% 11/1/06 B2 7,470 7,563
49,490
TOTAL NONDURABLES 87,502
RETAIL & WHOLESALE - 3.3%
GENERAL MERCHANDISE STORES -
0.1%
K mart Corp. 7.95% 2/1/23 Ba1 5,170 5,299
GROCERY STORES - 2.8%
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 6,420 6,227
10.5% 12/1/04 B3 3,580 3,508
Jitney-Jungle Stores America, B3 52,089 48,443
Inc. 10.375% 9/15/07
Pathmark Stores, Inc.:
9.625% 5/1/03 Caa1 6,220 6,407
11.625% 6/15/02 Caa2 29,855 30,751
12.625% 6/15/02 Caa2 10,220 10,527
Smiths Food & Drug Centers,
Inc. 1994 Pass Through Trust:
8.64% 7/2/12 BB+ 5,000 5,281
9.2% 7/2/18 BB+ 3,700 4,033
Star Market Co., Inc. 13% B3 8,490 9,275
11/1/04
124,452
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
U.S. Office Products Co. B3 21,485 14,717
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 144,468
SERVICES - 1.8%
ADVERTISING - 0.2%
Ackerly Group, Inc. 9% 1/15/09 B2 7,440 7,663
LEASING & RENTAL - 0.3%
Anthony Crane Rentals B3 8,210 8,333
LP/Anthony Credit Capital
Corp. 10.375% 8/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - CONTINUED
LEASING & RENTAL - CONTINUED
AP Holdings, Inc. 0% 3/15/08 Caa2 $ 2,360 $ 1,310
(c)
Apcoa, Inc. 9.25% 3/15/08 Caa1 3,520 3,274
12,917
PRINTING - 0.4%
Sullivan Graphics, Inc. Caa1 15,420 16,230
12.75% 8/1/05
SERVICES - 0.9%
Iron Mountain, Inc. 8.75% B2 10,990 11,265
9/30/09
Medaphis Corp. 9.5% 2/15/05 Caa1 7,330 4,838
SITEL Corp. 9.25% 3/15/06 B2 10,070 9,567
Spin Cycle, Inc. 0% 5/1/05 (c) - 18,880 6,986
Young American Corp. 11.625% Caa1 15,920 8,597
2/15/06
41,253
TOTAL SERVICES 78,063
TECHNOLOGY - 2.7%
COMPUTER SERVICES & SOFTWARE
- - 1.5%
Amazon.com, Inc. 0% 5/1/08 (c) Caa2 20,610 14,891
Concentric Network Corp. - 27,280 30,690
12.75% 12/15/07
DecisionOne Corp. 9.75% 8/1/07 B3 26,350 659
DecisionOne Holdings Corp. 0% Caa1 10,835 27
8/1/08 unit (c)
Federal Data Corp. 10.125% B3 4,270 4,206
8/1/05
Splitrock Services, Inc. - 16,000 16,240
11.75% 7/15/08
66,713
ELECTRONIC INSTRUMENTS - 1.0%
Fisher Scientific B3 21,815 22,088
International, Inc. 9% 2/1/08
Telecommunications Techniques B3 23,655 23,892
Co. LLC 9.75% 5/15/08
45,980
ELECTRONICS - 0.2%
Stellex Industries, Inc. 9.5% B3 9,750 8,775
11/1/07
TOTAL TECHNOLOGY 121,468
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TRANSPORTATION - 1.1%
AIR TRANSPORTATION - 0.7%
Atlas Air, Inc. 9.375% B3 $ 9,410 $ 9,410
11/15/06
Kitty Hawk, Inc. 9.95% B1 21,380 21,701
11/15/04
31,111
RAILROADS - 0.3%
TFM SA de CV:
0% 6/15/09 (c) B2 9,380 6,003
10.25% 6/15/07 B2 4,610 4,333
10,336
SHIPPING - 0.1%
International Shipholding Ba3 5,810 5,607
Corp. 7.75% 10/15/07
TOTAL TRANSPORTATION 47,054
UTILITIES - 25.9%
CELLULAR - 6.2%
Clearnet Communications, Inc. B3 8,940 5,655
0% 5/1/09 (c)
ESAT Holdings Ltd. 0% 2/1/07 Caa1 15,520 11,485
(c)
Intercel, Inc. 0% 2/1/06 (c) B2 4,250 3,554
McCaw International Ltd. 0% Caa1 41,840 27,614
4/15/07 (c)
Millicom International Caa1 55,010 42,633
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 9/15/07 (c) B2 15,301 11,935
0% 2/15/08 (c) B2 6,350 4,810
9.75% 8/15/04 B2 9,810 10,190
12% 11/1/08 (d) B2 22,320 26,338
Nextel International, Inc. 0% Caa1 1,730 973
4/15/08 (c)
Orbital Imaging Corp.:
11.625% 3/1/05 - 35,250 33,664
11.625% 3/1/05 (d) - 5,910 5,644
Rogers Cantel, Inc. 8.8% B2 7,220 7,617
10/1/07
Rogers Communications, Inc. B2 16,400 17,138
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 38,320 21,555
(c)(d)
Teligent, Inc.:
0% 3/1/08 (c) Caa1 2,900 1,682
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Teligent, Inc.: - continued
11.5% 12/1/07 Caa1 $ 27,410 $ 27,410
Triton PCS, Inc. 0% 5/1/08 (c) Caa1 19,720 12,473
272,370
ELECTRIC UTILITY - 1.1%
CMS Energy Corp. 6.75% Ba3 12,240 11,995
1/15/04 (d)
Niagara Mohawk Power Corp.:
0% 7/1/10 (c) Ba2 36,610 28,007
7.625% 10/1/05 Ba2 8,360 8,615
48,617
TELEPHONE SERVICES - 18.6%
Allegiance Telecom, Inc.:
0% 2/15/08 (c) - 3,440 2,288
12.875% 5/15/08 - 19,580 22,174
Covad Communications Group, B3 28,270 16,679
Inc. 0% 3/15/08 (c)
DTI Holdings, Inc. 0% 3/1/08 - 25,790 10,058
(c)
e.spire Communications, Inc.:
0% 11/1/05 (c) - 6,855 5,141
0% 4/1/06 (c) - 14,790 10,205
13.75% 7/15/07 - 15,200 14,744
ESAT Telecom Group PLC 0% Caa1 7,530 5,572
2/1/07 (c)
Firstworld Communications, - 19,020 9,700
Inc. 0% 4/15/08 (c)
Global Crossing Holdings Ltd. B1 31,640 35,200
9.625% 5/15/08
GST Network Funding, Inc. 0% - 35,110 21,505
5/1/08 (c)(d)
GST Equipment Funding, Inc. - 13,760 15,136
13.25% 5/1/07
GST Telecommunications, Inc. - 26,920 29,208
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (c) - 24,990 20,742
Hermes Europe Railtel BV B3 18,200 19,838
11.5% 8/15/07
ICG Services, Inc.:
0% 2/15/08 (c) - 95,400 59,864
0% 5/1/08 (c) - 6,390 3,914
Intermedia Communications,
Inc.:
8.5% 1/15/08 B2 2,490 2,478
8.6% 6/1/08 B2 11,320 11,320
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Intermedia Communications,
Inc.: - continued
8.875% 11/1/07 B2 $ 2,070 $ 2,091
9.5% 3/1/09 (d) B2 11,250 11,700
KMC Telecom Holdings, Inc. 0% - 28,410 15,910
2/15/08 (c)
Level 3 Communications, Inc. B3 41,000 41,820
9.125% 5/1/08
Logix Communications - 17,455 17,106
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
0% 3/1/07 (c) B2 7,210 5,804
8.375% 3/15/08 B2 5,140 5,153
9.25% 7/15/07 B2 12,240 12,760
9.5% 11/1/08 B2 13,730 14,691
Metromedia Fiber Network, B2 8,260 8,921
Inc. 10% 11/15/08 (d)
MetroNet Communications Corp.:
0% 11/1/07 (c) B3 11,190 9,036
0% 6/15/08 (c) B3 37,320 29,016
10.625% 11/1/08 (d) B3 14,780 17,330
MGC Communications, Inc. 13% Caa2 5,340 4,966
10/1/04
Netia Holdings BV 10.25% B3 32,125 30,519
11/1/07
NEXTLINK Communications LLC B3 28,040 30,914
12.5% 4/15/06
Pathnet, Inc. 12.25% 4/15/08 - 10,610 5,942
Qwest Communications
International, Inc.:
0% 10/15/07 (c) Ba1 25,620 20,304
7.25% 11/1/08 (d) Ba1 8,330 8,559
7.5% 11/1/08 Ba1 12,520 13,083
10.875% 4/1/07 Ba1 8,945 10,264
Rhythms NetConnections, Inc.:
0% 5/15/08 (c) - 16,270 9,193
12.75% 4/15/09 (d) - 16,860 16,776
RSL Communications Ltd./RSL B2 14,575 15,850
Communications PLC 12.25%
11/15/06
Telegroup, Inc. 0% 11/1/04 (c) - 5,820 1,921
TeleWest Communications PLC B1 5,360 6,177
11.25% 11/1/08 (d)
Transtel Pass Through Trust B2 12,030 5,323
12.5% 11/1/07 (d)
Versatel Telecom BV 13.25% - 7,060 7,625
5/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Viatel, Inc.:
0% 4/15/08 (c) Caa1 $ 24,860 $ 16,035
11.25% 4/15/08 Caa1 32,660 33,803
WinStar Communications, Inc.:
0% 10/15/05 (c) Caa1 2,560 2,202
0% 10/15/05 (c) Caa1 2,030 2,741
0% 3/15/08 (c) CCC 29,240 24,854
10% 3/15/08 CCC 33,310 28,980
Winstar Equipment Corp. 12.5% B3 16,020 16,501
3/15/04
819,636
TOTAL UTILITIES 1,140,623
TOTAL NONCONVERTIBLE BONDS 3,292,961
TOTAL CORPORATE BONDS 3,307,340
(Cost $3,365,185)
ASSET-BACKED SECURITIES - 0.4%
Airplanes Pass Through Trust Ba2 18,415 18,047
10.875% 3/15/19 (Cost
$19,398)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bardell Associates Note Trust - 1,660 1,764
12.5%, 11/1/08 (f)
First Chicago/Lennar Trust I - 10,700 7,905
Series 1997-CHL1 Class E,
8.0531% 4/1/39 (e)
Resolution Trust Corp. Series Ba3 3,636 2,945
1991 M2 Class A3, 7.2498%
9/25/20 (e)
Structured Asset Securities
Corp.:
Series 1995-C1 Class F, - 2,500 1,958
7.375% 9/25/24 (d)
Series 1995-C1 Class E, BB 4,000 3,743
7.375% 9/25/24 (d)
Series 1996-CFL Class G, B 9,260 8,301
7.75% 2/25/28 (d)
TOTAL COMMERCIAL MORTGAGE 26,616
SECURITIES
(Cost $24,993)
</TABLE>
COMMON STOCKS - 6.3%
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Foamex-JPS Automotive 15,350 $ 230
LP/Foamex JPS Capital Corp.
warrants 7/1/99 (a)
Trivest 1992 Special Fund 3 348
Ltd. (a)(h)
578
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd. 2,010 1
warrants 10/15/03 (a)
Gaylord Container Corp. Class 512,500 4,292
A (a)
4,293
TOTAL BASIC INDUSTRIES 4,871
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
Capital Pacific Holdings, 24,095 8
Inc. warrants 5/1/02 (a)(d)
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Ocwen Asset Investment Corp. 164,450 791
TOTAL CONSTRUCTION & REAL 799
ESTATE
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Arena Brands Holdings Corp. 42,253 1,056
Class B
ENERGY - 0.1%
OIL & GAS - 0.1%
Pioneer Natural Resources Co. 75,769 886
Plains Resources, Inc. (a) 70,500 1,203
2,089
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
AMRESCO, Inc. 118,000 767
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(d) 900 $ 81
TOTAL FINANCE 848
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
XRC Corp. (a) 84,961 1
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Oxford Health Plans, Inc. (a) 180,000 3,589
TOTAL HEALTH 3,590
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. Class A (a) 67,040 306
POLLUTION CONTROL - 0.3%
Allied Waste Industries, Inc. 757,000 13,389
(a)
TOTAL INDUSTRIAL MACHINERY & 13,695
EQUIPMENT
MEDIA & LEISURE - 2.6%
BROADCASTING - 2.3%
Adelphia Communications Corp. 156,800 10,702
Class A (a)
Cablevision Systems Corp. 52,700 4,078
Class A (a)
CS Wireless Systems, Inc. 439 0
(a)(d)
EchoStar Communications Corp. 492,537 49,408
Class A (a)
MediaOne Group, Inc. 250,000 20,391
NTL, Inc. (a) 100,000 7,625
NTL, Inc. warrants 12/31/08 53,424 2,671
(a)
Pegasus Communications Corp. 6,509 7,632
unit (a)
UIH Australia/Pacific, Inc. 19,690 20
warrants 5/15/06 (a)
102,527
ENTERTAINMENT - 0.0%
Livent, Inc. (a) 125,200 9
LEISURE DURABLES & TOYS - 0.0%
IHF Capital, Inc. Series I 1,460 0
warrants 11/14/99 (a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.3%
Station Casinos, Inc. (a) 244,800 $ 4,024
Sunterra Corp. (a) 580,100 6,236
10,260
TOTAL MEDIA & LEISURE 112,796
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Meyer (Fred), Inc. (a) 29,700 1,608
SERVICES - 0.0%
Spin Cycle, Inc. warrants 18,880 0
5/1/05 (a)(d)
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. (a) 76,300 6,371
Concentric Network Corp. 8,680 2,673
warrants 12/15/07 (a)(d)
Splitrock Services, Inc. 7,500 638
warrants 7/15/08 (a)
9,682
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. Class A 5,520 0
warrants 12/15/00 (a)
UTILITIES - 2.8%
CELLULAR - 0.2%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 19,560 147
.47) (a)
warrants 1/15/07 (CV ratio 18,480 176
.6) (a)
McCaw International Ltd. 66,290 166
warrants 4/15/07 (a)(d)
Microcell Telecommunications, 183,560 3,053
Inc. warrants 6/1/06 (a)(d)
Nextel Communications, Inc. 125,087 5,121
Class A (a)
Orbital Imaging Corp. 28,510 855
warrants 3/1/05 (a)(d)
Powertel, Inc. warrants 85,408 363
2/1/06 (a)
9,881
ELECTRIC UTILITY - 0.0%
Niagara Mohawk Holdings, Inc. 93,300 1,248
(a)
GAS - 0.1%
Ocean Energy, Inc. (a) 211,410 1,969
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 2.5%
Covad Communications Group, 32,410 $ 41,874
Inc. warrants 3/15/08 (a)(d)
DTI Holdings, Inc. warrants 136,150 1
3/1/08 (a)(d)
e.spire Communications, Inc. 206,400 2,580
(a)
Firstworld Communications, 19,020 951
Inc. warrants 4/15/08 (a)(d)
GST Telecommunications, Inc. 425,000 5,206
(a)
ICG Communications, Inc. (a) 252,500 5,571
Intermedia Communications, 102,200 3,290
Inc. (a)
Intermedia Communications, 2,500 310
Inc. warrants 6/1/00 (a)
KMC Telecom Holdings, Inc. 37,830 95
warrants 4/15/08 (a)(d)
MCI WorldCom, Inc. (a) 125,300 10,298
McLeodUSA, Inc. Class A (a) 260,000 14,576
MGC Communications, Inc. 5,340 828
warrants 10/1/04 (a)(d)
Pathnet, Inc. warrants 10,610 106
4/15/08 (a)(d)
Rhythms NetConnections, Inc. 57,520 12,916
warrants 5/15/08 (a)(d)
RSL Communications Ltd./RSL 25,710 3,394
Communications PLC warrants
11/15/06 (a)(d)
Source Media, Inc. warrants 48,052 565
11/1/07 (a)(d)
TeleWest Communications PLC 75,000 3,488
sponsored ADR (a)
Versatel Telecom BV warrants 7,060 494
5/15/08 (a)(d)
WinStar Communications, Inc. 100,000 4,863
(a)
111,406
TOTAL UTILITIES 124,504
TOTAL COMMON STOCKS 275,538
(Cost $124,619)
PREFERRED STOCKS - 13.1%
CONVERTIBLE PREFERRED STOCKS
- - 0.8%
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Host Marriott Financial Trust 146,600 6,698
$3.375 QUIPS
Station Casinos, Inc. $3.50 7,600 429
7,127
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
UTILITIES - 0.6%
TELEPHONE SERVICES - 0.6%
IXC Communications, Inc. 179,000 $ 6,914
$3.375 (d)
NEXTLINK Communications, Inc. 240,000 21,360
$3.25 (d)
28,274
TOTAL CONVERTIBLE PREFERRED 35,401
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 12.3%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 32,780 3,409
$12.375 pay-in-kind (d)
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
California Federal Preferred 533,897 13,881
Capital Corp. $2.28
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 33,881 62
Series 1
FINANCE - 0.3%
INSURANCE - 0.3%
American Annuity Group 10,340 10,828
Capital Trust II 8.875%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fresenius Medical Care 9,847 10,347
Capital Trust 9%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. 8% non-cumulative 182 284
MEDIA & LEISURE - 5.4%
BROADCASTING - 4.5%
Adelphia Communications Corp. 228,536 26,167
$13.00
Benedek Communications Corp. 11,712 8,784
11.5% pay-in-kind
Citadel Broadcasting Co. 115,033 13,890
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 548,732 63,927
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
CSC Holdings, Inc.: - continued
Series H, 11.75% pay-in-kind 175,393 $ 20,346
Granite Broadcasting Corp. 27,007 27,817
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 32,251 36,524
Pegasus Communications Corp. 1,322 1,471
12.75% pay-in-kind
198,926
PUBLISHING - 0.9%
PRIMEDIA, Inc.:
$9.20 76,000 7,638
8.625% 6,185 597
Series D, $10.00 309,863 32,574
40,809
TOTAL MEDIA & LEISURE 239,735
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Supermarkets General Holdings 116,319 4,217
Corp. $3.52 pay-in-kind
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. 7,366 7,918
13.5% pay-in-kind
UTILITIES - 5.7%
CELLULAR - 1.4%
Nextel Communications, Inc.:
11.125% pay-in-kind 17,086 18,795
Series D, 13% pay-in-kind 38,920 44,369
63,164
TELEPHONE SERVICES - 4.3%
e.spire Communications, Inc.:
$127.50 pay-in-kind 29,023 15,382
14.75% pay-in-kind 9,948 5,869
Hyperion Telecommunication, 18,143 17,054
Inc. 12.875% pay-in-kind
ICG Holdings, Inc. 14.25% 10,695 11,230
pay-in-kind
Intermedia Communications, 56,575 60,818
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 39,548 38,955
12.5% pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
NEXTLINK Communications, Inc. 298,749 $ 16,431
14% pay-in-kind
Source Media, Inc. 13.50% 104,953 1,889
pay-in-kind
Viatel, Inc. 10% pay-in-kind 28,848 7,097
(d)
WinStar Communications, Inc. 16,106 12,080
14.25% (a)
186,805
TOTAL UTILITIES 249,969
TOTAL NONCONVERTIBLE 540,650
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 576,051
(Cost $583,435)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
Oxford Health Plans, Inc. B3 $ 3,000 3,030
term loan 9.335% 5/13/03 (e)
(Cost $3,000)
CASH EQUIVALENTS - 4.5%
MATURITY AMOUNT (000S)
Investments in repurchase $ 200,641 200,559
agreements (U.S. Treasury
obligations), in a joint
trading account at 4.89%,
dated 4/30/99 due 5/3/99
(Cost $200,559)
TOTAL INVESTMENT IN $ 4,407,181
SECURITIES - 100%
(Cost $4,321,189)
</TABLE>
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred Securities
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(d) 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 $756,686,000 or 16.9% of net assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Bardell Associates Note Trust 4/19/94 $ 1,687
12.5% 11/1/08
Sealy Corp., Inc. 10% 2/23/98 - 3/31/99 $ 11,165
12/18/08 pay-in-kind
(g) Non-income producing issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(h) Share amount represents number of units held.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.2% BBB 0.2%
Ba 8.8% BB 8.4%
B 42.8% B 45.7%
Caa 11.4% CCC 7.7%
Ca, C 0.4% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 10.6%. FMR has
determined that unrated debt securities that are lower quality account
for 10.6% of the total value of investment in securities.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $4,322,387,000. Net unrealized appreciation
aggregated $84,794,000, of which $338,188,000 related to appreciated
investment securities and $253,394,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) APRIL 30,
1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 4,407,181
value (including repurchase
agreements of $200,559)
(cost $4,321,189) - See
accompanying schedule
Receivable for investments 28,484
sold
Receivable for fund shares 18,651
sold
Dividends receivable 3,539
Interest receivable 68,235
Other receivables 208
TOTAL ASSETS 4,526,298
LIABILITIES
Payable for investments $ 18,651
purchased
Payable for fund shares 15,996
redeemed
Distributions payable 5,820
Accrued management fee 2,110
Other payables and accrued 2,511
expenses
TOTAL LIABILITIES 45,088
NET ASSETS $ 4,481,210
Net Assets consist of:
Paid in capital $ 4,464,377
Undistributed net investment 24,209
income
Accumulated undistributed net (93,368)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 85,992
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 4,481,210
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) APRIL 30,
1999 (UNAUDITED)
CALCULATION OF MAXIMUM $12.16
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($180,582
(divided by) 14,856 shares)
Maximum offering price per $12.77
share (100/95.25 of $12.16)
CLASS T: NET ASSET VALUE and $12.18
redemption price per share
($2,715,765 (divided by)
223,054 shares)
Maximum offering price per $12.62
share (100/96.50 of $12.18)
CLASS B: NET ASSET VALUE and $12.13
offering price per share
($1,208,523 (divided by)
99,646 shares) A
CLASS C: NET ASSET VALUE and $12.15
offering price per share
($236,974 (divided by)
19,504 shares) A
INSTITUTIONAL CLASS: NET $11.92
ASSET VALUE, offering price
and redemption price per
share ($139,366 (divided by)
11,687 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED APRIL 30, 1999
(UNAUDITED)
INVESTMENT INCOME $ 32,231
Dividends
Interest 169,052
TOTAL INCOME 201,283
EXPENSES
Management fee $ 11,780
Transfer agent fees 3,390
Distribution fees 8,980
Accounting fees and expenses 450
Non-interested trustees' 7
compensation
Custodian fees and expenses 59
Registration fees 240
Audit 23
Legal 74
Total expenses before 25,003
reductions
Expense reductions (20) 24,983
NET INVESTMENT INCOME 176,300
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (89,532)
Foreign currency transactions 2 (89,530)
Change in net unrealized 552,806
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 463,276
NET INCREASE (DECREASE) IN $ 639,576
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 176,300 $ 313,431
income
Net realized gain (loss) (89,530) 61,426
Change in net unrealized 552,806 (597,544)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 639,576 (222,687)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (226,691) (282,288)
From net investment income
From net realized gain (44,511) (70,360)
TOTAL DISTRIBUTIONS (271,202) (352,648)
Share transactions - net 507,577 1,259,000
increase (decrease)
TOTAL INCREASE (DECREASE) 875,951 683,665
IN NET ASSETS
NET ASSETS
Beginning of period 3,605,259 2,921,594
End of period (including $ 4,481,210 $ 3,605,259
undistributed net investment
income of $24,209 and
$74,600, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 12.930 $ 12.300 $ 12.010
period
Income from Investment
Operations
Net investment income D .517 1.111 1.058 .163
Net realized and unrealized 1.360 (1.603) .710 .267
gain (loss)
Total from investment 1.877 (.492) 1.768 .430
operations
Less Distributions
From net investment income (.677) (1.048) (1.078) (.140)
From net realized gain (.130) (.300) (.060) -
Total distributions (.807) (1.348) (1.138) (.140)
Net asset value, end of period $ 12.160 $ 11.090 $ 12.930 $ 12.300
TOTAL RETURNB, C 17.52% (4.55)% 15.18% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 181 $ 117 $ 44 $ 4
millions)
Ratio of expenses to average .96% A 1.01% 1.15% 1.25% A, F
net assets
Ratio of expenses to average .96% A 1.00% G 1.14% G 1.25% A
net assets after expense
reductions
Ratio of net investment 9.02% A 9.03% 8.58% 9.06% A
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220 $ 12.010
period
Income from Investment
Operations
Net investment income .518 D 1.119 D 1.086 D 1.105 D .930 D .848
Net realized and unrealized 1.350 (1.612) .686 .364 .680 (.537)
gain (loss)
Total from investment 1.868 (.493) 1.772 1.469 1.610 .311
operations
Less Distributions
From net investment income (.668) (1.037) (1.082) (1.069) (.920) (.851)
From net realized gain (.130) (.300) (.060) - - (.250)
Total distributions (.798) (1.337) (1.142) (1.069) (.920) (1.101)
Net asset value, end of period $ 12.180 $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220
TOTAL RETURN B, C 17.40% (4.54)% 15.21% 12.92% 15.05% 2.64%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 2,716 $ 2,322 $ 2,208 $ 1,709 $ 1,200 $ 680
millions)
Ratio of expenses to average 1.05% A 1.07% 1.09% 1.12% 1.15% 1.20%
net assets
Ratio of expenses to average 1.05% A 1.07% 1.08% E 1.11% E 1.15% 1.20%
net assets after expense
reductions
Ratio of net investment 8.98% A 8.91% 8.72% 9.20% 8.32% 6.92%
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121% 112% 118%
</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 OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210 $ 11.300
of period
Income from Investment
Operations
Net investment income .476 D 1.024 D .998 D 1.017 D .794 D .223
Net realized and unrealized 1.349 (1.588) .674 .361 .721 (.118)
gain (loss)
Total from investment 1.825 (.564) 1.672 1.378 1.515 .105
operations
Less Distributions
From net investment income (.635) (.956) (1.002) (.988) (.835) (.195)
From net realized gain (.130) (.300) (.060) - - -
Total distributions (.765) (1.256) (1.062) (.988) (.835) (.195)
Net asset value, end of period $ 12.130 $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210
TOTAL RETURN B, C 17.04% (5.10)% 14.34% 12.10% 14.12% .93%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,208 $ 923 $ 593 $ 344 $ 156 $ 17
(in millions)
Ratio of expenses to average 1.71% A 1.74% 1.74% 1.79% 2.01% 2.20% A
net assets
Ratio of net invest- ment 8.30% A 8.25% 8.04% 8.52% 7.46% 5.92% A
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121% 112% 118%
</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 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 OCTOBER 31, 1994.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 12.970
period
Income from Investment
Operations
Net investment income D .467 .988
Net realized and unrealized 1.356 (1.639)
gain (loss)
Total from investment 1.823 (.651)
operations
Less Distributions
From net investment income (.633) (.929)
From net realized gain (.130) (.300)
Total distributions (.763) (1.229)
Net asset value, end of period $ 12.150 $ 11.090
TOTAL RETURNB, C 16.99% (5.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 237 $ 130
millions)
Ratio of expenses to average 1.80% A 1.86% A
net assets
Ratio of net investment 8.16% A 8.21% A
income to average net assets
Portfolio turnover rate 67% A 75%
</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 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 OCTOBER 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.900 $ 12.710 $ 12.120 $ 11.760 $ 11.560
of period
Income from Investment
Operations
Net investment income D .518 1.123 1.094 1.070 .390
Net realized and unrealized 1.315 (1.562) .671 .368 .193
gain (loss)
Total from investment 1.833 (.439) 1.765 1.438 .583
operations
Less Distributions
From net investment income (.683) (1.071) (1.115) (1.078) (.383)
From net realized gain (.130) (.300) (.060) - -
Total distributions (.813) (1.371) (1.175) (1.078) (.383)
Net asset value, end of period $ 11.920 $ 10.900 $ 12.710 $ 12.120 $ 11.760
TOTAL RETURNB, C 17.42% (4.21)% 15.42% 12.81% 5.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 139 $ 113 $ 76 $ 38 $ 0.1
(in millions)
Ratio of expenses to average .82% A .83% .85% 1.10% .70% A
net assets
Ratio of expenses to average .82% A .83% .85% 1.05% F .70% A
net assets after expense
reductions
Ratio of net investment 9.17% A 9.12% 8.96% 9.26% 8.77% A
income to average net assets
Portfolio turnover rate 67% A 75% 105% 121% 112%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor High Yield Fund (the fund) is a fund of Fidelity
Advisor Series II (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. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. 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 for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
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.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
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, foreign
currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
transactions, market discount, partnerships, non-taxable dividends and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
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.
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 SEC), 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.
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
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
prompt sale at an acceptable price may be difficult. At the end of the
period, restricted securities (excluding 144A issues) amounted to
$13,406,000 or 0.3% of net assets.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $3,030,000 or 0.1% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,566,959,000 and $1,285,906,000, 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 .45%. 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 .58% of average net
assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .15%
CLASS T .25%
CLASS B .90% *
CLASS C 1.00% **
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 107,000 $ 1,000
CLASS T 3,158,000 67,000
CLASS B 4,801,000 3,479,000
CLASS C 914,000 805,000
$ 8,980,000 $ 4,352,000
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares, and 3.50% 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 six 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 5% 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 - CONTINUED
SALES LOAD - CONTINUED
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 434,000 $ 164,000
CLASS T 966,000 457,000
CLASS B 1,516,000 1,516,000*
CLASS C 90,000 90,000*
$ 3,006,000 $ 2,227,000
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the fund.
FIIOC receives account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For
the period, the following amounts were paid to FIIOC:
AMOUNT % OF AVERAGE NET ASSETS
CLASS A $ 127,000 .18 *
CLASS T 2,079,000 .17 *
CLASS B 913,000 .17 *
CLASS C 144,000 .16 *
INSTITUTIONAL CLASS 127,000 .19 *
$ 3,390,000
* ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $4,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $15,000 under this arrangement.
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 $5,000 under the custodian
arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998 A
FROM NET INVESTMENT INCOME
Class A $ 8,153 $ 6,814
Class T 143,596 201,133
Class B 57,699 60,100
Class C 9,493 4,494
Institutional Class 7,750 9,747
Total $ 226,691 $ 282,288
FROM NET REALIZED GAIN
Class A $ 1,459 $ 1,152
Class T 28,145 52,313
Class B 11,487 14,488
Class C 1,805 165
Institutional Class 1,615 2,242
Total $ 44,511 $ 70,360
$ 271,202 $ 352,648
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
AMOUNTS IN THOUSANDS 1999 1998 A 1999
CLASS A Shares sold 6,186 8,996 $ 72,474
Reinvestment of distributions 673 520 7,784
Shares redeemed (2,564) (2,377) (29,961)
Net increase (decrease) 4,295 7,139 $ 50,297
CLASS T Shares sold 58,774 100,128 $ 682,595
Reinvestment of distributions 11,894 16,088 137,616
Shares redeemed (56,669) (77,873) (657,389)
Net increase (decrease) 13,999 38,343 $ 162,822
CLASS B Shares sold 24,852 47,554 $ 288,287
Reinvestment of distributions 4,002 3,879 46,116
Shares redeemed (12,618) (14,038) (145,832)
Net increase (decrease) 16,236 37,395 $ 188,571
CLASS C Shares sold 10,656 15,155 $ 123,734
Reinvestment of distributions 557 210 6,437
Shares redeemed (3,412) (3,662) (39,624)
Net increase (decrease) 7,801 11,703 $ 90,547
INSTITUTIONAL CLASS Shares 8,269 10,756 $ 94,000
sold
Reinvestment of distributions 622 822 7,054
Shares redeemed (7,540) (7,206) (85,714)
Net increase (decrease) 1,351 4,372 $ 15,340
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
AMOUNTS IN THOUSANDS 1998 A
CLASS A Shares sold $ 113,312
Reinvestment of distributions 6,429
Shares redeemed (29,080)
Net increase (decrease) $ 90,661
CLASS T Shares sold $ 1,257,106
Reinvestment of distributions 201,460
Shares redeemed (968,795)
Net increase (decrease) $ 489,771
CLASS B Shares sold $ 598,852
Reinvestment of distributions 48,184
Shares redeemed (172,228)
Net increase (decrease) $ 474,808
CLASS C Shares sold $ 191,117
Reinvestment of distributions 2,549
Shares redeemed (45,190)
Net increase (decrease) $ 148,476
INSTITUTIONAL CLASS Shares $ 133,230
sold
Reinvestment of distributions 10,139
Shares redeemed (88,085)
Net increase (decrease) $ 55,284
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Advisor
High Yield Fund, the Board of Trustees has determined not to retain
PricewaterhouseCoopers LLP as the fund's independent auditor and voted
to appoint Deloitte & Touche LLP for the fiscal year ended October 31,
1999. For the fiscal years ended October 31, 1998 and October 31,
1997, PricewaterhouseCooper's LLP audit reports contained no adverse
opinion or disclaimer of opinion; nor were their reports qualified as
to uncertainty, audit scope, or accounting principles. Further, there
were no disagreements between the fund and PricewaterhouseCoopers LLP
on accounting principles, financial statement disclosure or audit
scope, which if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference to
the disagreement in their report.
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
Bart A. Grenier, Vice President
Margaret L. Eagle, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy 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 *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
HYI-SANN-0699 77845
1.703463.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
INTERMEDIATE BOND
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 35 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 44 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class A shares
took place on September 3, 1996. Class A shares bear a 0.15% 12b-1 fee
that is reflected in returns after September 3, 1996. Returns between
September 10, 1992 (the date Class T shares were first offered) and
September 3, 1996 are those of Class T and reflect Class T shares'
0.25% 12b-1 fee. Returns prior to September 10, 1992 are those of the
Institutional Class, the original class of the fund, which does not
bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected,
returns prior to September 10, 1992 would have been lower. If Fidelity
had not reimbursed certain class expenses, the past one year, past
five years, and past 10 years total returns and dividends would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL A 1.26% 5.71% 34.77% 110.86%
FIDELITY ADV INT BOND - CL A -2.53% 1.75% 29.72% 102.95%
(INCL. 3.75% SALES CHARGE)
LB Int Govt/Corp Bond 0.51% 6.37% 41.63% 119.91%
Short-Intermediate Investment 1.07% 5.23% 35.28% 102.44%
Grade 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 index of government and investment-grade
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 Inc. The past six months
average represents a peer group of 104 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL A 5.71% 6.15% 7.75%
FIDELITY ADV INT BOND - CL A 1.75% 5.34% 7.33%
(INCL. 3.75% SALES CHARGE)
LB Int Gov/Corp Bond 6.37% 7.21% 8.20%
Short-Intermediate Investment 5.23% 6.22% 7.30%
Grade 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
1989/04/30 9625.00 10000.00
1989/05/31 9806.01 10198.57
1989/06/30 10044.94 10455.68
1989/07/31 10257.44 10670.36
1989/08/31 10118.91 10532.45
1989/09/30 10166.68 10582.21
1989/10/31 10378.81 10805.91
1989/11/30 10464.18 10909.22
1989/12/31 10481.43 10939.08
1990/01/31 10377.18 10868.94
1990/02/28 10411.31 10908.51
1990/03/31 10396.75 10922.73
1990/04/30 10329.54 10884.81
1990/05/31 10574.88 10745.01
1990/06/30 10716.26 11272.96
1990/07/31 10859.34 11429.35
1990/08/31 10768.68 11382.43
1990/09/30 10848.29 11470.34
1990/10/31 10950.52 11603.52
1990/11/30 11140.07 11372.24
1990/12/31 11310.77 11940.71
1991/01/31 11394.85 12061.80
1991/02/28 11486.24 12158.24
1991/03/31 11559.01 12240.94
1991/04/30 11687.93 12374.35
1991/05/31 11750.28 12450.42
1991/06/30 11753.81 12459.18
1991/07/31 11886.01 12598.04
1991/08/31 12135.54 12838.56
1991/09/30 12360.94 13059.41
1991/10/31 12507.21 13208.45
1991/11/30 12626.87 13360.11
1991/12/31 13025.21 13686.41
1992/01/31 12858.54 13562.47
1992/02/29 12891.90 13616.03
1992/03/31 12845.49 13562.47
1992/04/30 12917.67 13681.67
1992/05/31 13153.75 13893.75
1992/06/30 13339.23 14099.43
1992/07/31 13653.19 14379.75
1992/08/31 13779.42 14523.59
1992/09/30 13939.72 14720.74
1992/10/31 13733.99 14529.75
1992/11/30 13769.05 14474.54
1992/12/31 13953.55 14668.37
1993/01/31 14231.66 14953.67
1993/02/28 14515.62 15189.45
1993/03/31 14610.97 15249.88
1993/04/30 14700.68 15372.62
1993/05/31 14711.01 15338.50
1993/06/30 15002.67 15579.25
1993/07/31 15118.87 15617.40
1993/08/31 15451.45 15865.03
1993/09/30 15495.70 15930.90
1993/10/31 15579.13 15973.56
1993/11/30 15489.93 15884.46
1993/12/31 15557.26 15957.20
1994/01/31 15721.56 16134.45
1994/02/28 15417.70 15895.83
1994/03/31 15119.06 15633.52
1994/04/30 15058.94 15527.12
1994/05/31 15006.98 15537.55
1994/06/30 15002.82 15539.68
1994/07/31 15145.19 15763.37
1994/08/31 15143.39 15812.66
1994/09/30 15068.23 15667.16
1994/10/31 15069.14 15665.03
1994/11/30 15112.35 15593.94
1994/12/31 15173.54 15649.16
1995/01/31 15338.48 15912.89
1995/02/28 15528.11 16242.98
1995/03/31 15607.46 16335.87
1995/04/30 15761.33 16537.52
1995/05/31 16146.34 17037.51
1995/06/30 16241.87 17151.73
1995/07/31 16233.18 17154.10
1995/08/31 16363.47 17310.25
1995/09/30 16478.69 17435.61
1995/10/31 16644.08 17629.91
1995/11/30 16839.23 17861.66
1995/12/31 17023.77 18048.86
1996/01/31 17164.46 18204.54
1996/02/29 16952.41 17990.81
1996/03/31 16886.75 17898.15
1996/04/30 16801.42 17834.89
1996/05/31 16780.90 17821.38
1996/06/30 16934.57 18010.71
1996/07/31 16978.95 18064.26
1996/08/31 17007.40 18078.48
1996/09/30 17193.59 18330.37
1996/10/31 17465.61 18654.30
1996/11/30 17667.09 18900.26
1996/12/31 17571.07 18779.18
1997/01/31 17645.39 18852.16
1997/02/28 17662.03 18888.18
1997/03/31 17552.10 18757.85
1997/04/30 17745.77 18978.22
1997/05/31 17856.96 19135.80
1997/06/30 18033.76 19310.44
1997/07/31 18364.45 19703.32
1997/08/31 18294.43 19604.27
1997/09/30 18483.46 19832.23
1997/10/31 18659.01 20051.89
1997/11/30 18693.66 20096.21
1997/12/31 18836.69 20256.87
1998/01/31 19066.08 20522.26
1998/02/28 19057.44 20506.62
1998/03/31 19129.40 20572.50
1998/04/30 19198.57 20675.58
1998/05/31 19342.27 20827.23
1998/06/30 19448.57 20960.17
1998/07/31 19502.25 21034.10
1998/08/31 19720.20 21364.66
1998/09/30 20083.71 21901.38
1998/10/31 20042.24 21879.81
1998/11/30 20095.15 21878.15
1998/12/31 20185.86 21966.07
1999/01/31 20314.96 22086.68
1999/02/28 20095.44 21762.04
1999/03/31 20224.80 21924.43
1999/04/30 20295.48 21991.00
IMATRL PRASUN SHR__CHT 19990430 19990517 105438 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class A on April
30, 1989, and the current 3.75% sales charge was paid. As the chart
shows, by April 30, 1999, the value of the investment would have grown
to $20,295 - a 102.95% 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 $21,991 - a 119.91% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER
31,
1999 1998 1997 1996
Dividend returns 2.65% 5.71% 6.16% 1.00%
Capital returns -1.39% 1.70% 0.67% 1.64%
Total returns 1.26% 7.41% 6.83% 2.64%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.71(cents) 28.48(cents) 57.53(cents)
Annualized dividend rate 5.38% 5.37% 5.38%
30-day annualized yield 4.93% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.65 over the past one
month, $10.69 over the past six months and $10.69 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class A's
current 3.75% sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class T shares,
took place on September 10, 1992. Class T shares bear a 0.25% 12b-1
fee that is reflected in returns after September 10, 1992. Returns
prior to that date are those of the Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Had Class T
shares' 12b-1 fee been reflected, returns prior to September 10, 1992
would have been lower. If Fidelity had not reimbursed certain class
expenses, the past five year and past 10 year total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL T 1.19% 5.51% 34.52% 110.46%
FIDELITY ADV INT BOND - CL T -1.59% 2.61% 30.82% 104.67%
(INCL. 2.75% SALES CHARGE)
LB Int Govt/Corp Bond 0.51% 6.37% 41.63% 119.91%
Short-Intermediate Investment 1.07% 5.23% 35.28% 102.44%
Grade Debt Funds Average
</TABLE>
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 index of government and investment-grade
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 Inc. The past six months
average represents a peer group of 104 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL T 5.51% 6.11% 7.73%
FIDELITY ADV INT BOND - CL T 2.61% 5.52% 7.43%
(INCL. 2.75% SALES CHARGE)
LB Int Govt/Corp Bond 6.37% 7.21% 8.20%
Short-Intermediate Investment 5.23% 6.22% 7.30%
Grade 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
1989/04/30 9725.00 10000.00
1989/05/31 9907.89 10198.57
1989/06/30 10149.30 10455.68
1989/07/31 10364.01 10670.36
1989/08/31 10224.04 10532.45
1989/09/30 10272.31 10582.21
1989/10/31 10486.64 10805.91
1989/11/30 10572.90 10909.22
1989/12/31 10590.33 10939.08
1990/01/31 10485.00 10868.94
1990/02/28 10519.48 10908.51
1990/03/31 10504.77 10922.73
1990/04/30 10436.86 10884.81
1990/05/31 10684.75 10745.01
1990/06/30 10827.60 11272.96
1990/07/31 10972.16 11429.35
1990/08/31 10880.57 11382.43
1990/09/30 10961.00 11470.34
1990/10/31 11064.29 11603.52
1990/11/30 11255.82 11372.24
1990/12/31 11428.28 11940.71
1991/01/31 11513.24 12061.80
1991/02/28 11605.57 12158.24
1991/03/31 11679.10 12240.94
1991/04/30 11809.36 12374.35
1991/05/31 11872.36 12450.42
1991/06/30 11875.93 12459.18
1991/07/31 12009.50 12598.04
1991/08/31 12261.62 12838.56
1991/09/30 12489.37 13059.41
1991/10/31 12637.15 13208.45
1991/11/30 12758.06 13360.11
1991/12/31 13160.54 13686.41
1992/01/31 12992.13 13562.47
1992/02/29 13025.84 13616.03
1992/03/31 12978.95 13562.47
1992/04/30 13051.88 13681.67
1992/05/31 13290.41 13893.75
1992/06/30 13477.82 14099.43
1992/07/31 13795.04 14379.75
1992/08/31 13922.59 14523.59
1992/09/30 14084.55 14720.74
1992/10/31 13876.68 14529.75
1992/11/30 13912.11 14474.54
1992/12/31 14098.52 14668.37
1993/01/31 14379.53 14953.67
1993/02/28 14666.43 15189.45
1993/03/31 14762.77 15249.88
1993/04/30 14853.41 15372.62
1993/05/31 14863.85 15338.50
1993/06/30 15158.54 15579.25
1993/07/31 15275.95 15617.40
1993/08/31 15611.98 15865.03
1993/09/30 15656.70 15930.90
1993/10/31 15741.00 15973.56
1993/11/30 15650.87 15884.46
1993/12/31 15718.90 15957.20
1994/01/31 15884.90 16134.45
1994/02/28 15577.89 15895.83
1994/03/31 15276.14 15633.52
1994/04/30 15215.40 15527.12
1994/05/31 15162.90 15537.55
1994/06/30 15158.69 15539.68
1994/07/31 15302.54 15763.37
1994/08/31 15300.73 15812.66
1994/09/30 15224.78 15667.16
1994/10/31 15225.71 15665.03
1994/11/30 15269.36 15593.94
1994/12/31 15331.19 15649.16
1995/01/31 15497.84 15912.89
1995/02/28 15689.44 16242.98
1995/03/31 15769.62 16335.87
1995/04/30 15925.08 16537.52
1995/05/31 16314.09 17037.51
1995/06/30 16410.62 17151.73
1995/07/31 16401.84 17154.10
1995/08/31 16533.48 17310.25
1995/09/30 16649.89 17435.61
1995/10/31 16817.01 17629.91
1995/11/30 17014.18 17861.66
1995/12/31 17200.64 18048.86
1996/01/31 17342.80 18204.54
1996/02/29 17128.54 17990.81
1996/03/31 17062.20 17898.15
1996/04/30 16975.98 17834.89
1996/05/31 16955.24 17821.38
1996/06/30 17110.51 18010.71
1996/07/31 17155.35 18064.26
1996/08/31 17184.10 18078.48
1996/09/30 17389.14 18330.37
1996/10/31 17662.99 18654.30
1996/11/30 17882.57 18900.26
1996/12/31 17786.99 18779.18
1997/01/31 17844.20 18852.16
1997/02/28 17859.27 18888.18
1997/03/31 17747.94 18757.85
1997/04/30 17942.61 18978.22
1997/05/31 18054.26 19135.80
1997/06/30 18214.26 19310.44
1997/07/31 18565.31 19703.32
1997/08/31 18476.37 19604.27
1997/09/30 18683.82 19832.23
1997/10/31 18860.02 20051.89
1997/11/30 18876.44 20096.21
1997/12/31 19037.07 20256.87
1998/01/31 19267.93 20522.26
1998/02/28 19258.14 20506.62
1998/03/31 19329.93 20572.50
1998/04/30 19398.33 20675.58
1998/05/31 19524.46 20827.23
1998/06/30 19631.22 20960.17
1998/07/31 19684.73 21034.10
1998/08/31 19903.90 21364.66
1998/09/30 20269.23 21901.38
1998/10/31 20225.83 21879.81
1998/11/30 20275.46 21878.15
1998/12/31 20364.82 21966.07
1999/01/31 20511.48 22086.68
1999/02/28 20269.20 21762.04
1999/03/31 20397.64 21924.43
1999/04/30 20467.33 21991.76
IMATRL PRASUN SHR__CHT 19990430 19990517 110040 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class T on April
30, 1989, and the current 2.75% sales charge was paid. As the chart
shows, by April 30, 1999, the value of the investment would have grown
to $20,467 - a 104.67% 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 $21,991 - a 119.91% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.58% 5.64% 6.12% 6.53% 6.46% 5.43%
Capital returns -1.39% 1.60% 0.66% -1.50% 3.99% -8.70%
Total returns 1.19% 7.24% 6.78% 5.03% 10.45% -3.27%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.63(cents) 27.74(cents) 56.48(cents)
Annualized dividend rate 5.29% 5.23% 5.28%
30-day annualized yield 4.86% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.65 over the past one
month, $10.69 over the past six months and $10.69 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current 2.75% sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
The initial offering of Class B shares took place on June 30, 1994.
Class B shares bear a 0.90% 12b-1 fee (1.00% prior to January 1, 1996)
that is reflected in returns after June 30, 1994. Returns between
September 10, 1992 (the date Class T shares were first offered) and
June 30, 1994 are those of Class T and reflect Class T shares' 0.25%
12b-1 fee. Returns prior to September 10, 1992 are those of the
Institutional Class, the original class of the fund, which does not
bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past 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 past one year, past five years, and past
10 years total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL B 0.90% 4.85% 29.95% 103.31%
FIDELITY ADV INT BOND - CL B -2.06% 1.85% 29.95% 103.31%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 0.51% 6.37% 41.63% 119.91%
Short-Intermediate Investment 1.07% 5.23% 35.28% 102.44%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
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 Inc. The past six months
average represents a peer group of 104 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL B 4.85% 5.38% 7.35%
FIDELITY ADV INT BOND - CL B 1.85% 5.38% 7.35%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 6.37% 7.21% 8.20%
Short-Intermediate Investment 5.23% 6.22% 7.30%
Grade 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
1989/04/30 10000.00 10000.00
1989/05/31 10188.07 10198.57
1989/06/30 10436.30 10455.68
1989/07/31 10657.08 10670.36
1989/08/31 10513.16 10532.45
1989/09/30 10562.79 10582.21
1989/10/31 10783.18 10805.91
1989/11/30 10871.87 10909.22
1989/12/31 10889.80 10939.08
1990/01/31 10781.49 10868.94
1990/02/28 10816.95 10908.51
1990/03/31 10801.82 10922.73
1990/04/30 10731.99 10884.81
1990/05/31 10986.89 10745.01
1990/06/30 11133.78 11272.96
1990/07/31 11282.43 11429.35
1990/08/31 11188.24 11382.43
1990/09/30 11270.95 11470.34
1990/10/31 11377.17 11603.52
1990/11/30 11574.10 11372.24
1990/12/31 11751.45 11940.71
1991/01/31 11838.81 12061.80
1991/02/28 11933.75 12158.24
1991/03/31 12009.36 12240.94
1991/04/30 12143.30 12374.35
1991/05/31 12208.08 12450.42
1991/06/30 12211.76 12459.18
1991/07/31 12349.10 12598.04
1991/08/31 12608.35 12838.56
1991/09/30 12842.54 13059.41
1991/10/31 12994.50 13208.45
1991/11/30 13118.83 13360.11
1991/12/31 13532.69 13686.41
1992/01/31 13359.52 13562.47
1992/02/29 13394.18 13616.03
1992/03/31 13345.97 13562.47
1992/04/30 13420.96 13681.67
1992/05/31 13666.23 13893.75
1992/06/30 13858.94 14099.43
1992/07/31 14185.13 14379.75
1992/08/31 14316.28 14523.59
1992/09/30 14482.83 14720.74
1992/10/31 14269.08 14529.75
1992/11/30 14305.51 14474.54
1992/12/31 14497.19 14668.37
1993/01/31 14786.15 14953.67
1993/02/28 15081.17 15189.45
1993/03/31 15180.22 15249.88
1993/04/30 15273.43 15372.62
1993/05/31 15284.17 15338.50
1993/06/30 15587.19 15579.25
1993/07/31 15707.91 15617.40
1993/08/31 16053.45 15865.03
1993/09/30 16099.43 15930.90
1993/10/31 16186.11 15973.56
1993/11/30 16093.44 15884.46
1993/12/31 16163.39 15957.20
1994/01/31 16334.09 16134.45
1994/02/28 16018.39 15895.83
1994/03/31 15708.11 15633.52
1994/04/30 15645.66 15527.12
1994/05/31 15591.67 15537.55
1994/06/30 15587.34 15539.68
1994/07/31 15718.33 15763.37
1994/08/31 15704.93 15812.66
1994/09/30 15616.26 15667.16
1994/10/31 15590.86 15665.03
1994/11/30 15625.27 15593.94
1994/12/31 15662.05 15649.16
1995/01/31 15822.08 15912.89
1995/02/28 16008.91 16242.98
1995/03/31 16095.55 16335.87
1995/04/30 16228.71 16537.52
1995/05/31 16630.88 17037.51
1995/06/30 16734.46 17151.73
1995/07/31 16700.10 17154.10
1995/08/31 16824.98 17310.25
1995/09/30 16934.50 17435.61
1995/10/31 17095.16 17629.91
1995/11/30 17284.69 17861.66
1995/12/31 17464.87 18048.86
1996/01/31 17584.54 18204.54
1996/02/29 17374.85 17990.81
1996/03/31 17281.28 17898.15
1996/04/30 17200.10 17834.89
1996/05/31 17151.79 17821.38
1996/06/30 17316.44 18010.71
1996/07/31 17334.70 18064.26
1996/08/31 17353.35 18078.48
1996/09/30 17551.39 18330.37
1996/10/31 17835.60 18654.30
1996/11/30 18030.75 18900.26
1996/12/31 17923.86 18779.18
1997/01/31 17989.21 18852.16
1997/02/28 17994.39 18888.18
1997/03/31 17869.93 18757.85
1997/04/30 18038.46 18978.22
1997/05/31 18157.48 19135.80
1997/06/30 18308.39 19310.44
1997/07/31 18632.67 19703.32
1997/08/31 18549.88 19604.27
1997/09/30 18730.31 19832.23
1997/10/31 18896.50 20051.89
1997/11/30 18902.18 20096.21
1997/12/31 19053.32 20256.87
1998/01/31 19291.37 20522.26
1998/02/28 19271.65 20506.62
1998/03/31 19332.32 20572.50
1998/04/30 19390.30 20675.58
1998/05/31 19504.94 20827.23
1998/06/30 19618.91 20960.17
1998/07/31 19642.14 21034.10
1998/08/31 19849.75 21364.66
1998/09/30 20203.82 21901.38
1998/10/31 20149.52 21879.81
1998/11/30 20190.38 21878.15
1998/12/31 20268.92 21966.07
1999/01/31 20385.94 22086.68
1999/02/28 20152.57 21762.04
1999/03/31 20270.08 21924.43
1999/04/30 20331.18 21991.76
IMATRL PRASUN SHR__CHT 19990430 19990517 105753 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class B on April
30, 1989. As the chart shows, by April 30, 1999 the value of the
investment would have been $20,331 - a 103.31% 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 $21,991 - a 119.91% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JUNE 30, 1994 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.29% 4.93% 5.38% 5.83% 5.66% 1.55%
Capital returns -1.39% 1.70% 0.57% -1.50% 3.99% -1.53%
Total returns 0.90% 6.63% 5.95% 4.33% 9.65% 0.02%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.20(cents) 24.62(cents) 49.71(cents)
Annualized dividend rate 4.80% 4.65% 4.65%
30-day annualized yield 4.48% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.64 over the past one
month, $10.68 over the past six months and $10.68 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
The initial offering of Class C shares took place on November 3, 1997.
Class C shares bear a 1.00% 12b-1 fee that is reflected in returns
after November 3, 1997. Returns between June 30, 1994 (the date Class
B shares were first offered) and November 3, 1997 are those of Class B
and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1,
1996). Returns between September 10, 1992 (the date Class T shares
were first offered) and June 30, 1994 are those of Class T and reflect
Class T shares' 0.25% 12b-1 fee. Returns prior to September 10, 1992
are those of the Institutional Class, the original class of the fund,
which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been
reflected, returns between November 3, 1997 and January 1, 1996 and
prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past six months, past
one year, past five years and past 10 years total return figures are
1%, 1%, 0% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses, the past one year, past five years, and past
10 years total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL C 0.86% 4.76% 29.50% 102.62%
FIDELITY ADV INT BOND - CL C -0.12% 3.76% 29.50% 102.62%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 0.51% 6.37% 41.63% 119.91%
Short-Intermediate Investment 1.07% 5.23% 35.28% 102.44%
Grade Debt Funds Average
</TABLE>
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 index of government and investment-grade
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 Inc. The past six months
average represents a peer group of 104 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL C 4.76% 5.31% 7.32%
FIDELITY ADV INT BOND - CL C 3.76% 5.31% 7.32%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 6.37% 7.21% 8.20%
Short-Intermediate Investment 5.23% 6.22% 7.30%
Grade 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
1989/04/30 10000.00 10000.00
1989/05/31 10188.07 10198.57
1989/06/30 10436.30 10455.68
1989/07/31 10657.08 10670.36
1989/08/31 10513.16 10532.45
1989/09/30 10562.79 10582.21
1989/10/31 10783.18 10805.91
1989/11/30 10871.87 10909.22
1989/12/31 10889.80 10939.08
1990/01/31 10781.49 10868.94
1990/02/28 10816.95 10908.51
1990/03/31 10801.82 10922.73
1990/04/30 10731.99 10884.81
1990/05/31 10986.89 10745.01
1990/06/30 11133.78 11272.96
1990/07/31 11282.43 11429.35
1990/08/31 11188.24 11382.43
1990/09/30 11270.95 11470.34
1990/10/31 11377.17 11603.52
1990/11/30 11574.10 11372.24
1990/12/31 11751.45 11940.71
1991/01/31 11838.81 12061.80
1991/02/28 11933.75 12158.24
1991/03/31 12009.36 12240.94
1991/04/30 12143.30 12374.35
1991/05/31 12208.08 12450.42
1991/06/30 12211.76 12459.18
1991/07/31 12349.10 12598.04
1991/08/31 12608.35 12838.56
1991/09/30 12842.54 13059.41
1991/10/31 12994.50 13208.45
1991/11/30 13118.83 13360.11
1991/12/31 13532.69 13686.41
1992/01/31 13359.52 13562.47
1992/02/29 13394.18 13616.03
1992/03/31 13345.97 13562.47
1992/04/30 13420.96 13681.67
1992/05/31 13666.23 13893.75
1992/06/30 13858.94 14099.43
1992/07/31 14185.13 14379.75
1992/08/31 14316.28 14523.59
1992/09/30 14482.83 14720.74
1992/10/31 14269.08 14529.75
1992/11/30 14305.51 14474.54
1992/12/31 14497.19 14668.37
1993/01/31 14786.15 14953.67
1993/02/28 15081.17 15189.45
1993/03/31 15180.22 15249.88
1993/04/30 15273.43 15372.62
1993/05/31 15284.17 15338.50
1993/06/30 15587.19 15579.25
1993/07/31 15707.91 15617.40
1993/08/31 16053.45 15865.03
1993/09/30 16099.43 15930.90
1993/10/31 16186.11 15973.56
1993/11/30 16093.44 15884.46
1993/12/31 16163.39 15957.20
1994/01/31 16334.09 16134.45
1994/02/28 16018.39 15895.83
1994/03/31 15708.11 15633.52
1994/04/30 15645.66 15527.12
1994/05/31 15591.67 15537.55
1994/06/30 15587.34 15539.68
1994/07/31 15718.33 15763.37
1994/08/31 15704.93 15812.66
1994/09/30 15616.26 15667.16
1994/10/31 15590.86 15665.03
1994/11/30 15625.27 15593.94
1994/12/31 15662.05 15649.16
1995/01/31 15822.08 15912.89
1995/02/28 16008.91 16242.98
1995/03/31 16095.55 16335.87
1995/04/30 16228.71 16537.52
1995/05/31 16630.88 17037.51
1995/06/30 16734.46 17151.73
1995/07/31 16700.10 17154.10
1995/08/31 16824.98 17310.25
1995/09/30 16934.50 17435.61
1995/10/31 17095.16 17629.91
1995/11/30 17284.69 17861.66
1995/12/31 17464.87 18048.86
1996/01/31 17584.54 18204.54
1996/02/29 17374.85 17990.81
1996/03/31 17281.28 17898.15
1996/04/30 17200.10 17834.89
1996/05/31 17151.79 17821.38
1996/06/30 17316.44 18010.71
1996/07/31 17334.70 18064.26
1996/08/31 17353.35 18078.48
1996/09/30 17551.39 18330.37
1996/10/31 17835.60 18654.30
1996/11/30 18030.75 18900.26
1996/12/31 17923.86 18779.18
1997/01/31 17989.21 18852.16
1997/02/28 17994.39 18888.18
1997/03/31 17869.93 18757.85
1997/04/30 18038.46 18978.22
1997/05/31 18157.48 19135.80
1997/06/30 18308.39 19310.44
1997/07/31 18632.67 19703.32
1997/08/31 18549.88 19604.27
1997/09/30 18730.31 19832.23
1997/10/31 18896.50 20051.89
1997/11/30 18897.35 20096.21
1997/12/31 19044.97 20256.87
1998/01/31 19262.85 20522.26
1998/02/28 19225.80 20506.62
1998/03/31 19284.80 20572.50
1998/04/30 19341.02 20675.58
1998/05/31 19453.57 20827.23
1998/06/30 19565.72 20960.17
1998/07/31 19587.31 21034.10
1998/08/31 19792.45 21364.66
1998/09/30 20162.68 21901.38
1998/10/31 20088.34 21879.81
1998/11/30 20128.70 21878.15
1998/12/31 20205.76 21966.07
1999/01/31 20340.71 22086.68
1999/02/28 20087.35 21762.04
1999/03/31 20202.96 21924.43
1999/04/30 20261.87 21991.00
IMATRL PRASUN SHR__CHT 19990430 19990517 105849 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class C on April
30, 1989. As the chart shows, by April 30, 1999 the value of the
investment would have been $20,262 - a 102.62% 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 $21,991 - a 119.91% increase.
(checkmark)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.
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 2.25% 4.77%
Capital returns -1.39% 1.80%
Total returns 0.86% 6.57%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIOD ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.10(cents) 24.23(cents) 48.79(cents)
Annualized dividend rate 4.69% 4.58% 4.57%
30-day annualized yield 4.37% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.64 over the past one
month, $10.68 over the past six months and $10.68 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class C's
contingent deferred sales charge.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for the
six-month period that ended April
30, 1999. The Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable bond
performance - posted a total
return of 0.69% for this period.
Confronted with strong indications
of improving conditions abroad
and the lingering fear of inflation
from an overheated U.S. economy,
Treasuries gave back nearly all of
their flight-to-quality gains
captured during the fall. As prices
plunged, yields soared to levels not
seen since early August - at the
outset of the global crisis. As such,
the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations -
fueled rallies as each sector
managed strong returns relative to
comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the six months that ended April 30, 1999, the fund's Class A,
Class T, Class B and Class C shares returned 1.26%, 1.19%, 0.90% and
0.86%, respectively. By comparison, the short-intermediate investment
grade debt funds average tracked by Lipper Inc. returned 1.07%, and
the Lehman Brothers Intermediate Government/Corporate Bond Index
returned 0.51%. For the 12 months that ended April 30, 1999, the
fund's Class A, Class T, Class B and Class C shares returned 5.71%,
5.51%, 4.85% and 4.76%, respectively. During the same period, the
Lipper peer group returned 5.23%, while the Lehman Brothers index
returned 6.37%.
Q. THE FUND PERFORMED RELATIVELY WELL AGAINST ITS PEERS OVER THE PAST
SIX-MONTH PERIOD. TO WHAT DO YOU ATTRIBUTE THIS SUCCESS?
A. Unlike some competitors, the fund did not have much exposure to
Asia or to cyclicals during the downturn of the late summer. Another
factor is that a number of competitors engaged in market-timing
strategies. Over the past six months, it became clearly evident how
easy it was to get burned taking this approach. We don't market-time
because we feel that it is simply impossible to predict the market's
direction. Consequently, in the fall, those who bought Treasuries when
yields were at their lowest, and prices at their highest, suffered
during the reversal later in the period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE RELATIVE TO ITS
BENCHMARK?
A. During the fall, the fund was overweighted in corporate bonds and
mortgage securities. At the time, this positioning led to a slight
underperformance compared to the Lehman index, which excludes mortgage
securities and is heavily weighted in Treasuries. The majority of the
fund's tilt on the corporate side was toward short-term issues; they
tend to offer a yield advantage over Treasuries without a lot of
incremental price risk. This strategy offered some protection for the
fund over the period. Those corporates we did own were defensive -
cable companies and telephone utilities - which were hurt as well in
the fall, but not as much as the paper companies or investment-grade
Asian corporate bonds, which are components of the index. Late in the
period, the corporate bond market rallied. The telecommunications
sector, for instance, not only made back all of the underperformance
of the early fall, but returned even more. The market had a veritable
love affair with telecom and media companies, but remained bearish on
cyclicals for much of the period. These factors, together with the
recovery in the mortgage market due to a slowdown in prepayment
activity, proved beneficial for the fund.
Q. WHAT INVESTMENTS HURT PERFORMANCE?
A. As yield spreads widened at the beginning of the six-month period,
I could have shifted to a below-normal position in corporate bonds and
mortgages, although staying the course did help later in the period.
Within corporates, I should have owned more energy securities over the
last two months of the period. The fear with the oil industry was that
higher-rated companies with a lot of cash, those which we would like
to own, would likely acquire companies with more leveraged balance
sheets. Such acquisitions could drive the credit quality of the
higher-rated company down. So, even though the energy sector was
cheap, event risk simply rendered the securities difficult to analyze.
Q. WHAT'S YOUR OUTLOOK?
A. I am optimistic. Overall, it's an ideal environment for investing
in bonds. From an interest-rate perspective, I don't foresee any
significant moves one way or the other on the horizon. I think we're
set up for an environment where the spread sectors - mortgages,
corporates and the like - should outperform Treasuries over the next
six months. The Treasury market has given back virtually all of the
flight to quality from the fall. Corporates and mortgages, on the
other hand, have only retraced half of their cheapening and are thus
attractive relative to Treasuries. I feel that the corporate market
still has a lot of value in specific sectors, and I expect corporate
cash flows to remain strong in the coming months. The mortgage market
should be a good sector to own for a while. I may add to the position
if we see a short-term drop in prices. Overall, the market is
conditioned to expect little or no inflation. As for the general level
of interest rates, although the possibility of Fed tightening does
exist, an uptick in inflation appears nowhere in sight. I think the
bond market is in for a reasonably stable period for the next six to
12 months.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income;
may also seek capital
appreciation
START DATE: February 2, 1984
SIZE: as of April 30, 1999,
more than $561 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in
1993
KEVIN GRANT ON NAVIGATING
THROUGH SEAS OF MARKET
TURBULENCE:
"In times of uncertainty, investors
need to take a hard look at their
investment objectives. I suggest
they take a long-term view. It is
true that over short periods of
time, corporate bonds and
mortgage securities can
underperform Treasuries.
However, over the long term, the
yield advantage of corporates and
mortgages usually wins. It is
important to remember that yield
takes a year or two to create value.
So, if you're really concerned about
safety and high-quality
instruments, you should most
likely be in a government money
market fund. This approach,
however, is not what investing is
all about - it's about the longer
term. If you have a two- to
three-year time horizon, you
probably don't want to own
Treasuries. There are so many
other more attractive options
available in the marketplace. You
must, however, be comfortable
with the fact that random things
do happen and that, over short
periods of time, your return may fall
short of expectations. But
performance is likely to recover,
and then some, just by giving yield
some time to work for you. I think
you need to look at your portfolio
as a basket of investments, not as
a series of trades."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 56.8 54.8
Aa 2.8 4.3
A 18.4 17.2
Baa 13.6 9.4
Ba and Below 1.2 1.5
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 5.8 5.5
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 APRIL 30, 1999
6 MONTHS AGO
Years 3.5 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999 *
Corporate bonds 37.0%
U.S. government
and agency
obligations 42.3%
Foreign government
obligations 2.9%
Other 5.0%
Short-term
investments 12.8%
* FOREIGN INVESTMENTS 10.5%
Row: 1, Col: 1, Value: 37.0
Row: 1, Col: 2, Value: 42.3
Row: 1, Col: 3, Value: 2.9
Row: 1, Col: 4, Value: 5.0
Row: 1, Col: 5, Value: 12.8
AS OF OCTOBER 31, 1998 **
Corporate bonds 39.8%
U.S. government
and agency
obligations 46.0%
Foreign government
obligations 2.6%
Other 4.4%
Short-term
investments 7.2%
**FOREIGN INVESTMENTS 11.1%
Row: 1, Col: 1, Value: 39.8
Row: 1, Col: 2, Value: 46.0
Row: 1, Col: 3, Value: 2.6
Row: 1, Col: 4, Value: 4.4
Row: 1, Col: 5, Value: 7.2
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 29.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 1.5%
Monsanto Co. 5.75% 12/1/05 (c) A2 $ 5,000,000 $ 4,906,250
Praxair, Inc. 6.15% 4/15/03 A3 3,640,000 3,622,018
8,528,268
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 255,000 258,856
9/15/04
TOTAL BASIC INDUSTRIES 8,787,124
CONSTRUCTION & REAL ESTATE -
0.9%
REAL ESTATE INVESTMENT TRUSTS
- - 0.9%
CenterPoint Properties Trust Baa2 640,000 611,731
6.75% 4/1/05
Equity Office Properties Baa1 4,000,000 3,964,000
Trust 6.5% 1/15/04
ProLogis Trust 6.7% 4/15/04 Baa1 415,000 412,556
4,988,287
ENERGY - 0.7%
OIL & GAS - 0.7%
Apache Finance Property Ltd. Baa1 700,000 693,000
6.5% 12/15/07
Conoco, Inc.:
5.9% 4/15/04 A3 600,000 595,680
6.95% 4/15/29 A3 995,000 983,856
Petro-Canada 7% 11/15/28 A3 1,440,000 1,399,766
3,672,302
FINANCE - 14.5%
BANKS - 9.1%
ABN-Amro Bank NV, Chicago A1 2,750,000 2,792,130
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,500,000 2,596,625
BankAmerica Corp. 10% 2/1/03 Aa3 210,000 237,182
BankBoston Corp. 6.625% 2/1/04 A3 3,200,000 3,264,896
BanPonce Financial Corp.:
6.69% 9/21/00 A3 2,250,000 2,271,848
6.75% 8/9/01 A3 3,850,000 3,884,419
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 2,700,000 2,704,320
5.95% 7/15/01 A1 3,050,000 3,052,501
Capital One Bank 7.35% 6/20/00 Baa3 5,000,000 5,080,550
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Capital One Financial Corp. Ba1 $ 1,390,000 $ 1,341,850
7.125% 8/1/08
Chase Manhattan Corp. 5.5% Aa3 600,000 597,780
2/15/01
Kansallis-Osake-Pankki (NY A3 650,000 716,768
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa3 1,165,000 1,128,023
7.125% 9/17/01 Baa3 345,000 346,142
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 447,885
NationsBank Corp. 8.125% Aa3 3,000,000 3,195,720
6/15/02
Provident Bank 6.125% 12/15/00 A3 5,000,000 5,011,250
Skandinaviska Enskilda Banken A3 4,600,000 4,875,678
yankee 8.45% 5/15/02
U.S. Bancorp 7.5% 6/1/26 A2 2,000,000 2,190,840
Union Planters National Bank A3 1,500,000 1,534,050
6.81% 8/20/01
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 5,063,450
52,333,907
CREDIT & OTHER FINANCE - 5.1%
Associates Corp. of North Aa3 1,350,000 1,353,362
America 6% 4/15/03
AT&T Capital Corp. 7.5% Baa3 2,380,000 2,437,096
11/15/00
Citigroup, Inc. 5.8% 3/15/04 Aa2 3,500,000 3,468,675
ERP Operating LP 6.55% A3 470,000 472,811
11/15/01
Ford Motor Credit Co. 7.75% A1 100,000 105,781
11/15/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 3,350,000 3,375,561
RBSG Capital Corp. 10.125% A2 1,500,000 1,721,355
3/1/04
Sears Roebuck Acceptance A2 5,000,000 5,040,100
Corp. 6.15% 11/15/05
Spieker Properties LP 6.875% Baa2 5,000,000 4,960,400
2/1/05
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,160,000 1,147,890
5.875% 5/1/04 Baa1 2,265,000 2,241,308
6.875% 11/15/28 Baa1 765,000 741,989
6.9% 5/1/19 Baa1 1,885,000 1,856,951
Trizec Finance Ltd. yankee Baa3 590,000 649,000
10.875% 10/15/05
29,572,279
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 900,000 902,862
6.2% 4/2/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.6% A3 $ 700,000 $ 689,829
5/15/05
TOTAL FINANCE 83,498,877
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.8%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA Baa1 4,000,000 4,024,200
yankee 6.125% 6/15/01
POLLUTION CONTROL - 1.1%
WMX Technologies, Inc. 7.1% Baa2 6,000,000 6,217,380
8/1/26
TOTAL INDUSTRIAL MACHINERY & 10,241,580
EQUIPMENT
MEDIA & LEISURE - 0.7%
BROADCASTING - 0.7%
TCI Communications, Inc. A2 3,470,000 4,162,161
8.75% 8/1/15
NONDURABLES - 2.1%
BEVERAGES - 1.0%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 135,000 134,602
6.625% 12/15/05 Baa3 5,500,000 5,511,660
Seagram Co. Ltd. yankee Baa3 270,000 253,125
6.875% 9/1/23
5,899,387
TOBACCO - 1.1%
Philip Morris Companies, Inc. A2 6,000,000 6,135,900
6.95% 6/1/06
TOTAL NONDURABLES 12,035,287
RETAIL & WHOLESALE - 1.6%
DRUG STORES - 0.8%
Rite Aid Corp. 6% 12/15/05 (c) Baa1 5,000,000 4,784,500
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 1,970,000 1,972,522
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
USA Networks, Inc./USANI LLC Ba1 $ 2,500,000 $ 2,487,500
6.75% 11/15/05 (c)
TOTAL RETAIL & WHOLESALE 9,244,522
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
First Data Corp. 6.625% 4/1/03 A2 5,000,000 5,088,600
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc. 5.95% 4/30/02 Baa1 2,000,000 1,991,640
TOTAL TECHNOLOGY 7,080,240
UTILITIES - 4.6%
CELLULAR - 0.6%
Cable & Wireless Baa1 3,760,000 3,768,084
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.8%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 2,000,000 1,966,740
7.05% 12/11/07 (c) Baa2 5,000,000 5,141,800
DR Investments UK PLC yankee A2 5,000,000 5,106,950
7.1% 5/15/02 (c)
Israel Electric Corp. Ltd. A3 3,840,000 3,534,605
7.75% 12/15/27 (c)
Virginia Electric & Power Co. A2 150,000 156,659
7.375% 7/1/02
15,906,754
GAS - 0.3%
Cms Panhandle Holding Co.:
6.125% 3/15/04 (c) Baa3 1,000,000 1,000,000
7% 7/15/29 (c) Baa3 750,000 750,000
1,750,000
TELEPHONE SERVICES - 0.9%
MCI WorldCom, Inc. 6.4% Baa2 5,000,000 5,060,400
8/15/05
TOTAL UTILITIES 26,485,238
TOTAL NONCONVERTIBLE BONDS 170,195,618
(Cost $169,512,794)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 20.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.1%
Fannie Mae 6.15% 1/13/00 Aaa $ 1,100,000 $ 1,105,841
Farm Credit Systems Financial Aaa 1,800,000 2,050,308
Assistance Corp. 9.375%
7/21/03
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 3,830,000 4,086,725
7.38% 8/5/04 Aaa 1,930,000 2,066,914
7.7% 9/20/04 Aaa 1,250,000 1,357,025
Freddie Mac 8.115% 1/31/05 Aaa 5,460,000 6,080,201
Government Trust Certificates Aaa 665,523 692,343
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E 9.4%
5/15/02
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 A, 7.12% 4/15/06 Aaa 272,965 283,037
Series 1994 C, 6.61% 9/15/99 Aaa 6,409 6,428
17,728,822
U.S. TREASURY OBLIGATIONS -
17.5%
U.S. Treasury Bonds:
12% 8/15/13 Aaa 1,790,000 2,602,213
14% 11/15/11 Aaa 1,510,000 2,284,811
U.S. Treasury Notes:
6% 8/15/99 Aaa 960,000 963,540
6.375% 5/15/00 Aaa 40,000,000 40,562,400
6.375% 9/30/01 Aaa 8,500,000 8,735,705
7% 7/15/06 Aaa 17,405,000 19,033,934
7.25% 8/15/04 Aaa 4,890,000 5,323,988
7.5% 11/15/01 Aaa 20,090,000 21,201,178
100,707,769
TOTAL U.S. GOVERNMENT AND 118,436,591
GOVERNMENT AGENCY OBLIGATIONS
(Cost $118,525,185)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 25.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 20.3%
5.5% 9/1/10 to 5/1/11 Aaa $ 1,544,002 $ 1,504,010
6% 3/1/11 to 2/1/29 Aaa 52,192,696 51,379,387
6.5% 10/1/27 to 2/1/29 (g) Aaa 52,083,296 51,741,108
7% 12/1/23 to 12/1/28 Aaa 3,492,323 3,539,323
7.5% 4/1/28 Aaa 35,589 36,579
8.5% 6/1/11 to 4/1/27 Aaa 3,750,729 3,931,700
9.5% 2/1/25 Aaa 2,175,523 2,329,833
10% 1/1/20 Aaa 58,529 63,595
10.5% 7/1/11 to 8/1/20 Aaa 277,174 304,686
11% 8/1/15 Aaa 1,576,552 1,730,628
12.5% 2/1/11 to 4/1/15 Aaa 75,544 87,009
116,647,858
FREDDIE MAC - 0.7%
7% 11/1/00 to 6/1/01 Aaa 1,047,030 1,051,909
8.5% 9/1/24 to 8/1/27 Aaa 1,927,368 2,025,114
9.5% 1/1/17 Aaa 14,511 15,378
10% 4/1/05 to 8/1/10 Aaa 171,908 180,250
10.25% 12/1/09 Aaa 30,343 32,420
10.5% 5/1/21 Aaa 501,440 549,162
11% 12/1/11 Aaa 21,431 23,413
11.5% 10/1/15 Aaa 65,192 72,135
11.75% 10/1/10 Aaa 37,158 40,763
3,990,544
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 4.4%
6.5% 5/15/29 (d) Aaa 10,000,000 9,943,750
7% 11/15/22 to 7/15/28 Aaa 3,879,517 3,940,928
7.5% 2/15/28 to 10/15/28 Aaa 382,292 394,026
8% 2/15/02 to 6/15/25 Aaa 2,482,176 2,564,216
8.5% 4/15/17 to 12/15/21 Aaa 442,910 469,183
9% 5/15/16 to 10/15/18 Aaa 1,934,389 2,075,581
10% 11/15/09 to 1/15/26 Aaa 2,344,520 2,544,165
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
11% 12/15/09 to 10/15/20 Aaa $ 589,326 $ 654,218
11.5% 3/15/10 to 2/15/19 Aaa 2,259,433 2,543,124
25,129,191
TOTAL U.S. GOVERNMENT AGENCY 145,767,593
- - MORTGAGE SECURITIES
(Cost $146,652,341)
ASSET-BACKED SECURITIES - 10.2%
Aesop Funding II LLC 6.22% Aaa 8,000,000 8,042,500
10/20/01 (c)
Arcadia Automobile Aaa 5,000,000 5,014,063
Receivables Trust 6.5%
6/17/02
Chase Manhattan Grantor Trust:
6.61% 9/15/02 Aaa 1,050,919 1,060,771
6.76% 9/15/02 A3 394,094 397,789
Chevy Chase Auto Receivables
Trust:
5.9% 7/15/03 Aaa 1,073,826 1,075,839
5.91% 12/15/04 Aaa 647,746 650,276
6.6% 12/15/02 Aaa 335,303 338,129
Citibank Credit Card Master A1 10,000,000 10,076,538
Trust I 6.45% 8/15/02
Contimortgage Home Equity Aaa 4,261,729 4,261,729
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 2,000,000 1,988,125
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.4% 5/15/02 A1 1,460,000 1,471,695
6.4% 12/15/02 Baa3 590,000 588,525
Ford Credit Grantor Trust Aaa 499,964 500,121
5.9% 10/15/00
Key Auto Finance Trust 6.3% A2 1,123,185 1,124,413
10/15/03
KeyCorp Auto Grantor Trust A3 12,275 12,276
5.8% 7/15/00
MBNA Master Credit Card Trust Aaa 10,000,000 10,306,500
II 6.55% 1/15/07
PNC Student Loan Trust I Aaa 5,000,000 5,033,950
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 5,000,000 4,964,500
2/9/04
Sears Credit Account Master Aaa 1,983,333 1,989,521
Trust II 6.5% 10/15/03
TOTAL ASSET-BACKED SECURITIES 58,897,260
(Cost $58,389,416)
COMMERCIAL MORTGAGE
SECURITIES - 2.2%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CBM Funding Corp. sequential AA $ 15,225 $ 15,249
pay Series 1996-1 Class A
1, 7.55% 7/1/99
CS First Boston Mortgage
Securities Corp.:
Series 1995-WF1 Class A-2, AAA 4,451,342 4,442,996
6.648% 12/21/27
Series 1998 FLI Class E, Baa2 2,970,000 2,904,103
5.7888% 1/10/13 (c)(e)
Equitable Life Assurance A2 1,000,000 1,039,320
Society of the United States
(The) Series 174 Class C1,
7.52% 5/15/06 (c)
Thirteen Affiliates of Aaa 2,500,000 2,514,375
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10
(c)
Wells Fargo Capital Markets Aaa 1,496,720 1,515,249
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (c)
TOTAL COMMERCIAL MORTGAGE 12,431,292
SECURITIES
(Cost $12,419,434)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 2.6%
Canadian Government 6.125% Aa2 5,000,000 5,081,500
7/15/02 (f)
Korean Republic:
8.75% 4/15/03 (f) Baa3 1,220,000 1,282,464
8.875% 4/15/08 (f) Baa3 2,680,000 2,900,296
Quebec Province yankee:
6.86% 4/15/26 (b)(f) A2 5,000,000 5,235,100
7.125% 2/9/24 (f) A2 190,000 197,674
7.5% 7/15/23 (f) A2 190,000 206,123
TOTAL FOREIGN GOVERNMENT AND 14,903,157
GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,342,935)
SUPRANATIONAL OBLIGATIONS -
1.8%
Inter American Development Aaa 10,000,000 10,268,300
Bank yankee 6.29% 7/16/27
(Cost $9,937,100)
CERTIFICATES OF DEPOSIT - 0.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Canadian Imperial Bank of Aa3 $ 2,500,000 $ 2,523,500
Commerce, New York yankee
6.2% 8/1/00 (Cost $2,503,750)
CASH EQUIVALENTS - 7.2%
MATURIY AMOUNT
Investments in repurchase $ 41,449,091 41,432,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $41,432,000)
TOTAL INVESTMENT IN $ 574,855,311
SECURITIES - 100%
(Cost $573,714,955)
</TABLE>
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $45,693,892 or 8.1% of net assets.
(d) Security purchased on a delayed delivery or when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(g) A portion of these securities were sold on a delayed delivery or
when-issued basis.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 77.2% AAA, AA, A 75.7%
Baa 13.6% BBB 14.8%
Ba 1.2% BB 0.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
United States of America 89.5%
United Kingdom 3.5
Canada 2.7
Multi-National 1.8
Korea (South) 1.0
Others (individually less 1.5
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $573,714,955. Net unrealized appreciation
aggregated $1,140,356, of which $4,566,909 related to appreciated
investment securities and $3,426,553 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $10,771,000 of which $9,361,000 and $1,410,000 will
expire on October 31, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 574,855,311
value (including repurchase
agreements of $41,432,000)
(cost $573,714,955) - See
accompanying schedule
Commitment to sell securities $ (9,943,750)
on a delayed delivery basis
Receivable for securities 10,001,172 57,422
sold on a delayed delivery
basis
Receivable for investments 1,093,451
sold, regular delivery
Cash 273,115
Receivable for fund shares 1,700,975
sold
Interest receivable 7,509,919
TOTAL ASSETS 585,490,193
LIABILITIES
Payable for investments 10,462,789
purchased Regular delivery
Delayed delivery 10,041,528
Payable for fund shares 1,998,500
redeemed
Distributions payable 565,854
Accrued management fee 199,438
Distribution fees payable 115,433
Other payables and accrued 154,118
expenses
TOTAL LIABILITIES 23,537,660
NET ASSETS $ 561,952,533
Net Assets consist of:
Paid in capital $ 573,203,196
Distributions in excess of (1,395,190)
net investment income
Accumulated undistributed net (11,053,251)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,197,778
(depreciation) on investments
NET ASSETS $ 561,952,533
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.62
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($18,088,733
(divided by) 1,703,895
shares)
Maximum offering price per $11.03
share (100/96.25 of $10.62)
CLASS T: NET ASSET VALUE and $10.62
redemption price per share
($310,690,917 (divided by)
29,258,791 shares)
Maximum offering price per $10.92
share (100/97.25 of $10.62)
CLASS B: NET ASSET VALUE and $10.61
offering price per share
($55,290,641 (divided by)
5,212,136 shares) A
CLASS C: NET ASSET VALUE and $10.61
offering price per share
($11,678,213 (divided by)
1,100,831 shares) A
INSTITUTIONAL CLASS: NET $10.63
ASSET VALUE, offering price
and redemption price per
share ($166,204,029 (divided
by) 15,642,049 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 16,770,837
Interest
EXPENSES
Management fee $ 1,145,596
Transfer agent fees 532,224
Distribution fees 630,947
Accounting fees and expenses 83,429
Non-interested trustees' 906
compensation
Custodian fees and expenses 18,390
Registration fees 70,249
Audit 19,353
Legal 3,235
Total expenses before 2,504,329
reductions
Expense reductions (2,336) 2,501,993
NET INVESTMENT INCOME 14,268,844
REALIZED AND UNREALIZED GAIN (275,982)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (7,943,680)
Delayed delivery commitments 240,300 (7,703,380)
NET GAIN (LOSS) (7,979,362)
NET INCREASE (DECREASE) IN $ 6,289,482
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30,
1999 (UNAUDITED) 31, 1998 1997
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 14,268,844 $ 24,787,296 $ 28,868,748
income
Net realized gain (loss) (275,982) 4,353,759 (1,459,900)
Change in net unrealized (7,703,380) 4,740,098 (1,414,423)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 6,289,482 33,881,153 25,994,425
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (13,858,535) (24,380,390) (28,478,083)
from net investment income
Share transactions - net 59,794,828 17,749,456 (8,667,273)
increase (decrease)
TOTAL INCREASE (DECREASE) 52,225,775 27,250,219 (11,150,931)
IN NET ASSETS
NET ASSETS
Beginning of period 509,726,758 482,476,539 493,627,470
End of period (including $ 561,952,533 $ 509,726,758 $ 482,476,539
distributions in excess of
net investment income of
$1,395,190, $1,805,499 and
$1,999,021, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1998 G 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.560 $ 10.590 $ 10.350
period
Income from Investment
Operations
Net investment income D .282 .537 .615 .159
Net realized and unrealized (.147) .207 (.023) .235
gain (loss)
Total from investment .135 .744 .592 .394
operations
Less Distributions
From net investment income (.285) (.534) (.622) (.154)
Net asset value, end of period $ 10.620 $ 10.770 $ 10.560 $ 10.590
TOTAL RETURN B, C 1.26% 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,089 $ 8,217 $ 3,819 $ 687
(000 omitted)
Ratio of expenses to average .89% A .90% A, F .90% F .90% A, F
net assets
Ratio of net investment 5.47% A 5.51% A 5.93% 6.45% A
income to average net assets
Portfolio turnover rate 165% A 176% A 138% 200%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
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.
G ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1998 G 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260
period
Income from Investment
Operations
Net investment income .282 D .537 D .625 D .671 D .649
Net realized and unrealized (.155) .201 (.058) (.147) .491
gain (loss)
Total from investment .127 .738 .567 .524 1.140
operations
Less Distributions
From net investment income (.277) (.528) (.617) (.674) (.640)
In excess of net investment - - - - -
income
Total distributions (.277) (.528) (.617) (.674) (.640)
Net asset value, end of period $ 10.620 $ 10.770 $ 10.560 $ 10.610 $ 10.760
TOTAL RETURN B, C 1.19% 7.15% 5.56% 5.10% 11.43%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 310,691 $ 287,734 $ 278,869 $ 262,103 $ 228,439
(000 omitted)
Ratio of expenses to average .98% A .98% A .96% .97% .94% E
net assets
Ratio of expenses to average .98% A .98% A .96% .96% F .94%
net assets after expense
reductions
Ratio of net investment 5.39% A 5.48% A 5.97% 6.38% 6.20%
income to average net assets
Portfolio turnover rate 165% A 176% A 138% 200% 189%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T YEARS ENDED NOVEMBER 30,
1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.140 $ 10.640
period
Income from Investment
Operations
Net investment income .609 .785
Net realized and unrealized (.876) .511
gain (loss)
Total from investment (.267) 1.296
operations
Less Distributions
From net investment income (.555) (.796)
In excess of net investment (.058) -
income
Total distributions (.613) (.796)
Net asset value, end of period $ 10.260 $ 11.140
TOTAL RETURN B, C (2.44)% 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 141,866 $ 59,184
(000 omitted)
Ratio of expenses to average 1.02% E 1.23%
net assets
Ratio of expenses to average 1.02% 1.23%
net assets after expense
reductions
Ratio of net investment 6.04% 6.81%
income to average net assets
Portfolio turnover rate 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.
G ELEVEN MONTHS ENDED OCTOBER 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1998 G 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250
period
Income from Investment
Operations
Net investment income .247 D .468 D .551 D .597 D .579
Net realized and unrealized (.151) .214 (.057) (.153) .483
gain (loss)
Total from investment .096 .682 .494 .444 1.062
operations
Less Distributions
From net investment income (.246) (.462) (.544) (.604) (.562)
In excess of net investment - - - - -
income
Total distributions (.246) (.462) (.544) (.604) (.562)
Net asset value, end of period $ 10.610 $ 10.760 $ 10.540 $ 10.590 $ 10.750
TOTAL RETURN B, C .90% 6.60% 4.83% 4.32% 10.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 55,291 $ 39,657 $ 22,201 $ 18,972 $ 15,830
(000 omitted)
Ratio of expenses to average 1.63% A 1.65% A, F 1.65% F 1.66% F 1.70% F
net assets
Ratio of net invest- ment 4.74% A 4.79% A 5.27% 5.69% 5.44%
income to average net
assets
Portfolio turnover rate 165% A 176% A 138% 200% 189%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED NOVEMBER 30,
1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.430
period
Income from Investment
Operations
Net investment income .204
Net realized and unrealized (.178)
gain (loss)
Total from investment .026
operations
Less Distributions
From net investment income (.187)
In excess of net investment (.019)
income
Total distributions (.206)
Net asset value, end of period $ 10.250
TOTAL RETURN B, C .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,156
(000 omitted)
Ratio of expenses to average 1.65%A, F
net assets
Ratio of net invest- ment 5.42% A
income to average net
assets
Portfolio turnover rate 68%
</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 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.
G ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1998 H 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.560 $ 10.570
period
Income from Investment
Operations
Net investment income D .238 .453 .031
Net realized and unrealized (.146) .199 (.005)
gain (loss)
Total from investment .092 .652 .026
operations
Less Distributions
From net investment income (.242) (.452) (.036)
Net asset value, end of period $ 10.610 $ 10.760 $ 10.560
TOTAL RETURN B, C .86% 6.30% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,678 $ 6,100 $ 160
(000 omitted)
Ratio of expenses to average 1.74% A 1.75% A, F 1.75% A, F
net assets
Ratio of expenses to average 1.74% A 1.75% A 1.73% A, G
net assets after expense
reductions
Ratio of net investment 4.61% A 4.67% A 4.42% A
income to average net assets
Portfolio turnover rate 165% A 176% A 138%
</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 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
H ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
INSTITUTIONAL CLASS
(UNAUDITED) 1998 F 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270
period
Income from Investment
Operations
Net investment income .299 D .566 D .658 D .705 D .671
Net realized and unrealized (.155) .201 (.060) (.151) .499
gain (loss)
Total from investment .144 .767 .598 .554 1.170
operations
Less Distributions
From net investment income (.294) (.557) (.648) (.704) (.670)
In excess of net investment - - - - -
income
Total distributions (.294) (.557) (.648) (.704) (.670)
Net asset value, end of period $ 10.630 $ 10.780 $ 10.570 $ 10.620 $ 10.770
TOTAL RETURN B, C 1.35% 7.44% 5.86% 5.40% 11.73%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 166,204 $ 168,019 $ 177,427 $ 211,866 $ 208,861
(000 omitted)
Ratio of expenses to average .67% A .68% A .67% .66% .67% E
net assets
Ratio of net investment 5.70% A 5.78% A 6.27% 6.69% 6.47%
income to average net assets
Portfolio turnover rate 165% A 176% A 138% 200% 189%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED NOVEMBER 30,
INSTITUTIONAL CLASS
1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.160 $ 10.640
period
Income from Investment
Operations
Net investment income .602 .832
Net realized and unrealized (.833) .531
gain (loss)
Total from investment (.231) 1.363
operations
Less Distributions
From net investment income (.597) (.843)
In excess of net investment (.062) -
income
Total distributions (.659) (.843)
Net asset value, end of period $ 10.270 $ 11.160
TOTAL RETURN B, C (2.10)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 172,122 $ 183,790
(000 omitted)
Ratio of expenses to average .61% .64%
net assets
Ratio of net investment 6.45% 7.41%
income to average net assets
Portfolio turnover rate 68% 59%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 ELEVEN MONTHS ENDED OCTOBER 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund(the fund) is a fund of
Fidelity Advisor Series II (formerly a fund of Fidelity Advisor Series
IV) (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements 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 funds, 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 funds' investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
to purchase commitments, the fund identifies securities as segregated
in its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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 $441,299,618 and $384,856,284, respectively, of which U.S.
government and government agency obligations aggregated $290,568,216
and $292,113,278, 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 .43% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 8,868 $ -
CLASS T 371,166 17,003
CLASS B 207,289 150,307
CLASS C 43,624 35,689
$ 630,947 $ 202,999
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 FDC RETAINED BY FDC
CLASS A $ 64,247 $ 30,724
CLASS T 86,435 30,907
CLASS B 50,358 50,358*
CLASS C 5,192 5,192*
$ 206,232 $ 117,181
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the fund.
FIIOC receives account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For
the period, the following amounts were paid to FIIOC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 13,392 .23
CLASS T 324,370 .22
CLASS B 48,505 .21
CLASS C 9,634 .22
INSTITUTIONAL CLASS 136,323 .16
$ 532,224
*ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
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 $2,336 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30,
31,
1999 1998 1997A
FROM NET INVESTMENT INCOME
Class A $ 313,694 $ 299,762 $ 122,899
Class T 7,685,272 13,762,990 15,434,281
Class B 1,056,635 1,166,769 1,017,603
Class C 196,640 106,569 312
Institutional Class 4,606,294 9,044,300 11,902,988
Total $ 13,858,535 $ 24,380,390 $ 28,478,083
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER 31, YEAR ENDED NOVEMBER 30,
1999 1998 1997A
CLASS A Shares sold 1,563,541 826,066 455,670
Reinvestment of distributions 25,440 24,233 10,671
Shares redeemed (648,143) (448,992) (169,434)
Net increase (decrease) 940,838 401,307 296,907
CLASS T Shares sold 10,066,489 13,142,016 13,128,368
Reinvestment of distributions 642,675 1,173,166 1,340,839
Shares redeemed (8,166,182) (14,007,864) (12,764,354)
Net increase (decrease) 2,542,982 307,318 1,704,853
CLASS B Shares sold 2,586,030 3,469,510 1,113,298
Reinvestment of distributions 77,482 85,515 76,151
Shares redeemed (1,136,534) (1,975,435) (874,566)
Net increase (decrease) 1,526,978 1,579,590 314,883
CLASS C Shares sold 807,539 639,302 15,175
Reinvestment of distributions 14,107 8,679 16
Shares redeemed (287,560) (96,427) -
Net increase (decrease) 534,086 551,554 15,191
INSTITUTIONAL CLASS Shares 2,820,671 5,436,279 5,646,676
sold
Reinvestment of distributions 199,087 349,249 477,520
Shares redeemed (2,966,903) (6,987,186) (9,287,961)
Net increase (decrease) 52,855 (1,201,658) (3,163,765)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30,
31,
1999 1998 1997A
CLASS A Shares sold $ 16,699,033 $ 8,801,326 $ 4,761,173
Reinvestment of distributions 271,576 258,506 111,981
Shares redeemed (6,928,029) (4,782,656) (1,767,583)
Net increase (decrease) $ 10,042,580 $ 4,277,176 $ 3,105,571
CLASS T Shares sold $ 107,518,113 $ 140,268,143 $ 137,559,201
Reinvestment of distributions 6,869,884 12,511,199 14,043,998
Shares redeemed (87,222,131) (149,280,620) (133,637,535)
Net increase (decrease) $ 27,165,866 $ 3,498,722 $ 17,965,664
CLASS B Shares sold $ 27,611,403 $ 37,025,976 $ 11,661,677
Reinvestment of distributions 826,905 911,937 796,683
Shares redeemed (12,132,632) (21,073,447) (9,166,397)
Net increase (decrease) $ 16,305,676 $ 16,864,466 $ 3,291,963
CLASS C Shares sold $ 8,623,201 $ 6,829,640 $ 160,441
Reinvestment of distributions 150,551 92,773 167
Shares redeemed (3,073,473) (1,036,670) -
Net increase (decrease) $ 5,700,279 $ 5,885,743 $ 160,608
INSTITUTIONAL CLASS Shares $ 30,184,120 $ 57,943,429 $ 59,206,035
sold
Reinvestment of distributions 2,130,201 3,726,467 5,003,755
Shares redeemed (31,733,894) (74,446,547) (97,400,869)
Net increase (decrease) $ 580,427 $ (12,776,651) $ (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.
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
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
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
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
LTB-SANN-0699 77839
1.704556.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 21 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 30 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR INTERMEDIATE BOND FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
class expenses, the past five year and past 10 year total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - INST CL 1.35% 5.92% 36.55% 115.48%
LB Int Govt/Corp Bond 0.51% 6.37% 41.63% 119.91%
Short-Intermediate Investment 1.07% 5.23% 35.28% 102.44%
Grade Debt 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 index of
government and investment-grade 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 Inc. The past six months average represents a peer
group of 104 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - INST CL 5.92% 6.43% 7.98%
LB Int Govt/Corp Bond 6.37% 7.21% 8.20%
Short-Intermediate Investment 5.23% 6.22% 7.30%
Grade Debt 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
1989/04/30 10000.00 10000.00
1989/05/31 10188.07 10198.57
1989/06/30 10436.30 10455.68
1989/07/31 10657.08 10670.36
1989/08/31 10513.16 10532.45
1989/09/30 10562.79 10582.21
1989/10/31 10783.18 10805.91
1989/11/30 10871.87 10909.22
1989/12/31 10889.80 10939.08
1990/01/31 10781.49 10868.94
1990/02/28 10816.95 10908.51
1990/03/31 10801.82 10922.73
1990/04/30 10731.99 10884.81
1990/05/31 10986.89 10745.01
1990/06/30 11133.78 11272.96
1990/07/31 11282.43 11429.35
1990/08/31 11188.24 11382.43
1990/09/30 11270.95 11470.34
1990/10/31 11377.17 11603.52
1990/11/30 11574.10 11372.24
1990/12/31 11751.45 11940.71
1991/01/31 11838.81 12061.80
1991/02/28 11933.75 12158.24
1991/03/31 12009.36 12240.94
1991/04/30 12143.30 12374.35
1991/05/31 12208.08 12450.42
1991/06/30 12211.76 12459.18
1991/07/31 12349.10 12598.04
1991/08/31 12608.35 12838.56
1991/09/30 12842.54 13059.41
1991/10/31 12994.50 13208.45
1991/11/30 13118.83 13360.11
1991/12/31 13532.69 13686.41
1992/01/31 13359.52 13562.47
1992/02/29 13394.18 13616.03
1992/03/31 13345.97 13562.47
1992/04/30 13420.96 13681.67
1992/05/31 13666.23 13893.75
1992/06/30 13858.94 14099.43
1992/07/31 14185.13 14379.75
1992/08/31 14316.28 14523.59
1992/09/30 14498.66 14720.74
1992/10/31 14288.08 14529.75
1992/11/30 14327.67 14474.54
1992/12/31 14522.69 14668.37
1993/01/31 14828.82 14953.67
1993/02/28 15113.99 15189.45
1993/03/31 15216.51 15249.88
1993/04/30 15315.04 15372.62
1993/05/31 15333.20 15338.50
1993/06/30 15642.80 15579.25
1993/07/31 15786.85 15617.40
1993/08/31 16142.15 15865.03
1993/09/30 16194.48 15930.90
1993/10/31 16287.29 15973.56
1993/11/30 16214.83 15884.46
1993/12/31 16277.40 15957.20
1994/01/31 16455.31 16134.45
1994/02/28 16126.55 15895.83
1994/03/31 15819.54 15633.52
1994/04/30 15780.32 15527.12
1994/05/31 15739.01 15537.55
1994/06/30 15740.94 15539.68
1994/07/31 15893.86 15763.37
1994/08/31 15895.69 15812.66
1994/09/30 15822.06 15667.16
1994/10/31 15825.53 15665.03
1994/11/30 15874.43 15593.94
1994/12/31 15942.37 15649.16
1995/01/31 16118.56 15912.89
1995/02/28 16305.22 16242.98
1995/03/31 16407.73 16335.87
1995/04/30 16557.09 16537.52
1995/05/31 16981.00 17037.51
1995/06/30 17084.95 17151.73
1995/07/31 17080.55 17154.10
1995/08/31 17222.37 17310.25
1995/09/30 17331.95 17435.61
1995/10/31 17526.98 17629.91
1995/11/30 17736.90 17861.66
1995/12/31 17935.90 18048.86
1996/01/31 18071.71 18204.54
1996/02/29 17869.83 17990.81
1996/03/31 17787.79 17898.15
1996/04/30 17718.59 17834.89
1996/05/31 17683.41 17821.38
1996/06/30 17866.28 18010.71
1996/07/31 17917.40 18064.26
1996/08/31 17934.73 18078.48
1996/09/30 18170.53 18330.37
1996/10/31 18461.00 18654.30
1996/11/30 18694.93 18900.26
1996/12/31 18599.90 18779.18
1997/01/31 18664.10 18852.16
1997/02/28 18684.27 18888.18
1997/03/31 18572.25 18757.85
1997/04/30 18780.07 18978.22
1997/05/31 18901.35 19135.80
1997/06/30 19073.27 19310.44
1997/07/31 19426.87 19703.32
1997/08/31 19356.98 19604.27
1997/09/30 19578.89 19832.23
1997/10/31 19749.91 20051.89
1997/11/30 19790.56 20096.21
1997/12/31 19945.44 20256.87
1998/01/31 20192.36 20522.26
1998/02/28 20187.00 20506.62
1998/03/31 20266.96 20572.50
1998/04/30 20343.81 20675.58
1998/05/31 20500.28 20827.23
1998/06/30 20617.29 20960.17
1998/07/31 20678.47 21034.10
1998/08/31 20913.75 21364.66
1998/09/30 21302.45 21901.38
1998/10/31 21262.17 21879.81
1998/11/30 21319.52 21878.15
1998/12/31 21418.45 21966.07
1999/01/31 21558.04 22086.68
1999/02/28 21329.13 21762.04
1999/03/31 21469.32 21924.43
1999/04/30 21548.28 21991.00
IMATRL PRASUN SHR__CHT 19990430 19990517 110122 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Institutional
Class on April 30, 1989. As the chart shows, by April 30, 1999, the
value of the investment would have grown to $21,548 - a 115.48%
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 $21,991 - a 119.91%
increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.74% 5.96% 6.41% 6.83% 6.77% 5.86%
Capital returns -1.39% 1.70% 0.57% -1.50% 3.98% -8.70%
Total returns 1.35% 7.66% 6.98% 5.33% 10.75% -2.84%
</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.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.91(cents) 29.36(cents) 59.68(cents)
Annualized dividend rate 5.60% 5.53% 5.58%
30-day annualized yield 5.33% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.66 over the past one
month, $10.70 over the past six months and $10.70 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for the
six-month period that ended April
30, 1999. The Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable bond
performance - posted a total
return of 0.69% for this period.
Confronted with strong indications
of improving conditions abroad
and the lingering fear of inflation
from an overheated U.S. economy,
Treasuries gave back nearly all of
their flight-to-quality gains
captured during the fall. As prices
plunged, yields soared to levels not
seen since early August - at the
outset of the global crisis. As such,
the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations -
fueled rallies as each sector
managed strong returns relative to
comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Fidelity Advisor
Intermediate Bond Fund
Q. HOW DID THE FUND PERFORM, KEVIN?
A. For the six months that ended April 30, 1999, the fund's
Institutional Class shares returned 1.35%. That outpaced the 1.07%
return for the short-intermediate investment grade debt funds average
tracked by Lipper Inc. During the same period, the Lehman Brothers
Intermediate Government/Corporate Bond Index returned 0.51%. For the
12 months that ended April 30, 1999, the fund's Institutional Class
shares returned 5.92%, compared with 5.23% for the Lipper peer group
and 6.37% for the Lehman Brothers index.
Q. THE FUND PERFORMED RELATIVELY WELL AGAINST ITS PEERS OVER THE PAST
SIX-MONTH PERIOD. TO WHAT DO YOU ATTRIBUTE THIS SUCCESS?
A. Unlike some competitors, the fund did not have much exposure to
Asia or to cyclicals during the downturn of the late summer. Another
factor is that a number of competitors engaged in market-timing
strategies. Over the past six months, it became clearly evident how
easy it was to get burned taking this approach. We don't market-time
because we feel that it is simply impossible to predict the market's
direction. Consequently, in the fall, those who bought Treasuries when
yields were at their lowest, and prices at their highest, suffered
during the reversal later in the period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE RELATIVE TO ITS
BENCHMARK?
A. During the fall, the fund was overweighted in corporate bonds and
mortgage securities. At the time, this positioning led to a slight
underperformance compared to the Lehman index, which excludes mortgage
securities and is heavily weighted in Treasuries. The majority of the
fund's tilt on the corporate side was toward short-term issues; they
tend to offer a yield advantage over Treasuries without a lot of
incremental price risk. This strategy offered some protection for the
fund over the period. Those corporates we did own were defensive -
cable companies and telephone utilities - which were hurt as well in
the fall, but not as much as the paper companies or investment-grade
Asian corporate bonds, which are components of the index. Late in the
period, the corporate bond market rallied. The telecommunications
sector, for instance, not only made back all of the underperformance
of the early fall, but returned even more. The market had a veritable
love affair with telecom and media companies, but remained bearish on
cyclicals for much of the period. These factors, together with the
recovery in the mortgage market due to a slowdown in prepayment
activity, proved beneficial for the fund.
Q. WHAT INVESTMENTS HURT PERFORMANCE?
A. As yield spreads widened at the beginning of the six-month period,
I could have shifted to a below-normal position in corporate bonds and
mortgages, although staying the course did help later in the period.
Within corporates, I should have owned more energy securities over the
last two months of the period. The fear with the oil industry was that
higher-rated companies with a lot of cash, those which we would like
to own, would likely acquire companies with more leveraged balance
sheets. Such acquisitions could drive the credit quality of the
higher-rated company down. So, even though the energy sector was
cheap, event risk simply rendered the securities difficult to analyze.
Q. WHAT'S YOUR OUTLOOK?
A. I am optimistic. Overall, it's an ideal environment for investing
in bonds. From an interest-rate perspective, I don't foresee any
significant moves one way or the other on the horizon. I think we're
set up for an environment where the spread sectors - mortgages,
corporates and the like - should outperform Treasuries over the next
six months. The Treasury market has given back virtually all of the
flight to quality from the fall. Corporates and mortgages, on the
other hand, have only retraced half of their cheapening and are thus
attractive relative to Treasuries. I feel that the corporate market
still has a lot of value in specific sectors, and I expect corporate
cash flows to remain strong in the coming months. The mortgage market
should be a good sector to own for a while. I may add to the position
if we see a short-term drop in prices. Overall, the market is
conditioned to expect little or no inflation. As for the general level
of interest rates, although the possibility of Fed tightening does
exist, an uptick in inflation appears nowhere in sight. I think the
bond market is in for a reasonably stable period for the next six to
12 months.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income;
may also seek capital
appreciation
START DATE: February 2, 1984
SIZE: as of April 30, 1999,
more than $561 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in
1993
KEVIN GRANT ON NAVIGATING
THROUGH SEAS OF MARKET
TURBULENCE:
"In times of uncertainty, investors
need to take a hard look at their
investment objectives. I suggest
they take a long-term view. It is
true that over short periods of
time, corporate bonds and
mortgage securities can
underperform Treasuries.
However, over the long term, the
yield advantage of corporates and
mortgages usually wins. It is
important to remember that yield
takes a year or two to create value.
So, if you're really concerned about
safety and high-quality
instruments, you should most
likely be in a government money
market fund. This approach,
however, is not what investing is
all about - it's about the longer
term. If you have a two- to
three-year time horizon, you
probably don't want to own
Treasuries. There are so many
other more attractive options
available in the marketplace. You
must, however, be comfortable
with the fact that random things
do happen and that, over short
periods of time, your return may fall
short of expectations. But
performance is likely to recover,
and then some, just by giving yield
some time to work for you. I think
you need to look at your portfolio
as a basket of investments, not as
a series of trades."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 56.8 54.8
Aa 2.8 4.3
A 18.4 17.2
Baa 13.6 9.4
Ba and Below 1.2 1.5
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 5.8 5.5
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 APRIL 30, 1999
6 MONTHS AGO
Years 3.5 3.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF APRIL 30, 1999 *
Corporate bonds 39.8%
U.S. government
and agency
obligations 46.0%
Foreign government
obligations 2.6%
Other 4.4%
Short-term
investments 7.2%
* FOREIGN INVESTMENTS 10.5%
Row: 1, Col: 1, Value: 39.8
Row: 1, Col: 2, Value: 46.0
Row: 1, Col: 3, Value: 2.6
Row: 1, Col: 4, Value: 4.4
Row: 1, Col: 5, Value: 7.2
AS OF OCTOBER 31, 1998 **
Corporate bonds 37.0%
U.S. government
and agency
obligations 42.3%
Foreign government
obligations 2.9%
Other 5.0%
Short-term
investments 12.8%
**FOREIGN INVESTMENTS 11.1%
Row: 1, Col: 1, Value: 37.0
Row: 1, Col: 2, Value: 42.3
Row: 1, Col: 3, Value: 2.9
Row: 1, Col: 4, Value: 5.0
Row: 1, Col: 5, Value: 12.8
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 29.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 1.5%
Monsanto Co. 5.75% 12/1/05 (c) A2 $ 5,000,000 $ 4,906,250
Praxair, Inc. 6.15% 4/15/03 A3 3,640,000 3,622,018
8,528,268
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 255,000 258,856
9/15/04
TOTAL BASIC INDUSTRIES 8,787,124
CONSTRUCTION & REAL ESTATE -
0.9%
REAL ESTATE INVESTMENT TRUSTS
- - 0.9%
CenterPoint Properties Trust Baa2 640,000 611,731
6.75% 4/1/05
Equity Office Properties Baa1 4,000,000 3,964,000
Trust 6.5% 1/15/04
ProLogis Trust 6.7% 4/15/04 Baa1 415,000 412,556
4,988,287
ENERGY - 0.7%
OIL & GAS - 0.7%
Apache Finance Property Ltd. Baa1 700,000 693,000
6.5% 12/15/07
Conoco, Inc.:
5.9% 4/15/04 A3 600,000 595,680
6.95% 4/15/29 A3 995,000 983,856
Petro-Canada 7% 11/15/28 A3 1,440,000 1,399,766
3,672,302
FINANCE - 14.5%
BANKS - 9.1%
ABN-Amro Bank NV, Chicago A1 2,750,000 2,792,130
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,500,000 2,596,625
BankAmerica Corp. 10% 2/1/03 Aa3 210,000 237,182
BankBoston Corp. 6.625% 2/1/04 A3 3,200,000 3,264,896
BanPonce Financial Corp.:
6.69% 9/21/00 A3 2,250,000 2,271,848
6.75% 8/9/01 A3 3,850,000 3,884,419
Barclays Bank PLC yankee:
5.875% 7/15/00 A1 2,700,000 2,704,320
5.95% 7/15/01 A1 3,050,000 3,052,501
Capital One Bank 7.35% 6/20/00 Baa3 5,000,000 5,080,550
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Capital One Financial Corp. Ba1 $ 1,390,000 $ 1,341,850
7.125% 8/1/08
Chase Manhattan Corp. 5.5% Aa3 600,000 597,780
2/15/01
Kansallis-Osake-Pankki (NY A3 650,000 716,768
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa3 1,165,000 1,128,023
7.125% 9/17/01 Baa3 345,000 346,142
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 447,885
NationsBank Corp. 8.125% Aa3 3,000,000 3,195,720
6/15/02
Provident Bank 6.125% 12/15/00 A3 5,000,000 5,011,250
Skandinaviska Enskilda Banken A3 4,600,000 4,875,678
yankee 8.45% 5/15/02
U.S. Bancorp 7.5% 6/1/26 A2 2,000,000 2,190,840
Union Planters National Bank A3 1,500,000 1,534,050
6.81% 8/20/01
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 5,063,450
52,333,907
CREDIT & OTHER FINANCE - 5.1%
Associates Corp. of North Aa3 1,350,000 1,353,362
America 6% 4/15/03
AT&T Capital Corp. 7.5% Baa3 2,380,000 2,437,096
11/15/00
Citigroup, Inc. 5.8% 3/15/04 Aa2 3,500,000 3,468,675
ERP Operating LP 6.55% A3 470,000 472,811
11/15/01
Ford Motor Credit Co. 7.75% A1 100,000 105,781
11/15/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 3,350,000 3,375,561
RBSG Capital Corp. 10.125% A2 1,500,000 1,721,355
3/1/04
Sears Roebuck Acceptance A2 5,000,000 5,040,100
Corp. 6.15% 11/15/05
Spieker Properties LP 6.875% Baa2 5,000,000 4,960,400
2/1/05
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,160,000 1,147,890
5.875% 5/1/04 Baa1 2,265,000 2,241,308
6.875% 11/15/28 Baa1 765,000 741,989
6.9% 5/1/19 Baa1 1,885,000 1,856,951
Trizec Finance Ltd. yankee Baa3 590,000 649,000
10.875% 10/15/05
29,572,279
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 900,000 902,862
6.2% 4/2/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.6% A3 $ 700,000 $ 689,829
5/15/05
TOTAL FINANCE 83,498,877
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.8%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA Baa1 4,000,000 4,024,200
yankee 6.125% 6/15/01
POLLUTION CONTROL - 1.1%
WMX Technologies, Inc. 7.1% Baa2 6,000,000 6,217,380
8/1/26
TOTAL INDUSTRIAL MACHINERY & 10,241,580
EQUIPMENT
MEDIA & LEISURE - 0.7%
BROADCASTING - 0.7%
TCI Communications, Inc. A2 3,470,000 4,162,161
8.75% 8/1/15
NONDURABLES - 2.1%
BEVERAGES - 1.0%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 135,000 134,602
6.625% 12/15/05 Baa3 5,500,000 5,511,660
Seagram Co. Ltd. yankee Baa3 270,000 253,125
6.875% 9/1/23
5,899,387
TOBACCO - 1.1%
Philip Morris Companies, Inc. A2 6,000,000 6,135,900
6.95% 6/1/06
TOTAL NONDURABLES 12,035,287
RETAIL & WHOLESALE - 1.6%
DRUG STORES - 0.8%
Rite Aid Corp. 6% 12/15/05 (c) Baa1 5,000,000 4,784,500
GROCERY STORES - 0.4%
Kroger Co. 6% 7/1/00 Baa3 1,970,000 1,972,522
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
USA Networks, Inc./USANI LLC Ba1 $ 2,500,000 $ 2,487,500
6.75% 11/15/05 (c)
TOTAL RETAIL & WHOLESALE 9,244,522
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
First Data Corp. 6.625% 4/1/03 A2 5,000,000 5,088,600
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc. 5.95% 4/30/02 Baa1 2,000,000 1,991,640
TOTAL TECHNOLOGY 7,080,240
UTILITIES - 4.6%
CELLULAR - 0.6%
Cable & Wireless Baa1 3,760,000 3,768,084
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.8%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 2,000,000 1,966,740
7.05% 12/11/07 (c) Baa2 5,000,000 5,141,800
DR Investments UK PLC yankee A2 5,000,000 5,106,950
7.1% 5/15/02 (c)
Israel Electric Corp. Ltd. A3 3,840,000 3,534,605
7.75% 12/15/27 (c)
Virginia Electric & Power Co. A2 150,000 156,659
7.375% 7/1/02
15,906,754
GAS - 0.3%
Cms Panhandle Holding Co.:
6.125% 3/15/04 (c) Baa3 1,000,000 1,000,000
7% 7/15/29 (c) Baa3 750,000 750,000
1,750,000
TELEPHONE SERVICES - 0.9%
MCI WorldCom, Inc. 6.4% Baa2 5,000,000 5,060,400
8/15/05
TOTAL UTILITIES 26,485,238
TOTAL NONCONVERTIBLE BONDS 170,195,618
(Cost $169,512,794)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 20.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.1%
Fannie Mae 6.15% 1/13/00 Aaa $ 1,100,000 $ 1,105,841
Farm Credit Systems Financial Aaa 1,800,000 2,050,308
Assistance Corp. 9.375%
7/21/03
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 3,830,000 4,086,725
7.38% 8/5/04 Aaa 1,930,000 2,066,914
7.7% 9/20/04 Aaa 1,250,000 1,357,025
Freddie Mac 8.115% 1/31/05 Aaa 5,460,000 6,080,201
Government Trust Certificates Aaa 665,523 692,343
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E 9.4%
5/15/02
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 A, 7.12% 4/15/06 Aaa 272,965 283,037
Series 1994 C, 6.61% 9/15/99 Aaa 6,409 6,428
17,728,822
U.S. TREASURY OBLIGATIONS -
17.5%
U.S. Treasury Bonds:
12% 8/15/13 Aaa 1,790,000 2,602,213
14% 11/15/11 Aaa 1,510,000 2,284,811
U.S. Treasury Notes:
6% 8/15/99 Aaa 960,000 963,540
6.375% 5/15/00 Aaa 40,000,000 40,562,400
6.375% 9/30/01 Aaa 8,500,000 8,735,705
7% 7/15/06 Aaa 17,405,000 19,033,934
7.25% 8/15/04 Aaa 4,890,000 5,323,988
7.5% 11/15/01 Aaa 20,090,000 21,201,178
100,707,769
TOTAL U.S. GOVERNMENT AND 118,436,591
GOVERNMENT AGENCY OBLIGATIONS
(Cost $118,525,185)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 25.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 20.3%
5.5% 9/1/10 to 5/1/11 Aaa $ 1,544,002 $ 1,504,010
6% 3/1/11 to 2/1/29 Aaa 52,192,696 51,379,387
6.5% 10/1/27 to 2/1/29 (g) Aaa 52,083,296 51,741,108
7% 12/1/23 to 12/1/28 Aaa 3,492,323 3,539,323
7.5% 4/1/28 Aaa 35,589 36,579
8.5% 6/1/11 to 4/1/27 Aaa 3,750,729 3,931,700
9.5% 2/1/25 Aaa 2,175,523 2,329,833
10% 1/1/20 Aaa 58,529 63,595
10.5% 7/1/11 to 8/1/20 Aaa 277,174 304,686
11% 8/1/15 Aaa 1,576,552 1,730,628
12.5% 2/1/11 to 4/1/15 Aaa 75,544 87,009
116,647,858
FREDDIE MAC - 0.7%
7% 11/1/00 to 6/1/01 Aaa 1,047,030 1,051,909
8.5% 9/1/24 to 8/1/27 Aaa 1,927,368 2,025,114
9.5% 1/1/17 Aaa 14,511 15,378
10% 4/1/05 to 8/1/10 Aaa 171,908 180,250
10.25% 12/1/09 Aaa 30,343 32,420
10.5% 5/1/21 Aaa 501,440 549,162
11% 12/1/11 Aaa 21,431 23,413
11.5% 10/1/15 Aaa 65,192 72,135
11.75% 10/1/10 Aaa 37,158 40,763
3,990,544
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 4.4%
6.5% 5/15/29 (d) Aaa 10,000,000 9,943,750
7% 11/15/22 to 7/15/28 Aaa 3,879,517 3,940,928
7.5% 2/15/28 to 10/15/28 Aaa 382,292 394,026
8% 2/15/02 to 6/15/25 Aaa 2,482,176 2,564,216
8.5% 4/15/17 to 12/15/21 Aaa 442,910 469,183
9% 5/15/16 to 10/15/18 Aaa 1,934,389 2,075,581
10% 11/15/09 to 1/15/26 Aaa 2,344,520 2,544,165
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
11% 12/15/09 to 10/15/20 Aaa $ 589,326 $ 654,218
11.5% 3/15/10 to 2/15/19 Aaa 2,259,433 2,543,124
25,129,191
TOTAL U.S. GOVERNMENT AGENCY 145,767,593
- - MORTGAGE SECURITIES
(Cost $146,652,341)
ASSET-BACKED SECURITIES - 10.2%
Aesop Funding II LLC 6.22% Aaa 8,000,000 8,042,500
10/20/01 (c)
Arcadia Automobile Aaa 5,000,000 5,014,063
Receivables Trust 6.5%
6/17/02
Chase Manhattan Grantor Trust:
6.61% 9/15/02 Aaa 1,050,919 1,060,771
6.76% 9/15/02 A3 394,094 397,789
Chevy Chase Auto Receivables
Trust:
5.9% 7/15/03 Aaa 1,073,826 1,075,839
5.91% 12/15/04 Aaa 647,746 650,276
6.6% 12/15/02 Aaa 335,303 338,129
Citibank Credit Card Master A1 10,000,000 10,076,538
Trust I 6.45% 8/15/02
Contimortgage Home Equity Aaa 4,261,729 4,261,729
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 2,000,000 1,988,125
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.4% 5/15/02 A1 1,460,000 1,471,695
6.4% 12/15/02 Baa3 590,000 588,525
Ford Credit Grantor Trust Aaa 499,964 500,121
5.9% 10/15/00
Key Auto Finance Trust 6.3% A2 1,123,185 1,124,413
10/15/03
KeyCorp Auto Grantor Trust A3 12,275 12,276
5.8% 7/15/00
MBNA Master Credit Card Trust Aaa 10,000,000 10,306,500
II 6.55% 1/15/07
PNC Student Loan Trust I Aaa 5,000,000 5,033,950
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 5,000,000 4,964,500
2/9/04
Sears Credit Account Master Aaa 1,983,333 1,989,521
Trust II 6.5% 10/15/03
TOTAL ASSET-BACKED SECURITIES 58,897,260
(Cost $58,389,416)
COMMERCIAL MORTGAGE
SECURITIES - 2.2%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CBM Funding Corp. sequential AA $ 15,225 $ 15,249
pay Series 1996-1 Class A
1, 7.55% 7/1/99
CS First Boston Mortgage
Securities Corp.:
Series 1995-WF1 Class A-2, AAA 4,451,342 4,442,996
6.648% 12/21/27
Series 1998 FLI Class E, Baa2 2,970,000 2,904,103
5.7888% 1/10/13 (c)(e)
Equitable Life Assurance A2 1,000,000 1,039,320
Society of the United States
(The) Series 174 Class C1,
7.52% 5/15/06 (c)
Thirteen Affiliates of Aaa 2,500,000 2,514,375
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10
(c)
Wells Fargo Capital Markets Aaa 1,496,720 1,515,249
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (c)
TOTAL COMMERCIAL MORTGAGE 12,431,292
SECURITIES
(Cost $12,419,434)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 2.6%
Canadian Government 6.125% Aa2 5,000,000 5,081,500
7/15/02 (f)
Korean Republic:
8.75% 4/15/03 (f) Baa3 1,220,000 1,282,464
8.875% 4/15/08 (f) Baa3 2,680,000 2,900,296
Quebec Province yankee:
6.86% 4/15/26 (b)(f) A2 5,000,000 5,235,100
7.125% 2/9/24 (f) A2 190,000 197,674
7.5% 7/15/23 (f) A2 190,000 206,123
TOTAL FOREIGN GOVERNMENT AND 14,903,157
GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,342,935)
SUPRANATIONAL OBLIGATIONS -
1.8%
Inter American Development Aaa 10,000,000 10,268,300
Bank yankee 6.29% 7/16/27
(Cost $9,937,100)
CERTIFICATES OF DEPOSIT - 0.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Canadian Imperial Bank of Aa3 $ 2,500,000 $ 2,523,500
Commerce, New York yankee
6.2% 8/1/00 (Cost $2,503,750)
CASH EQUIVALENTS - 7.2%
MATURIY AMOUNT
Investments in repurchase $ 41,449,091 41,432,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $41,432,000)
TOTAL INVESTMENT IN $ 574,855,311
SECURITIES - 100%
(Cost $573,714,955)
</TABLE>
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $45,693,892 or 8.1% of net assets.
(d) Security purchased on a delayed delivery or when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(g) A portion of these securities were sold on a delayed delivery or
when-issued basis.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 77.2% AAA, AA, A 75.7%
Baa 13.6% BBB 14.8%
Ba 1.2% BB 0.9%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Distribution of investments by country of issue, as a percentage of
total value of investments in securities, is as follows:
United States of America 89.5%
United Kingdom 3.5
Canada 2.7
Multi-National 1.8
Korea (South) 1.0
Others (individually less 1.5
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $573,714,955. Net unrealized appreciation
aggregated $1,140,356, of which $4,566,909 related to appreciated
investment securities and $3,426,553 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $10,771,000 of which $9,361,000 and $1,410,000 will
expire on October 31, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 574,855,311
value (including repurchase
agreements of $41,432,000)
(cost $573,714,955) - See
accompanying schedule
Commitment to sell securities $ (9,943,750)
on a delayed delivery basis
Receivable for securities 10,001,172 57,422
sold on a delayed delivery
basis
Receivable for investments 1,093,451
sold, regular delivery
Cash 273,115
Receivable for fund shares 1,700,975
sold
Interest receivable 7,509,919
TOTAL ASSETS 585,490,193
LIABILITIES
Payable for investments 10,462,789
purchased Regular delivery
Delayed delivery 10,041,528
Payable for fund shares 1,998,500
redeemed
Distributions payable 565,854
Accrued management fee 199,438
Distribution fees payable 115,433
Other payables and accrued 154,118
expenses
TOTAL LIABILITIES 23,537,660
NET ASSETS $ 561,952,533
Net Assets consist of:
Paid in capital $ 573,203,196
Distributions in excess of (1,395,190)
net investment income
Accumulated undistributed net (11,053,251)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,197,778
(depreciation) on investments
NET ASSETS $ 561,952,533
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.62
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($18,088,733
(divided by) 1,703,895
shares)
Maximum offering price per $11.03
share (100/96.25 of $10.62)
CLASS T: NET ASSET VALUE and $10.62
redemption price per share
($310,690,917 (divided by)
29,258,791 shares)
Maximum offering price per $10.92
share (100/97.25 of $10.62)
CLASS B: NET ASSET VALUE and $10.61
offering price per share
($55,290,641 (divided by)
5,212,136 shares) A
CLASS C: NET ASSET VALUE and $10.61
offering price per share
($11,678,213 (divided by)
1,100,831 shares) A
INSTITUTIONAL CLASS: NET $10.63
ASSET VALUE, offering price
and redemption price per
share ($166,204,029 (divided
by) 15,642,049 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 16,770,837
Interest
EXPENSES
Management fee $ 1,145,596
Transfer agent fees 532,224
Distribution fees 630,947
Accounting fees and expenses 83,429
Non-interested trustees' 906
compensation
Custodian fees and expenses 18,390
Registration fees 70,249
Audit 19,353
Legal 3,235
Total expenses before 2,504,329
reductions
Expense reductions (2,336) 2,501,993
NET INVESTMENT INCOME 14,268,844
REALIZED AND UNREALIZED GAIN (275,982)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (7,943,680)
Delayed delivery commitments 240,300 (7,703,380)
NET GAIN (LOSS) (7,979,362)
NET INCREASE (DECREASE) IN $ 6,289,482
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30,
1999 (UNAUDITED) 31, 1998 1997
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 14,268,844 $ 24,787,296 $ 28,868,748
income
Net realized gain (loss) (275,982) 4,353,759 (1,459,900)
Change in net unrealized (7,703,380) 4,740,098 (1,414,423)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 6,289,482 33,881,153 25,994,425
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (13,858,535) (24,380,390) (28,478,083)
from net investment income
Share transactions - net 59,794,828 17,749,456 (8,667,273)
increase (decrease)
TOTAL INCREASE (DECREASE) 52,225,775 27,250,219 (11,150,931)
IN NET ASSETS
NET ASSETS
Beginning of period 509,726,758 482,476,539 493,627,470
End of period (including $ 561,952,533 $ 509,726,758 $ 482,476,539
distributions in excess of
net investment income of
$1,395,190, $1,805,499 and
$1,999,021, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1998 G 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.560 $ 10.590 $ 10.350
period
Income from Investment
Operations
Net investment income D .282 .537 .615 .159
Net realized and unrealized (.147) .207 (.023) .235
gain (loss)
Total from investment .135 .744 .592 .394
operations
Less Distributions
From net investment income (.285) (.534) (.622) (.154)
Net asset value, end of period $ 10.620 $ 10.770 $ 10.560 $ 10.590
TOTAL RETURN B, C 1.26% 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,089 $ 8,217 $ 3,819 $ 687
(000 omitted)
Ratio of expenses to average .89% A .90% A, F .90% F .90% A, F
net assets
Ratio of net investment 5.47% A 5.51% A 5.93% 6.45% A
income to average net assets
Portfolio turnover rate 165% A 176% A 138% 200%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
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.
G ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1998 G 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260
period
Income from Investment
Operations
Net investment income .282 D .537 D .625 D .671 D .649
Net realized and unrealized (.155) .201 (.058) (.147) .491
gain (loss)
Total from investment .127 .738 .567 .524 1.140
operations
Less Distributions
From net investment income (.277) (.528) (.617) (.674) (.640)
In excess of net investment - - - - -
income
Total distributions (.277) (.528) (.617) (.674) (.640)
Net asset value, end of period $ 10.620 $ 10.770 $ 10.560 $ 10.610 $ 10.760
TOTAL RETURN B, C 1.19% 7.15% 5.56% 5.10% 11.43%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 310,691 $ 287,734 $ 278,869 $ 262,103 $ 228,439
(000 omitted)
Ratio of expenses to average .98% A .98% A .96% .97% .94% E
net assets
Ratio of expenses to average .98% A .98% A .96% .96% F .94%
net assets after expense
reductions
Ratio of net investment 5.39% A 5.48% A 5.97% 6.38% 6.20%
income to average net assets
Portfolio turnover rate 165% A 176% A 138% 200% 189%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T YEARS ENDED NOVEMBER 30,
1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.140 $ 10.640
period
Income from Investment
Operations
Net investment income .609 .785
Net realized and unrealized (.876) .511
gain (loss)
Total from investment (.267) 1.296
operations
Less Distributions
From net investment income (.555) (.796)
In excess of net investment (.058) -
income
Total distributions (.613) (.796)
Net asset value, end of period $ 10.260 $ 11.140
TOTAL RETURN B, C (2.44)% 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 141,866 $ 59,184
(000 omitted)
Ratio of expenses to average 1.02% E 1.23%
net assets
Ratio of expenses to average 1.02% 1.23%
net assets after expense
reductions
Ratio of net investment 6.04% 6.81%
income to average net assets
Portfolio turnover rate 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.
G ELEVEN MONTHS ENDED OCTOBER 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1998 G 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250
period
Income from Investment
Operations
Net investment income .247 D .468 D .551 D .597 D .579
Net realized and unrealized (.151) .214 (.057) (.153) .483
gain (loss)
Total from investment .096 .682 .494 .444 1.062
operations
Less Distributions
From net investment income (.246) (.462) (.544) (.604) (.562)
In excess of net investment - - - - -
income
Total distributions (.246) (.462) (.544) (.604) (.562)
Net asset value, end of period $ 10.610 $ 10.760 $ 10.540 $ 10.590 $ 10.750
TOTAL RETURN B, C .90% 6.60% 4.83% 4.32% 10.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 55,291 $ 39,657 $ 22,201 $ 18,972 $ 15,830
(000 omitted)
Ratio of expenses to average 1.63% A 1.65% A, F 1.65% F 1.66% F 1.70% F
net assets
Ratio of net invest- ment 4.74% A 4.79% A 5.27% 5.69% 5.44%
income to average net
assets
Portfolio turnover rate 165% A 176% A 138% 200% 189%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED NOVEMBER 30,
1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.430
period
Income from Investment
Operations
Net investment income .204
Net realized and unrealized (.178)
gain (loss)
Total from investment .026
operations
Less Distributions
From net investment income (.187)
In excess of net investment (.019)
income
Total distributions (.206)
Net asset value, end of period $ 10.250
TOTAL RETURN B, C .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,156
(000 omitted)
Ratio of expenses to average 1.65%A, F
net assets
Ratio of net invest- ment 5.42% A
income to average net
assets
Portfolio turnover rate 68%
</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 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.
G ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1998 H 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.560 $ 10.570
period
Income from Investment
Operations
Net investment income D .238 .453 .031
Net realized and unrealized (.146) .199 (.005)
gain (loss)
Total from investment .092 .652 .026
operations
Less Distributions
From net investment income (.242) (.452) (.036)
Net asset value, end of period $ 10.610 $ 10.760 $ 10.560
TOTAL RETURN B, C .86% 6.30% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,678 $ 6,100 $ 160
(000 omitted)
Ratio of expenses to average 1.74% A 1.75% A, F 1.75% A, F
net assets
Ratio of expenses to average 1.74% A 1.75% A 1.73% A, G
net assets after expense
reductions
Ratio of net investment 4.61% A 4.67% A 4.42% A
income to average net assets
Portfolio turnover rate 165% A 176% A 138%
</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 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.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
H ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED NOVEMBER 30,
INSTITUTIONAL CLASS
(UNAUDITED) 1998 F 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270
period
Income from Investment
Operations
Net investment income .299 D .566 D .658 D .705 D .671
Net realized and unrealized (.155) .201 (.060) (.151) .499
gain (loss)
Total from investment .144 .767 .598 .554 1.170
operations
Less Distributions
From net investment income (.294) (.557) (.648) (.704) (.670)
In excess of net investment - - - - -
income
Total distributions (.294) (.557) (.648) (.704) (.670)
Net asset value, end of period $ 10.630 $ 10.780 $ 10.570 $ 10.620 $ 10.770
TOTAL RETURN B, C 1.35% 7.44% 5.86% 5.40% 11.73%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 166,204 $ 168,019 $ 177,427 $ 211,866 $ 208,861
(000 omitted)
Ratio of expenses to average .67% A .68% A .67% .66% .67% E
net assets
Ratio of net investment 5.70% A 5.78% A 6.27% 6.69% 6.47%
income to average net assets
Portfolio turnover rate 165% A 176% A 138% 200% 189%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED NOVEMBER 30,
INSTITUTIONAL CLASS
1994 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.160 $ 10.640
period
Income from Investment
Operations
Net investment income .602 .832
Net realized and unrealized (.833) .531
gain (loss)
Total from investment (.231) 1.363
operations
Less Distributions
From net investment income (.597) (.843)
In excess of net investment (.062) -
income
Total distributions (.659) (.843)
Net asset value, end of period $ 10.270 $ 11.160
TOTAL RETURN B, C (2.10)% 13.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 172,122 $ 183,790
(000 omitted)
Ratio of expenses to average .61% .64%
net assets
Ratio of net investment 6.45% 7.41%
income to average net assets
Portfolio turnover rate 68% 59%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 ELEVEN MONTHS ENDED OCTOBER 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund(the fund) is a fund of
Fidelity Advisor Series II (formerly a fund of Fidelity Advisor Series
IV) (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for the fiscal year. The schedules of investments
include information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements 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 funds, 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 funds' investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
to purchase commitments, the fund identifies securities as segregated
in its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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 $441,299,618 and $384,856,284, respectively, of which U.S.
government and government agency obligations aggregated $290,568,216
and $292,113,278, 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 .43% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 8,868 $ -
CLASS T 371,166 17,003
CLASS B 207,289 150,307
CLASS C 43,624 35,689
$ 630,947 $ 202,999
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 FDC RETAINED BY FDC
CLASS A $ 64,247 $ 30,724
CLASS T 86,435 30,907
CLASS B 50,358 50,358*
CLASS C 5,192 5,192*
$ 206,232 $ 117,181
* WHEN CLASS B AND CLASS C SHARES ARE INITIALLY SOLD, FDC PAYS
COMMISSIONS FROM ITS OWN RESOURCES TO SECURITIES DEALERS,
BANKS, AND OTHER FINANCIAL INSTITUTIONS THROUGH WHICH THE SALES ARE
MADE.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc., (FIIOC), an affiliate of FMR, is the transfer, dividend
disbursing and shareholder servicing agent for each class of the fund.
FIIOC receives account fees and asset-based fees that vary according
to the account size and type of account of the shareholders of the
respective classes of the fund. FIIOC pays for typesetting, printing
and mailing of all shareholder reports, except proxy statements. For
the period, the following amounts were paid to FIIOC:
AMOUNT % OF AVERAGE NET ASSETS*
CLASS A $ 13,392 .23
CLASS T 324,370 .22
CLASS B 48,505 .21
CLASS C 9,634 .22
INSTITUTIONAL CLASS 136,323 .16
$ 532,224
*ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
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 $2,336 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30,
31,
1999 1998 1997A
FROM NET INVESTMENT INCOME
Class A $ 313,694 $ 299,762 $ 122,899
Class T 7,685,272 13,762,990 15,434,281
Class B 1,056,635 1,166,769 1,017,603
Class C 196,640 106,569 312
Institutional Class 4,606,294 9,044,300 11,902,988
Total $ 13,858,535 $ 24,380,390 $ 28,478,083
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER 31, YEAR ENDED NOVEMBER 30,
1999 1998 1997A
CLASS A Shares sold 1,563,541 826,066 455,670
Reinvestment of distributions 25,440 24,233 10,671
Shares redeemed (648,143) (448,992) (169,434)
Net increase (decrease) 940,838 401,307 296,907
CLASS T Shares sold 10,066,489 13,142,016 13,128,368
Reinvestment of distributions 642,675 1,173,166 1,340,839
Shares redeemed (8,166,182) (14,007,864) (12,764,354)
Net increase (decrease) 2,542,982 307,318 1,704,853
CLASS B Shares sold 2,586,030 3,469,510 1,113,298
Reinvestment of distributions 77,482 85,515 76,151
Shares redeemed (1,136,534) (1,975,435) (874,566)
Net increase (decrease) 1,526,978 1,579,590 314,883
CLASS C Shares sold 807,539 639,302 15,175
Reinvestment of distributions 14,107 8,679 16
Shares redeemed (287,560) (96,427) -
Net increase (decrease) 534,086 551,554 15,191
INSTITUTIONAL CLASS Shares 2,820,671 5,436,279 5,646,676
sold
Reinvestment of distributions 199,087 349,249 477,520
Shares redeemed (2,966,903) (6,987,186) (9,287,961)
Net increase (decrease) 52,855 (1,201,658) (3,163,765)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30,
31,
1999 1998 1997A
CLASS A Shares sold $ 16,699,033 $ 8,801,326 $ 4,761,173
Reinvestment of distributions 271,576 258,506 111,981
Shares redeemed (6,928,029) (4,782,656) (1,767,583)
Net increase (decrease) $ 10,042,580 $ 4,277,176 $ 3,105,571
CLASS T Shares sold $ 107,518,113 $ 140,268,143 $ 137,559,201
Reinvestment of distributions 6,869,884 12,511,199 14,043,998
Shares redeemed (87,222,131) (149,280,620) (133,637,535)
Net increase (decrease) $ 27,165,866 $ 3,498,722 $ 17,965,664
CLASS B Shares sold $ 27,611,403 $ 37,025,976 $ 11,661,677
Reinvestment of distributions 826,905 911,937 796,683
Shares redeemed (12,132,632) (21,073,447) (9,166,397)
Net increase (decrease) $ 16,305,676 $ 16,864,466 $ 3,291,963
CLASS C Shares sold $ 8,623,201 $ 6,829,640 $ 160,441
Reinvestment of distributions 150,551 92,773 167
Shares redeemed (3,073,473) (1,036,670) -
Net increase (decrease) $ 5,700,279 $ 5,885,743 $ 160,608
INSTITUTIONAL CLASS Shares $ 30,184,120 $ 57,943,429 $ 59,206,035
sold
Reinvestment of distributions 2,130,201 3,726,467 5,003,755
Shares redeemed (31,733,894) (74,446,547) (97,400,869)
Net increase (decrease) $ 580,427 $ (12,776,651) $ (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.
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
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
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
Matthew N. Karstetter, Deputy Treasurer
Stanley N. Griffith, Assistant Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
LTBI-SANN-0699 77840
1.704557.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
INTERMEDIATE MUNICIPAL INCOME FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 19 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 22 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 23 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 31 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 40 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME 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 shares and reflect Class T
shares' 0.25% 12b-1 fee. Returns prior to September 10, 1992 are those
of Institutional Class, the original class of the fund, which does not
bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected,
returns prior to September 10, 1992 would have been lower. If Fidelity
had not reimbursed certain class expenses, the total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.28% 5.58% 34.27% 86.31%
INCOME - CL A
FIDELITY ADV INT MUNICIPAL -2.52% 1.62% 29.23% 79.33%
INCOME - CL A (INCL. 3.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 1.77% 6.76% 39.71% n/a
Intermediate Municipal Debt 1.29% 5.83% 34.44% 93.13%
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 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class A's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 135 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 5.58% 6.07% 6.42%
INCOME - CL A
FIDELITY ADV INT MUNICIPAL 1.62% 5.26% 6.01%
INCOME - CL A (INCL. 3.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 6.76% 6.92% n/a
Intermediate Municipal Debt 5.83% 6.09% 6.80%
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 Int Muni Inc -CL A LB Municipal Bond
00262 LB015
1989/04/30 9625.00 10000.00
1989/05/31 9768.73 10207.70
1989/06/30 9875.95 10346.32
1989/07/31 9974.50 10487.13
1989/08/31 9942.19 10384.46
1989/09/30 9940.22 10353.52
1989/10/31 10019.94 10480.14
1989/11/30 10129.57 10663.55
1989/12/31 10220.87 10750.77
1990/01/31 10187.54 10699.92
1990/02/28 10278.00 10795.15
1990/03/31 10295.51 10798.39
1990/04/30 10189.64 10720.21
1990/05/31 10375.42 10954.23
1990/06/30 10461.32 11050.52
1990/07/31 10587.57 11212.96
1990/08/31 10526.01 11050.15
1990/09/30 10554.20 11056.45
1990/10/31 10672.23 11257.01
1990/11/30 10842.50 11483.39
1990/12/31 10871.77 11533.34
1991/01/31 10993.16 11688.12
1991/02/28 11093.25 11789.81
1991/03/31 11100.70 11794.05
1991/04/30 11201.33 11950.91
1991/05/31 11291.07 12057.16
1991/06/30 11297.93 12045.22
1991/07/31 11411.09 12191.93
1991/08/31 11502.27 12352.50
1991/09/30 11572.77 12513.33
1991/10/31 11697.04 12625.95
1991/11/30 11726.52 12661.17
1991/12/31 11920.30 12932.88
1992/01/31 12003.57 12962.37
1992/02/29 12017.34 12966.52
1992/03/31 11971.39 12971.32
1992/04/30 12055.12 13086.76
1992/05/31 12187.35 13240.79
1992/06/30 12347.29 13462.97
1992/07/31 12613.21 13866.59
1992/08/31 12519.95 13731.39
1992/09/30 12638.30 13821.20
1992/10/31 12548.38 13685.33
1992/11/30 12777.67 13930.44
1992/12/31 12793.10 14072.67
1993/01/31 12938.57 14236.33
1993/02/28 13297.80 14751.26
1993/03/31 13165.89 14595.34
1993/04/30 13258.49 14742.61
1993/05/31 13314.29 14825.46
1993/06/30 13454.62 15072.90
1993/07/31 13469.91 15092.64
1993/08/31 13717.74 15406.87
1993/09/30 13859.65 15582.36
1993/10/31 13872.66 15612.43
1993/11/30 13764.52 15474.88
1993/12/31 13999.71 15801.56
1994/01/31 14129.59 15982.01
1994/02/28 13776.79 15568.08
1994/03/31 13238.52 14934.15
1994/04/30 13355.70 15060.79
1994/05/31 13475.23 15191.37
1994/06/30 13378.39 15098.55
1994/07/31 13564.79 15375.30
1994/08/31 13616.08 15428.50
1994/09/30 13463.59 15202.01
1994/10/31 13258.86 14932.02
1994/11/30 12969.13 14662.05
1994/12/31 13203.89 14984.76
1995/01/31 13536.17 15413.03
1995/02/28 13879.65 15861.24
1995/03/31 14031.47 16043.48
1995/04/30 14027.45 16062.42
1995/05/31 14347.82 16574.97
1995/06/30 14270.74 16430.77
1995/07/31 14363.63 16586.53
1995/08/31 14557.78 16796.85
1995/09/30 14650.78 16903.17
1995/10/31 14807.05 17148.94
1995/11/30 14977.67 17433.44
1995/12/31 15078.33 17600.98
1996/01/31 15178.93 17733.87
1996/02/29 15129.35 17614.16
1996/03/31 14980.45 17389.05
1996/04/30 14932.62 17339.84
1996/05/31 14931.01 17332.91
1996/06/30 15046.25 17521.66
1996/07/31 15163.66 17681.11
1996/08/31 15162.57 17676.87
1996/09/30 15295.74 17924.34
1996/10/31 15445.39 18127.07
1996/11/30 15713.26 18458.79
1996/12/31 15653.97 18381.26
1997/01/31 15699.15 18416.01
1997/02/28 15830.18 18585.06
1997/03/31 15644.39 18337.33
1997/04/30 15763.31 18490.81
1997/05/31 15930.76 18768.91
1997/06/30 16097.25 18968.80
1997/07/31 16498.24 19494.24
1997/08/31 16356.18 19311.57
1997/09/30 16539.84 19540.80
1997/10/31 16632.35 19666.45
1997/11/30 16721.90 19782.09
1997/12/31 16909.27 20070.71
1998/01/31 17049.18 20277.84
1998/02/28 17040.18 20283.92
1998/03/31 17053.03 20301.77
1998/04/30 16985.10 20210.21
1998/05/31 17207.78 20530.14
1998/06/30 17267.52 20611.03
1998/07/31 17281.66 20662.76
1998/08/31 17521.76 20982.00
1998/09/30 17711.72 21243.44
1998/10/31 17706.43 21243.01
1998/11/30 17748.10 21317.57
1998/12/31 17775.91 21371.30
1999/01/31 17987.40 21625.40
1999/02/28 17892.42 21530.90
1999/03/31 17888.60 21560.82
1999/04/30 17932.63 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990512 154917 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class A on April 30, 1989, and the current 3.75% sales charge was
paid. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $17,933 - a 79.33% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a market value-weighted index of
investment-grade municipal bonds with maturities of one year or more -
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $21,615 -
a 116.15% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 2.03% 4.37% 4.65% 0.75%
Capital returns -0.75% 2.09% 3.03% 1.08%
Total returns 1.28% 6.46% 7.68% 1.83%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.61(cents) 21.61(cents) 44.08(cents)
Annualized dividend rate 4.13% 4.08% 4.13%
30-day annualized yield 3.31% - -
30-day annualized 5.17% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.63 over the past one month, $10.68 over the past six months and
$10.68 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period.
It also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class A's current 3.75% sales charge. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the class' tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses, the yield and tax equivalent yield would have
been 3.22% and 5.03%, respectively.
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME 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 Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Had Class T
shares' 12b-1 fee been reflected, returns prior to September 10, 1992
would have been lower. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.26% 5.46% 34.02% 85.96%
INCOME - CL T
FIDELITY ADV INT MUNICIPAL -1.52% 2.56% 30.33% 80.85%
INCOME - CL T (INCL. 2.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 1.77% 6.76% 39.71% n/a
Intermediate Municipal Debt 1.29% 5.83% 34.44% 93.13%
Funds Average
</TABLE>
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 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class T's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 135 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 5.46% 6.03% 6.40%
INCOME - CL T
FIDELITY ADV INT MUNICIPAL 2.56% 5.44% 6.10%
INCOME - CL T (INCL. 2.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 6.76% 6.92% n/a
Intermediate Municipal Debt 5.83% 6.09% 6.80%
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 Int Muni Inc -CL T LB Municipal Bond
00289 LB015
1989/04/30 9725.00 10000.00
1989/05/31 9870.22 10207.70
1989/06/30 9978.55 10346.32
1989/07/31 10078.13 10487.13
1989/08/31 10045.49 10384.46
1989/09/30 10043.49 10353.52
1989/10/31 10124.04 10480.14
1989/11/30 10234.81 10663.55
1989/12/31 10327.07 10750.77
1990/01/31 10293.38 10699.92
1990/02/28 10384.79 10795.15
1990/03/31 10402.48 10798.39
1990/04/30 10295.50 10720.21
1990/05/31 10483.21 10954.23
1990/06/30 10570.01 11050.52
1990/07/31 10697.57 11212.96
1990/08/31 10635.37 11050.15
1990/09/30 10663.85 11056.45
1990/10/31 10783.11 11257.01
1990/11/30 10955.15 11483.39
1990/12/31 10984.72 11533.34
1991/01/31 11107.38 11688.12
1991/02/28 11208.50 11789.81
1991/03/31 11216.03 11794.05
1991/04/30 11317.71 11950.91
1991/05/31 11408.38 12057.16
1991/06/30 11415.31 12045.22
1991/07/31 11529.65 12191.93
1991/08/31 11621.77 12352.50
1991/09/30 11693.00 12513.33
1991/10/31 11818.57 12625.95
1991/11/30 11848.36 12661.17
1991/12/31 12044.14 12932.88
1992/01/31 12128.28 12962.37
1992/02/29 12142.19 12966.52
1992/03/31 12095.77 12971.32
1992/04/30 12180.37 13086.76
1992/05/31 12313.97 13240.79
1992/06/30 12475.57 13462.97
1992/07/31 12744.25 13866.59
1992/08/31 12650.03 13731.39
1992/09/30 12769.61 13821.20
1992/10/31 12678.75 13685.33
1992/11/30 12910.42 13930.44
1992/12/31 12926.02 14072.67
1993/01/31 13073.00 14236.33
1993/02/28 13435.96 14751.26
1993/03/31 13302.68 14595.34
1993/04/30 13396.24 14742.61
1993/05/31 13452.62 14825.46
1993/06/30 13594.41 15072.90
1993/07/31 13609.85 15092.64
1993/08/31 13860.26 15406.87
1993/09/30 14003.65 15582.36
1993/10/31 14016.79 15612.43
1993/11/30 13907.53 15474.88
1993/12/31 14145.16 15801.56
1994/01/31 14276.39 15982.01
1994/02/28 13919.92 15568.08
1994/03/31 13376.06 14934.15
1994/04/30 13494.46 15060.79
1994/05/31 13615.24 15191.37
1994/06/30 13517.39 15098.55
1994/07/31 13705.73 15375.30
1994/08/31 13757.55 15428.50
1994/09/30 13603.47 15202.01
1994/10/31 13396.62 14932.02
1994/11/30 13103.88 14662.05
1994/12/31 13341.08 14984.76
1995/01/31 13676.80 15413.03
1995/02/28 14023.85 15861.24
1995/03/31 14177.25 16043.48
1995/04/30 14173.19 16062.42
1995/05/31 14496.89 16574.97
1995/06/30 14419.01 16430.77
1995/07/31 14512.87 16586.53
1995/08/31 14709.03 16796.85
1995/09/30 14803.00 16903.17
1995/10/31 14960.89 17148.94
1995/11/30 15133.28 17433.44
1995/12/31 15234.99 17600.98
1996/01/31 15336.64 17733.87
1996/02/29 15286.54 17614.16
1996/03/31 15136.10 17389.05
1996/04/30 15087.76 17339.84
1996/05/31 15086.14 17332.91
1996/06/30 15202.58 17521.66
1996/07/31 15321.20 17681.11
1996/08/31 15320.11 17676.87
1996/09/30 15453.54 17924.34
1996/10/31 15618.57 18127.07
1996/11/30 15872.67 18458.79
1996/12/31 15827.38 18381.26
1997/01/31 15856.30 18416.01
1997/02/28 15986.36 18585.06
1997/03/31 15797.28 18337.33
1997/04/30 15916.06 18490.81
1997/05/31 16099.31 18768.91
1997/06/30 16250.44 18968.80
1997/07/31 16653.82 19494.24
1997/08/31 16508.94 19311.57
1997/09/30 16693.00 19540.80
1997/10/31 16769.12 19666.45
1997/11/30 16858.20 19782.09
1997/12/31 17061.86 20070.71
1998/01/31 17201.57 20277.84
1998/02/28 17191.25 20283.92
1998/03/31 17202.87 20301.77
1998/04/30 17149.24 20210.21
1998/05/31 17356.40 20530.14
1998/06/30 17416.64 20611.03
1998/07/31 17447.26 20662.76
1998/08/31 17673.17 20982.00
1998/09/30 17864.80 21243.44
1998/10/31 17859.53 21243.01
1998/11/30 17901.62 21317.57
1998/12/31 17929.00 21371.30
1999/01/31 18142.18 21625.40
1999/02/28 18028.87 21530.90
1999/03/31 18041.10 21560.82
1999/04/30 18084.82 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990512 155218 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class T on April 30, 1989, and the current 2.75% sales charge was
paid. As the chart shows, by April 30, 1999, the value of the
investment would have grown to $18,085 - an 80.85% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a market value-weighted index of
investment-grade municipal bonds with maturities of one year or more -
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $21,615 -
a 116.15% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.01% 4.32% 4.54% 4.59% 4.94% 4.20%
Capital returns -0.75% 2.18% 2.83% -0.19% 6.74% -8.62%
Total returns 1.26% 6.50% 7.37% 4.40% 11.68% -4.42%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.57(cents) 21.44(cents) 43.84(cents)
Annualized dividend rate 4.09% 4.05% 4.10%
30-day annualized yield 3.31% - -
30-day annualized 5.17% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.63 over the past one month, $10.68 over the past six months and
$10.68 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period.
It also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class T's current 2.75% sales charge. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the class' tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses, the yield and tax-equivalent yield would have
been 3.12% and 4.88%, respectively.
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME 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
shares and reflect Class T shares' 0.25% 12b-1 fee. Returns prior to
September 10, 1992 are those of Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Had Class B
shares' 12b-1 fee been reflected, returns prior to June 30, 1994 would
have been lower. Class B shares' contingent deferred sales charges
included in the past 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 0.91% 4.70% 29.37% 79.52%
INCOME - CL B
FIDELITY ADV INT MUNICIPAL -2.05% 1.70% 29.37% 79.52%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 1.77% 6.76% 39.71% n/a
Intermediate Municipal Debt 1.29% 5.83% 34.44% 93.13%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class B's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 135 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 4.70% 5.29% 6.03%
INCOME - CL B
FIDELITY ADV INT MUNICIPAL 1.70% 5.29% 6.03%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 6.76% 6.92% n/a
Intermediate Municipal Debt 5.83% 6.09% 6.80%
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 Int Muni Inc -CL B LB Municipal Bond
00689 LB015
1989/04/30 10000.00 10000.00
1989/05/31 10149.33 10207.70
1989/06/30 10260.72 10346.32
1989/07/31 10363.12 10487.13
1989/08/31 10329.55 10384.46
1989/09/30 10327.50 10353.52
1989/10/31 10410.33 10480.14
1989/11/30 10524.23 10663.55
1989/12/31 10619.09 10750.77
1990/01/31 10584.45 10699.92
1990/02/28 10678.44 10795.15
1990/03/31 10696.63 10798.39
1990/04/30 10586.64 10720.21
1990/05/31 10779.65 10954.23
1990/06/30 10868.90 11050.52
1990/07/31 11000.07 11212.96
1990/08/31 10936.11 11050.15
1990/09/30 10965.40 11056.45
1990/10/31 11088.03 11257.01
1990/11/30 11264.94 11483.39
1990/12/31 11295.34 11533.34
1991/01/31 11421.47 11688.12
1991/02/28 11525.45 11789.81
1991/03/31 11533.19 11794.05
1991/04/30 11637.75 11950.91
1991/05/31 11730.98 12057.16
1991/06/30 11738.10 12045.22
1991/07/31 11855.68 12191.93
1991/08/31 11950.41 12352.50
1991/09/30 12023.65 12513.33
1991/10/31 12152.77 12625.95
1991/11/30 12183.40 12661.17
1991/12/31 12384.72 12932.88
1992/01/31 12471.24 12962.37
1992/02/29 12485.55 12966.52
1992/03/31 12437.81 12971.32
1992/04/30 12524.80 13086.76
1992/05/31 12662.18 13240.79
1992/06/30 12828.35 13462.97
1992/07/31 13104.63 13866.59
1992/08/31 13007.74 13731.39
1992/09/30 13130.70 13821.20
1992/10/31 13037.28 13685.33
1992/11/30 13275.50 13930.44
1992/12/31 13291.53 14072.67
1993/01/31 13442.67 14236.33
1993/02/28 13815.89 14751.26
1993/03/31 13678.85 14595.34
1993/04/30 13775.06 14742.61
1993/05/31 13833.03 14825.46
1993/06/30 13978.83 15072.90
1993/07/31 13994.71 15092.64
1993/08/31 14252.20 15406.87
1993/09/30 14399.64 15582.36
1993/10/31 14413.15 15612.43
1993/11/30 14300.80 15474.88
1993/12/31 14545.15 15801.56
1994/01/31 14680.10 15982.01
1994/02/28 14313.55 15568.08
1994/03/31 13754.31 14934.15
1994/04/30 13876.05 15060.79
1994/05/31 14000.24 15191.37
1994/06/30 13899.63 15098.55
1994/07/31 14079.42 15375.30
1994/08/31 14120.24 15428.50
1994/09/30 13938.19 15202.01
1994/10/31 13730.98 14932.02
1994/11/30 13421.58 14662.05
1994/12/31 13655.69 14984.76
1995/01/31 13989.03 15413.03
1995/02/28 14335.52 15861.24
1995/03/31 14483.01 16043.48
1995/04/30 14469.53 16062.42
1995/05/31 14790.37 16574.97
1995/06/30 14701.47 16430.77
1995/07/31 14802.08 16586.53
1995/08/31 14978.00 16796.85
1995/09/30 15064.85 16903.17
1995/10/31 15215.98 17148.94
1995/11/30 15381.05 17433.44
1995/12/31 15460.43 17600.98
1996/01/31 15570.80 17733.87
1996/02/29 15511.68 17614.16
1996/03/31 15335.83 17389.05
1996/04/30 15293.96 17339.84
1996/05/31 15268.96 17332.91
1996/06/30 15393.87 17521.66
1996/07/31 15505.28 17681.11
1996/08/31 15495.24 17676.87
1996/09/30 15621.92 17924.34
1996/10/31 15764.84 18127.07
1996/11/30 16028.49 18458.79
1996/12/31 15959.27 18381.26
1997/01/31 15995.93 18416.01
1997/02/28 16119.25 18585.06
1997/03/31 15919.81 18337.33
1997/04/30 16031.02 18490.81
1997/05/31 16191.06 18768.91
1997/06/30 16350.17 18968.80
1997/07/31 16731.15 19494.24
1997/08/31 16592.15 19311.57
1997/09/30 16768.25 19540.80
1997/10/31 16835.45 19666.45
1997/11/30 16915.87 19782.09
1997/12/31 17111.15 20070.71
1998/01/31 17242.24 20277.84
1998/02/28 17222.55 20283.92
1998/03/31 17224.72 20301.77
1998/04/30 17145.66 20210.21
1998/05/31 17359.60 20530.14
1998/06/30 17409.15 20611.03
1998/07/31 17412.33 20662.76
1998/08/31 17643.28 20982.00
1998/09/30 17823.75 21243.44
1998/10/31 17807.19 21243.01
1998/11/30 17821.47 21317.57
1998/12/31 17854.84 21371.30
1999/01/31 18056.51 21625.40
1999/02/28 17934.03 21530.90
1999/03/31 17935.58 21560.82
1999/04/30 17951.83 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990512 154940 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class B on April 30, 1989. As the chart shows, by April 30, 1999, the
value of the investment would have been $17,952 - a 79.52% increase on
the initial investment. For comparison, look at how the Lehman
Brothers Municipal Bond Index - a market value-weighted index of
investment-grade municipal bonds with maturities of one year or more -
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $21,615 a 116.15 %
increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JUNE 30, 1994 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 1.66% 3.58% 3.86% 3.90% 4.07% 1.22%
Capital returns -0.75% 2.09% 2.93% -0.29% 6.74% -2.43%
Total returns 0.91% 5.67% 6.79% 3.61% 10.81% -1.21%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 2.96(cents) 17.67(cents) 36.13(cents)
Annualized dividend rate 3.39% 3.34% 3.38%
30-day annualized yield 2.70% - -
30-day annualized 4.22% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.63 over the past one month, $10.67 over the past six months and
$10.68 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period.
It also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
excludes the effect of Class B's contingent deferred sales charge. The
tax-equivalent yield shows what you would have to earn on a taxable
investment to equal the class' tax-free yield, if you're in the 36%
federal tax bracket, but does not reflect payment of the federal
alternative minimum tax, if applicable. If Fidelity had not reimbursed
certain class expenses, the yield and tax equivalent yield would have
been 2.57% and 4.02%, respectively.
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change, or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class C shares
took place on November 3, 1997. Class C shares bear a 1.00% 12b-1 fee
that is reflected in returns after November 3, 1997. Returns between
June 30, 1994 (the date Class B shares were first offered) and
November 3, 1997 are those of Class B shares and reflect Class B
shares' 0.90% 12b-1 fee (1.00% prior to January 1, 1996). Returns
between September 10, 1992 (the date Class T shares were first
offered) and June 30, 1994 are those of Class T shares and reflect
Class T shares' 0.25% 12b-1 fee. Returns prior to September 10, 1992
are those of the Institutional Class, the original class of the fund,
which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been
reflected, returns between November 3, 1997 and January 1, 1996 and
prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past six months, past
one year, past five years and past 10 years total return figures are
1%, 1%, 0% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses, the total returns and dividends would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 0.86% 4.59% 29.28% 79.39%
INCOME - CL C
FIDELITY ADV INT MUNICIPAL -0.13% 3.59% 29.28% 79.39%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 1.77% 6.76% 39.71% n/a
Intermediate Municipal Debt 1.29% 5.83% 34.44% 93.13%
Funds Average
</TABLE>
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 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class C's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 135 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 4.59% 5.27% 6.02%
INCOME - CL C
FIDELITY ADV INT MUNICIPAL 3.59% 5.27% 6.02%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 6.76% 6.92% n/a
Intermediate Municipal Debt 5.83% 6.09% 6.80%
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 Int Muni Inc -CL C LB Municipal Bond
00525 LB015
1989/04/30 10000.00 10000.00
1989/05/31 10149.33 10207.70
1989/06/30 10260.72 10346.32
1989/07/31 10363.12 10487.13
1989/08/31 10329.55 10384.46
1989/09/30 10327.50 10353.52
1989/10/31 10410.33 10480.14
1989/11/30 10524.23 10663.55
1989/12/31 10619.09 10750.77
1990/01/31 10584.45 10699.92
1990/02/28 10678.44 10795.15
1990/03/31 10696.63 10798.39
1990/04/30 10586.64 10720.21
1990/05/31 10779.65 10954.23
1990/06/30 10868.90 11050.52
1990/07/31 11000.07 11212.96
1990/08/31 10936.11 11050.15
1990/09/30 10965.40 11056.45
1990/10/31 11088.03 11257.01
1990/11/30 11264.94 11483.39
1990/12/31 11295.34 11533.34
1991/01/31 11421.47 11688.12
1991/02/28 11525.45 11789.81
1991/03/31 11533.19 11794.05
1991/04/30 11637.75 11950.91
1991/05/31 11730.98 12057.16
1991/06/30 11738.10 12045.22
1991/07/31 11855.68 12191.93
1991/08/31 11950.41 12352.50
1991/09/30 12023.65 12513.33
1991/10/31 12152.77 12625.95
1991/11/30 12183.40 12661.17
1991/12/31 12384.72 12932.88
1992/01/31 12471.24 12962.37
1992/02/29 12485.55 12966.52
1992/03/31 12437.81 12971.32
1992/04/30 12524.80 13086.76
1992/05/31 12662.18 13240.79
1992/06/30 12828.35 13462.97
1992/07/31 13104.63 13866.59
1992/08/31 13007.74 13731.39
1992/09/30 13130.70 13821.20
1992/10/31 13037.28 13685.33
1992/11/30 13275.50 13930.44
1992/12/31 13291.53 14072.67
1993/01/31 13442.67 14236.33
1993/02/28 13815.89 14751.26
1993/03/31 13678.85 14595.34
1993/04/30 13775.06 14742.61
1993/05/31 13833.03 14825.46
1993/06/30 13978.83 15072.90
1993/07/31 13994.71 15092.64
1993/08/31 14252.20 15406.87
1993/09/30 14399.64 15582.36
1993/10/31 14413.15 15612.43
1993/11/30 14300.80 15474.88
1993/12/31 14545.15 15801.56
1994/01/31 14680.10 15982.01
1994/02/28 14313.55 15568.08
1994/03/31 13754.31 14934.15
1994/04/30 13876.05 15060.79
1994/05/31 14000.24 15191.37
1994/06/30 13899.63 15098.55
1994/07/31 14079.42 15375.30
1994/08/31 14120.24 15428.50
1994/09/30 13938.19 15202.01
1994/10/31 13730.98 14932.02
1994/11/30 13421.58 14662.05
1994/12/31 13655.69 14984.76
1995/01/31 13989.03 15413.03
1995/02/28 14335.52 15861.24
1995/03/31 14483.01 16043.48
1995/04/30 14469.53 16062.42
1995/05/31 14790.37 16574.97
1995/06/30 14701.47 16430.77
1995/07/31 14802.08 16586.53
1995/08/31 14978.00 16796.85
1995/09/30 15064.85 16903.17
1995/10/31 15215.98 17148.94
1995/11/30 15381.05 17433.44
1995/12/31 15460.43 17600.98
1996/01/31 15570.80 17733.87
1996/02/29 15511.68 17614.16
1996/03/31 15335.83 17389.05
1996/04/30 15293.96 17339.84
1996/05/31 15268.96 17332.91
1996/06/30 15393.87 17521.66
1996/07/31 15505.28 17681.11
1996/08/31 15495.24 17676.87
1996/09/30 15621.92 17924.34
1996/10/31 15764.84 18127.07
1996/11/30 16028.49 18458.79
1996/12/31 15959.27 18381.26
1997/01/31 15995.93 18416.01
1997/02/28 16119.25 18585.06
1997/03/31 15919.81 18337.33
1997/04/30 16031.02 18490.81
1997/05/31 16191.06 18768.91
1997/06/30 16350.17 18968.80
1997/07/31 16731.15 19494.24
1997/08/31 16592.15 19311.57
1997/09/30 16768.25 19540.80
1997/10/31 16835.45 19666.45
1997/11/30 16914.68 19782.09
1997/12/31 17108.79 20070.71
1998/01/31 17237.80 20277.84
1998/02/28 17217.26 20283.92
1998/03/31 17232.85 20301.77
1998/04/30 17152.29 20210.21
1998/05/31 17364.47 20530.14
1998/06/30 17395.49 20611.03
1998/07/31 17413.69 20662.76
1998/08/31 17626.51 20982.00
1998/09/30 17805.43 21243.44
1998/10/31 17787.31 21243.01
1998/11/30 17816.81 21317.57
1998/12/31 17848.69 21371.30
1999/01/31 18031.69 21625.40
1999/02/28 17924.81 21530.90
1999/03/31 17907.99 21560.82
1999/04/30 17939.46 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990512 155209 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class C on April 30, 1989. As the chart shows, by April 30, 1999, the
value of the investment would have been $17,939 - a 79.39% increase on
the initial investment. For comparison, look at how the Lehman
Brothers Municipal Bond Index - a market value-weighted index of
investment-grade municipal bonds with maturities of one year or more -
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $21,615 - a 116.15%
increase.
(checkmark)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.
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER
31,
1999 1998
Dividend returns 1.61% 3.44%
Capital returns -0.75% 2.38%
Total returns 0.86% 5.82%
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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 2.87(cents) 17.15(cents) 35.01(cents)
Annualized dividend rate 3.28% 3.24% 3.28%
30-day annualized yield n/a - -
30-day annualized n/a - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set
period. The annualized dividend rate is based on an average share
price of $10.63 over the past one month, $10.68 over the past six
months and $10.68 over the past one year. The 30-day annualized YIELD
is a standard formula for all bond funds based on the yields of the
bonds in the fund, averaged over the past 30 days. This figure shows
you the yield characteristics of the fund's investments at the end of
the period. It also helps you compare funds from different companies
on an equal basis. The tax equivalent yield shows what you would have
to earn on a taxable investment to equal the class' tax-free yield, if
you're in the 36% federal tax bracket, but does not reflect payment of
the federal alternative minimum tax, if applicable. Yield information
will be reported once Class C has a longer, more stable, operating
history.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Municipal bonds outperformed
Treasuries during the six-month
period that ended April 30, 1999.
During that time, the Lehman Brothers
Municipal Bond Index - an index
of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned 1.75%.
In contrast, the Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable bond
performance - gained 0.69%.
During the six-month period, the
ratio of municipal bond yields to
Treasury bond yields improved.
While Treasury yields rose during
the first quarter of the year,
municipal yields remained
relatively stable, due in part to an
improving supply and demand
environment. Municipal bond
issuance was off its torrid pace
experienced last year (which was
just shy of the record $292 billion
issued in 1993), while retail investor
demand strengthened in 1999,
helping municipal bonds
outperform Treasuries. Although the
municipal market managed to
produce marginal returns over the
past six months, bond market
sentiment turned bearish late in the
period as strong economic reports
indicated that the U.S. economy
continued to grow at brisk pace. The
strength of the domestic economy
combined with a perception of
improving overseas markets caused
investors to once again focus on the
threat of inflation and the prospects of
higher interest rates.
(photograph of Norm Lind)
An interview with Norm Lind, Portfolio Manager of Fidelity Advisor
Intermediate Municipal Income Fund
Q. HOW DID THE FUND PERFORM, NORM?
A. For the six-month period ended April 30, 1999, the fund's Class A,
Class T, Class B and Class C shares had total returns of 1.28%, 1.26%,
0.91% and 0.86%, respectively. To get a sense of how the fund did
relative to its competitors, the intermediate municipal debt funds
average returned 1.29% for the same six-month period, according to
Lipper Inc. Additionally, the Lehman Brothers 1-17 Year Municipal Bond
Index - which tracks the types of securities in which the fund invests
- - returned 1.77% for the same six-month period. For the 12-month
period that ended April 30, 1999, the fund's Class A, Class T, Class B
and Class C shares had total returns of 5.58%, 5.46%, 4.70% and 4.59%,
respectively. Those returns compared to the intermediate municipal
debt funds average's 5.83% return and the Lehman Brothers index's
6.76% return for the same 12-month period.
Q. MUNICIPAL BONDS - WHILE OUTPACING THEIR TREASURY COUNTERPARTS - HAD
A FAIRLY TOUGH GO OF IT OVER THE PAST SIX MONTHS. WERE THERE ANY
BRIGHT SPOTS FOR THE FUND GIVEN THAT DIFFICULT BACKDROP?
A. The student loan bond area was one segment of the municipal bond
market that held up relatively well. These bonds tend to pay higher
levels of income than comparably rated bonds from other sectors
because they carry the risk of being prepaid before maturity.
Bondholders generally dislike prepayment because it potentially forces
them to reinvest at lower interest rates. The attractive level of
income that student loan bonds paid, coupled with the fact that there
was a diminished likelihood of prepayment due to rising interest
rates, helped the bonds. I'd also say that the fund benefited from its
emphasis on relatively high-quality bonds - rated A, Aa or Aaa -
because they outpaced lower-quality Baa-rated bonds during the period.
Q. CAN YOU EXPLAIN HOW PROBLEMS WITH A MAJOR HOSPITAL SYSTEM IN
PHILADELPHIA CAUSED MANY BAA-RATED SECURITIES TO FALTER?
A. Sure. When Allegheny Health Education and Research Foundation
(AHERF), - a hospital system in Philadelphia, that was at one time
Baa-rated - declared bankruptcy, the event cast a pall on the
Baa-rated segment of the market as a whole. In response to an increase
in the perceived risk of these securities, investors pushed Baa-rated
bond yields higher, and their prices lower. While the fund didn't own
any bonds issued by AHERF, its stake in Baa-rated bonds - which stood
at 11% of investments at the end of the period - performed poorly.
Q. BECAUSE OF THE STATE'S BETTER-THAN-AVERAGE ECONOMIC GROWTH, BONDS
ISSUED IN CALIFORNIA PERFORMED RELATIVELY WELL COMPARED WITH BONDS
FROM OTHER STATES. DID THE FUND BENEFIT FROM THAT DEVELOPMENT DURING
THE PAST SIX MONTHS?
A. Yes, it did, but the fund's relatively light stake in bonds issued
in California - 12.3% of investments at the end of the period - ended
up being a source of disappointment during the past six months. I had
reduced the fund's stake in California securities last year because I
felt their prices already reflected most of the economic improvement
that had or would take place, and the bonds had reached their upside
limit as a result. As it turned out, however, California bonds
generally continued to appreciate in response to further economic
expansion in that state.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. Supply and demand conditions - which can have a dramatic effect on
the municipal market's performance - appear favorable. In contrast to
last year, there has been a relatively light supply of municipal bonds
issued so far in 1999. In 1998, falling interest rates prompted a wave
of municipal bond refundings as issuers looked to refinance their debt
at lower interest rates. Those refundings made up more than one-third
of total supply of municipal bonds issued last year. So far this year,
however, refunding issuance has slowed dramatically as interest rates
rose. Meanwhile, demand has been firm. However, the direction of
interest rates will be the primary factor determining municipal bond
performance.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to provide high current
income exempt from federal
income tax by investing
normally in
investment-grade municipal
debt securities
START DATE: September 19,
1985
SIZE: as of April 30, 1999,
more than $78 million
MANAGER: Norm Lind, since
1998; joined Fidelity in
1986
NORM LIND ON DEVELOPMENTS
IN TECHNOLOGY AND THEIR EFFECT
ON MUNICIPAL-BOND ISSUERS:
"I'm currently keeping an eye on
two technology-related
developments and their
potential effect on
municipal-bond issuers. How
individual issuers meet these
challenges could have a dramatic
impact on their fiscal health and,
ultimately, their credit
worthiness. The first is potential
problems stemming from the
so-called Year 2000 glitch, or `Y2K.'
The issue is whether problems
that arise from Y2K will seriously
compromise the operations of a
municipal issuer. I'll also be
monitoring the extent to which
municipal issuers adequately
budget for Y2K fixes.
"The second technology-related
issue I'm watching is the rise of
the Internet. As more and more
people shop for goods and services
online, it's uncertain to what
extent states and municipalities
will lose out on sales tax revenue.
Many government entities across
the nation are wrestling with
whether they will be able to tax
Internet-based sales that emanate
from their states or
municipalities. As yet, there's no
definitive estimate of the
magnitude of potential problems
stemming from this issue.
Nonetheless, I'm factoring it in
when I evaluate the attractiveness
of issuers, especially those that
are heavily reliant on sales-tax
revenues."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE HOLDINGS 6 MONTHS AGO
California 12.3 13.1
Texas 11.0 5.2
New York 8.6 8.3
Massachusetts 7.6 6.6
Washington 7.4 5.5
TOP FIVE SECTORS AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 24.8 20.9
Education 20.9 21.6
Electric Utilities 17.6 16.2
Health Care 13.9 14.6
Housing 5.1 5.2
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 7.6 7.3
</TABLE>
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 APRIL 30, 1999
6 MONTHS AGO
Years 5.2 5.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 1999
Aaa 48.3%
Aa, A 38.3%
Baa 11.0%
Short-term
investments 2.4%
Row: 1, Col: 1, Value: 48.3
Row: 1, Col: 2, Value: 38.3
Row: 1, Col: 3, Value: 11.0
Row: 1, Col: 4, Value: 2.4
AS OF OCTOBER 31, 1998
Aaa 46.1%
Aa, A 34.5%
Baa 12.0%
Short-term
investments 7.4%
Row: 1, Col: 1, Value: 46.1
Row: 1, Col: 2, Value: 34.5
Row: 1, Col: 3, Value: 12.0
Row: 1, Col: 4, Value: 7.4
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P (registered
trademark) RATINGS. AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALASKA - 0.4%
Alaska Student Ln. Corp. Aaa $ 300,000 $ 309,828
Student Ln. Rev. Series A,
5% 7/1/03 (AMBAC Insured) (e)
ARIZONA - 1.3%
Maricopa County Cmnty. Aa1 1,000,000 1,050,110
College District Series B,
5.25% 7/1/10
ARKANSAS - 1.1%
Arkansas Gen. Oblig. (Cap. Aa3 1,000,000 889,710
Appreciation) Series A, 0%
6/1/02
CALIFORNIA - 12.3%
California Ed. Facilities AAA 225,000 233,890
Auth. Rev. Rfdg. (Chapman
Univ.) 5.375% 10/1/16
(Connie Lee Insured)
California Health Facilities A+ 2,275,000 2,414,048
Fing. Auth. Rev. (Casa de
Las Campanas) Series A,
5.375% 8/1/09
California Hsg. Fin. Agcy. Aaa 1,000,000 1,037,940
Rev. (Home Mtg.) Series R,
5.35% 8/1/07 (MBIA Insured)
(e)
California Poll. Cont. Fing. Baa2 500,000 532,965
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc.) Series
A, 7.15% 2/1/11 (e)
California Rural Home Mtg. Aaa 2,000,000 2,023,260
Fin. Auth. Lease Rev. (Rural
Lease Purp.) Series A, 4.45%
8/1/01 (MBIA Insured)
Los Angeles County Ctfs. of Baa1 970,000 765,825
Prtn. (Cap. Appreciation)
(Disney Parking Proj.) 0%
9/1/04
Sacramento Muni. Util. Aaa 1,000,000 1,073,240
District Elec. Rev. 5.45%
11/15/08 (FGIC Insured)
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/02 BBB- 1,000,000 1,062,030
6.5% 7/1/08 BBB- 300,000 336,594
San Bernardino County Rfdg. A3 500,000 526,685
Ctfs. of Prtn. (Med. Ctr.
Fing. Proj.) 5.25% 8/1/04
10,006,477
COLORADO - 1.2%
Arapaho County Cap. Impt. Aaa 3,620,000 581,444
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/2005 @ 20.8626) (f)
Colorado Health Facilities Baa2 400,000 411,828
Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.25%
2/1/04
993,272
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DISTRICT OF COLUMBIA - 1.9%
District of Columbia Gen. Aaa $ 1,000,000 $ 1,063,930
Oblig. Rfdg. Series B 1,
5.4% 6/1/06 (AMBAC Insured)
District of Columbia Redev. Baa 500,000 508,500
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.
5.4% 11/1/00
1,572,430
FLORIDA - 1.9%
Broward County Resource A3 460,000 483,538
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 500,000 517,665
Rfdg. (Miami Int'l. Arpt.)
Series A, 5.25% 10/1/01 (FSA
Insured) (e)
Jacksonville Port Auth. Rev. Aaa 500,000 546,570
Rfdg. 5.75% 11/1/09 (MBIA
Insured) (e)
1,547,773
ILLINOIS - 2.0%
Chicago Midway Arpt. Rev. Aaa 300,000 327,957
Series B, 6% 1/1/09 (MBIA
Insured) (e)
Metro. Pier & Exposition
Auth. Dedicated Tax Rev.:
(Cap. Appreciation) Series A:
0% 6/15/09 (FGIC Insured) Aaa 435,000 276,016
0% 6/15/09 (FGIC Insured) Aaa 65,000 41,121
(Escrowed to Maturity) (f)
0% 6/15/00 (AMBAC Insured) Aaa 1,000,000 962,920
1,608,014
IOWA - 1.9%
Iowa Student Ln. Liquidity Aa1 1,500,000 1,562,325
Corp. Student Ln. Rev.
Series A, 6.35% 3/1/01
KANSAS - 4.0%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity -
Leavenworth Health Svc. Co.):
5.25% 12/1/09 (MBIA Insured) Aaa 1,385,000 1,463,156
5.25% 12/1/11 (MBIA Insured) Aaa 1,750,000 1,825,705
3,288,861
LOUISIANA - 2.3%
Louisiana Pub. Facilities Aaa 1,825,000 1,892,799
Auth. Student Ln. Rev. Rfdg.
Series A 1, 6.2% 3/1/01
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MAINE - 1.2%
Maine Edl. Ln. Marketing Aaa $ 1,000,000 $ 1,007,910
Corp. Student Ln. Rev.
Series A 4, 5.45% 11/1/99 (e)
MASSACHUSETTS - 7.6%
Boston Gen. Oblig. Rev. Aaa 250,000 268,033
(Boston City Hosp.) Series
A, 7.625% 2/15/21
(Pre-Refunded to 8/15/2000 @
101.666) (f)
Massachusetts Gen. Oblig.
Rfdg.:
Series A, 5.5% 2/1/11 Aa3 250,000 265,670
Series C, 4.7% 8/1/02 Aa3 1,000,000 1,029,900
Massachusetts Health & Edl. Aaa 700,000 707,420
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care)
Series B, 4.55% 1/1/21 (MBIA
Insured), LOC BankBoston NA
Massachusetts Ind. Fin. Agcy. A1 1,600,000 1,406,480
Rev. (Cap. Appreciation)
(Massachusetts Biomedical)
Series A 1, 0% 8/1/02
Massachusetts Tpk. Auth. Aaa 550,000 554,494
Series A, 5.55% 1/1/17 (MBIA
Insured)
New England Ed. Ln. Marketing A3 1,950,000 1,986,543
Corp. Student Ln. Rev. Rfdg.
Series B, 5.4% 6/1/00
6,218,540
MICHIGAN - 2.6%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(McLaren Health Care Corp.) A1 2,000,000 1,928,620
Series A, 5% 6/1/19
(Mercy Health Services) Aa3 200,000 216,688
Series S, 5.75% 8/15/05
2,145,308
MINNESOTA - 0.5%
Minneapolis Gen. Oblig. (Cap. Aaa 200,000 175,572
Appreciation) Series B, 0%
12/1/02
Minnesota Higher Ed. Aa3 200,000 208,320
Facilities Auth. Rev.
(MacAlester College) Series
4 C, 5.5% 3/1/12
383,892
MONTANA - 1.5%
Montana Higher Ed. Student A 1,220,000 1,239,105
Assistance Corp. Student Ln.
Rev. Series B, 6.6% 12/1/99
(e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEVADA - 0.7%
Clark County School District Aaa $ 500,000 $ 559,890
Series A, 9.75% 6/1/01 (MBIA
Insured)
NEW MEXICO - 4.2%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/00 (AMBAC Insured) Aaa 250,000 257,360
(e)
6.75% 7/1/09 (AMBAC Insured) Aaa 450,000 527,999
(e)
New Mexico Edl. Assistance Aaa 1,900,000 2,019,928
Foundation Student Ln. Rev.
Series IV A2, 6.65% 3/1/07
Rio Rancho Wtr. & Wastewtr. Aaa 500,000 588,895
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
3,394,182
NEW YORK - 8.6%
Buffalo Gen. Oblig. Rfdg. Aaa 1,025,000 1,076,363
Series C, 5.25% 12/1/13
(FGIC Insured)
New York City Gen. Oblig. A3 1,000,000 1,059,170
Series H, 5.5% 8/1/12
New York State Dorm. Auth.
Rev.:
(Consolidated City Univ. Sys.):
Series A, 5.75% 7/1/13 Baa1 500,000 545,575
Series C, 7.5% 7/1/10 Baa1 500,000 592,935
Rfdg. (State Univ. Edl. A3 500,000 554,350
Facilities) Series A, 6.5%
5/15/04
New York State Envir. Aa2 500,000 485,715
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev. Series
F, 4.875% 6/15/18
New York State Local Govt.
Assistance Corp.:
(Cap. Appreciation) Series A, A3 1,000,000 675,660
0% 4/1/08
Rfdg. Series A, 5.5% 4/1/04 Aaa 100,000 106,814
(AMBAC Insured)
New York State Thruway Auth. A3 500,000 550,060
Hwy. & Bridge Trust Fund
Series A, 5.8% 4/1/09
(Pre-Refunded to 4/1/2004 @
102) (f)
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge):
5.4% 4/1/03 Baa1 250,000 262,623
6% 4/1/03 Baa1 200,000 214,024
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York State Urban Dev.
Corp. Rev.:
(Sports Facility Assistance Aaa $ 500,000 $ 534,570
Prog.) Series A, 5.5% 4/1/10
(MBIA Insured)
Rfdg. (Correctional Aaa 300,000 319,695
Facilities) 5.625% 1/1/07
(AMBAC Insured)
6,977,554
NORTH CAROLINA - 4.6%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series B, 6% 1/1/06 Baa1 1,315,000 1,401,488
Series C, 5.5% 1/1/07 Baa1 700,000 731,073
Series A, 5.625% 1/1/03 Baa1 500,000 521,300
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:
5.75% 1/1/02 A3 750,000 782,325
5.9% 1/1/03 A3 250,000 264,943
3,701,129
OHIO - 1.0%
Ohio Bldg. Auth. Facilities Aaa 500,000 540,730
(Adult Correctional) Series
A, 5.95% 10/1/14 (MBIA
Insured)
Ohio Tpk. Commission Tpk. Aaa 250,000 269,890
Rev. Series A, 5.6% 2/15/12
(MBIA Insured)
810,620
OREGON - 1.3%
Clackamas County School Aaa 1,000,000 1,042,440
District #12 5.25% 6/1/13
(FGIC Insured)
PENNSYLVANIA - 4.4%
Pennsylvania Convention Ctr. Baa 110,000 110,634
Auth. Rev. Rfdg. Series A,
5.75% 9/1/99
Pennsylvania Higher Edl. AA- 1,270,000 1,383,983
Facilities Auth. College &
Univ. Rev. Rfdg. (RIDC
Reg'l. Growth -Carnegie
Mellon Univ. Proj.) 6%
11/1/04
Pennsylvania Hsg. Fin. Agcy. Aa3 1,000,000 1,056,630
Rfdg. (Residential Dev.
Section 8) Series A, 7%
7/1/01
Philadelphia Gas Works Rev. Aaa 1,000,000 1,062,940
Series A, 5.25% 7/1/05 (FSA
Insured)
3,614,187
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RHODE ISLAND - 1.3%
Rhode Island Student Ln. A $ 1,000,000 $ 1,034,740
Auth. Student Ln. Rev. Rfdg.
Series A, 6.55% 12/1/00
SOUTH CAROLINA - 2.9%
South Carolina Ed. Assistance
Auth. Student Ln. Rev. Rfdg.:
(Sr. Lien) Series A 2, 5.4% AAA 1,250,000 1,292,063
9/1/02
Series B, 5.7% 9/1/05 (e) A 1,000,000 1,056,180
2,348,243
TENNESSEE - 1.5%
Memphis-Shelby County Arpt. Aaa 275,000 281,776
Auth. Arpt. Rev. Rfdg.
Series A, 5.25% 2/15/01
(MBIA Insured) (e)
Montgomery County Health Edl. Baa2 1,000,000 954,400
& Hsg. Facilities Board
Hosp.Rev. Rfdg. & Impt.
(Clarksville Reg'l. Health
Sys.) 5.375% 1/1/28
1,236,176
TEXAS - 11.0%
Austin Independent School Aaa 500,000 548,435
District (School Bldg.)
8.125% 8/1/01 (Escrowed to
Maturity) (f)
Brazos Higher Ed. Auth., Inc. Aaa 435,000 455,384
Student Ln. Rev. Rfdg.
Series A 1, 6.05% 12/1/01 (e)
Deer Park Independent School Aaa 200,000 172,144
District Rfdg. 0% 2/15/03
Harris County Gen. Oblig. Aaa 3,000,000 2,642,394
(Cap. Appreciation) (Toll
Road Tax) 0% 8/15/02 (MBIA
Insured)
Hurst Euless Bedford Aaa 1,000,000 556,650
Independent School District
Rfdg. (Cap. Appreciation) 0%
8/15/11
Irving Independent School Aaa 250,000 243,623
District (Cap. Appreciation)
0% 2/15/00
Laredo Gen. Oblig. Rfdg. Aaa 1,000,000 1,031,360
5.125% 8/15/12 (FGIC
Insured)
Northside Independent School Aaa 500,000 518,520
District (School Bldg.)
8.375% 2/1/00
San Antonio Gen. Oblig.:
Rfdg. 5.5% 8/1/02 Aa2 125,000 131,566
Series 2000, 5% 2/1/09 (b) Aa2 1,255,000 1,290,404
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TEXAS - CONTINUED
Texas Pub. Fin. Auth. Bldg. Aaa $ 1,000,000 $ 1,130,450
Rev. Rfdg. (Texas Technical
College) 6.25% 8/1/09 (MBIA
Insured)
Univ. of Texas Permanent Aaa 250,000 259,348
Univ. Fund Rfdg. 5% 7/1/10
8,980,278
UTAH - 3.4%
Intermountain Pwr. Agcy.:
(Cap. Appreciation) Series A, Aaa 2,860,000 2,102,844
0% 7/1/06 (MBIA Insured)
Rfdg.:
(Cap. Appreciation) Series B, Aaa 500,000 479,860
0% 7/1/00 (MBIA Insured)
Series D, 5% 7/1/21 (MBIA Aaa 200,000 194,768
Insured)
2,777,472
VIRGINIA - 1.6%
Henrico County Wtr. & Swr. Aa2 1,250,000 1,303,900
Rev. Rfdg. 5.25% 5/1/14
WASHINGTON - 7.4%
Grant County Pub. Util. Aaa 1,715,000 1,720,848
District No. 2 (Priest
Rapids Hydro Elec.) Series
B, 5.375% 1/1/16 (MBIA
Insured) (b)(e)
King County Gen. Oblig. Aa1 1,000,000 1,107,250
Series B, 5.9% 12/1/14
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series C, 7.5% 7/1/03 Aa1 525,000 567,483
(Pre-Refunded to 1/1/2001 @
102) (f)
5.4% 7/1/12 Aa1 2,000,000 2,107,420
Washington Pub. Pwr. Supply Aa1 500,000 523,115
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5.1% 7/1/07
6,026,116
TOTAL MUNICIPAL BONDS 79,523,281
(Cost $77,105,939)
CASH EQUIVALENTS - 2.4%
SHARES VALUE (NOTE 1)
Municipal Central Cash Fund 1,960,755 $ 1,960,755
(c)(d) (Cost $1,960,755)
TOTAL INVESTMENT IN $ 81,484,036
SECURITIES - 100%
(Cost $79,066,694)
</TABLE>
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(d) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.54%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(e) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(f) Security collateralized by an amount sufficient to pay interest
and principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 78.7% AAA, AA, A 71.0%
Baa 9.3% BBB 11.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The distribution of municipal securities by revenue source, as a
percentage of total value of investments in securities, is as follows:
General Obligations 24.8%
Education 20.9
Electric Utilities 17.6
Health Care 13.9
Housing 5.1
Others (individually less 17.7
than 5%)
TOTAL 100.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $79,066,694. Net unrealized appreciation
aggregated $2,417,342, of which $2,464,705 related to appreciated
investment securities and $47,363 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 81,484,036
value (cost $79,066,694) -
See accompanying schedule
Receivable for fund shares 124,252
sold
Interest receivable 1,100,748
Other receivables 911
TOTAL ASSETS 82,709,947
LIABILITIES
Payable to custodian bank $ 8,355
Payable for investments 495,713
purchased Regular delivery
Delayed delivery 2,975,265
Payable for fund shares 121,302
redeemed
Distributions payable 80,931
Accrued management fee 25,739
Distribution fees payable 21,545
Other payables and accrued 25,504
expenses
TOTAL LIABILITIES 3,754,354
NET ASSETS $ 78,955,593
Net Assets consist of:
Paid in capital $ 76,452,274
Accumulated undistributed net 85,977
realized gain (loss) on
investments
Net unrealized appreciation 2,417,342
(depreciation) on investments
NET ASSETS $ 78,955,593
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.61
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,702,562 (divided by)
254,760 shares)
Maximum offering price per $11.02
share (100/96.25 of $10.61)
CLASS T: NET ASSET VALUE and $10.61
redemption price per share
($56,809,048 (divided by)
5,355,073 shares)
Maximum offering price per $10.91
share (100/97.25 of $10.61)
CLASS B: NET ASSET VALUE and $10.60
offering price per share
($10,906,091 (divided by)
1,028,703 shares) A
CLASS C: NET ASSET VALUE and $10.61
offering price per share
($1,725,350 (divided by)
162,619 shares) A
INSTITUTIONAL CLASS: NET $10.61
ASSET VALUE, offering price
and redemption price per
share ($6,812,542 (divided
by) 642,252 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INTEREST INCOME $ 1,945,144
EXPENSES
Management fee $ 151,245
Transfer agent fees 55,062
Distribution fees 128,944
Accounting fees and expenses 30,977
Non-interested trustees' 143
compensation
Custodian fees and expenses 2,846
Registration fees 53,214
Audit 26,546
Legal 3,263
Reports to shareholders 6,590
Miscellaneous 89
Total expenses before 458,919
reductions
Expense reductions (69,767) 389,152
NET INTEREST INCOME 1,555,992
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 116,772
Futures contracts (46,201) 70,571
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (722,637)
Futures contracts 38,839 (683,798)
NET GAIN (LOSS) (613,227)
NET INCREASE (DECREASE) IN $ 942,765
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
1999 (UNAUDITED) 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 1,555,992 $ 2,576,544 $ 2,794,353
Net realized gain (loss) 70,571 831,999 875,029
Change in net unrealized (683,798) 795,349 192,183
appreciation (depreciation)
NET INCREASE (DECREASE) IN 942,765 4,203,892 3,861,565
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,555,992) (2,576,544) (2,794,353)
From net interest income
From net realized gain (588,174) (172,795) (6,721)
TOTAL DISTRIBUTIONS (2,144,166) (2,749,339) (2,801,074)
Share transactions - net 406,210 14,997,838 (8,495,226)
increase (decrease)
TOTAL INCREASE (DECREASE) (795,191) 16,452,391 (7,434,735)
IN NET ASSETS
NET ASSETS
Beginning of period 79,750,784 63,298,393 70,733,128
End of period $ 78,955,593 $ 79,750,784 $ 63,298,393
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED) 1998 H 1997 G 1996 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.600 $ 10.410 $ 10.160
period
Income from Investment
Operations
Net interest income .216 .411 .459 .113
Net realized and unrealized (.080) .200 .191 .250
gain (loss)
Total from investment .136 .611 .650 .363
operations
Less Distributions
From net interest income (.216) (.411) (.459) (.113)
From net realized gain (.080) (.030) (.001) -
Total distributions (.296) (.441) (.460) (.113)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.600 $ 10.410
TOTAL RETURN B, C 1.28% 5.89% 6.42% 3.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,703 $ 1,082 $ 442 $ 103
(000 omitted)
Ratio of expenses to average .86% A, E .90% A, E .90% E .90% A, E
net assets
Ratio of net interest income 4.08% A 4.19% A 4.37% 4.60% A
to average net assets
Portfolio turnover rate 11% A 26% A, F 18% 35%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G YEAR ENDED NOVEMBER 30
H ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30,
1999
(UNAUDITED) 1998 F 1997 G 1996 G 1995 G 1994 G 1993 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 10.460 $ 11.080
period
Income from Investment
Operations
Net interest income .214 .407 .449 .461 .451 .455 .508
Net realized and unrealized (.080) .210 .181 .030 .980 (1.040) .260
gain (loss)
Total from investment .134 .617 .630 .491 1.431 (.585) .768
operations
Less Distributions
From net interest income (.214) (.407) (.449) (.461) (.451) (.455) (.508)
From net realized gain (.080) (.030) (.001) - - - (.880)
In excess of net realized gain - - - - - (.020) -
Total distributions (.294) (.437) (.450) (.461) (.451) (.475) (1.388)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 10.460
TOTAL RETURN B, C 1.26% 5.94% 6.21% 4.89% 15.49% (5.78)% 7.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 56,809 $ 60,070 $ 48,830 $ 56,729 $ 62,852 $ 57,382 $ 39,800
(000 omitted)
Ratio of expenses to average .90% A, D .95% A, D 1.00% D 1.00% D .94% D .90% D .90% D
net assets
Ratio of net interest income 4.05% A 4.15% A 4.32% 4.42% 4.56% 4.49% 4.76%
to average net assets
Portfolio turnover rate 11% A 26% A, E 18% 35% 53% 53% 46%
</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 FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
F ELEVEN MONTHS ENDED OCTOBER 31.
G YEAR ENDED NOVEMBER 30.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED) 1998 G 1997 H 1996 H 1995 H 1994 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 9.890
period
Income from Investment
Operations
Net interest income .177 .339 .382 .394 .373 .155
Net realized and unrealized (.080) .200 .181 .030 .980 (.490)
gain (loss)
Total from investment .097 .539 .563 .424 1.353 (.335)
operations
Less Distributions
From net interest income (.177) (.339) (.382) (.394) (.373) (.155)
From net realized gain (.080) (.030) (.001) - - -
Total distributions (.257) (.369) (.383) (.394) (.373) (.155)
Net asset value, end of period $ 10.600 $ 10.760 $ 10.590 $ 10.410 $ 10.380 $ 9.400
TOTAL RETURN B, C .91% 5.17% 5.54% 4.21% 14.60% (3.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,906 $ 11,134 $ 7,917 $ 7,445 $ 6,226 $ 1,682
(000 omitted)
Ratio of expenses to average 1.61% A, E 1.65% A, E 1.65% E 1.66% E 1.68% E 1.65% A, E
net assets
Ratio of net interest income 3.34% A 3.45% A 3.67% 3.76% 3.71% 3.74% A
to average net assets
Portfolio turnover rate 11% A 26% A, F 18% 35% 53% 53%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G ELEVEN MONTHS ENDED OCTOBER 31.
H YEAR ENDED NOVEMBER 30.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED) 1998 G 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.550
period
Income from Investment
Operations
Net interest income .171 .328 .027
Net realized and unrealized (.080) .210 .040
gain (loss)
Total from investment .091 .538 .067
operations
Less Distributions
From net interest income (.171) (.328) (.027)
From net realized gain (.080) (.030) -
Total distributions (.251) (.358) (.027)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.590
TOTAL RETURN B, C .86% 5.16% .63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,725 $ 1,137 $ 13
(000 omitted)
Ratio of expenses to average 1.71% A, E 1.75% A, E 1.75% A, E
net assets
Ratio of net interest income 3.23% A 3.29% A 3.33% A
to average net assets
Portfolio turnover rate 11% A 26% A, F 18%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G ELEVEN MONTHS ENDED OCTOBER 31.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30,
INSTITUTIONAL CLASS 1999
(UNAUDITED) 1998 G 1997 H 1996 H 1995 H 1994 H 1993 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410 $ 10.460 $ 11.080
period
Income from Investment
Operations
Net interest income .225 .427 .475 .487 .477 .481 .536
Net realized and unrealized (.080) .210 .181 .050 .950 (1.030) .260
gain (loss)
Total from investment .145 .637 .656 .537 1.427 (.549) .796
operations
Less Distributions
From net interest income (.225) (.427) (.475) (.487) (.477) (.481) (.536)
From net realized gain (.080) (.030) (.001) - - - (.880)
In excess of net realized gain - - - - - (.020) -
Total distributions (.305) (.457) (.476) (.487) (.477) (.501) (1.416)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410 $ 10.460
TOTAL RETURN B, C 1.36% 6.14% 6.48% 5.36% 15.44% (5.43)% 8.01%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,813 $ 6,328 $ 6,098 $ 6,455 $ 11,085 $ 11,702 $ 15,076
(000 omitted)
Ratio of expenses to average .71% A, D .75% A, D .75% D .75% D .70% D .65% D .65% D
net assets
Ratio of expenses to average .71% A .75% A .75% .74% E .70% .65% .65%
net assets after expense
reductions
Ratio of net interest income 4.25% A 4.36% A 4.57% 4.68% 4.96% 4.75% 5.01%
to average net assets
Portfolio turnover rate 11% A 26% A, F 18% 35% 53% 53% 46%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G ELEVEN MONTHS ENDED OCTOBER 31.
H YEAR ENDED NOVEMBER 30.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Municipal Income Fund (the fund) is a
fund of Fidelity Advisor Series II (the trust) (formerly a fund of
Advisor Series VI) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. 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 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."
INTEREST INCOME. Interest income, which includes amortization of
premium and 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 interest 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 futures transactions and losses deferred due to
futures. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc. (FIMM), an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract,
or if the issuer does not issue the securities due to political,
economic, or other factors.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Losses may arise from changes in the value of the underlying
instruments or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $11,072,169 and $4,111,713, respectively.
The market value of futures contracts opened and closed during the
period amounted to $3,833,875 and $6,387,873, 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 .25%. 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 .38% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with FIMM, a wholly
owned subsidiary of FMR. For its services, FIMM receives a fee from
FMR of 50% of the management fee payable to FMR. The fee is paid prior
to any voluntary expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,241 $ 182
CLASS T 73,935 1,850
CLASS B 46,673 33,825
CLASS C 7,095 6,505
$ 128,944 $ 42,362
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 FDC RETAINED BY FDC
CLASS A $ 5,781 $ 1,198
CLASS T 12,210 5,933
CLASS B 6,484 6,484*
CLASS C 352 352*
$ 24,827 $ 13,967
* 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 AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Class C, and Institutional Class
shares. UMB has entered into a sub-arrangement with Fidelity
Investments Institutional Operations Company, Inc. (FIIOC) with
respect to all classes of the fund to perform the transfer, dividend
disbursing, and shareholder servicing agent functions. FIIOC, an
affiliate of FMR, receives account fees and asset-based fees that vary
according to the account size and type of account of the shareholders
of the respective classes of the fund. All fees are paid to FIIOC by
UMB, which is reimbursed by each class for such payments. FIIOC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, each class paid the following
transfer agent fees:
AMOUNT % OF AVERAGE NET ASSETS
CLASS A $ 1,525 .19*
CLASS T 40,330 .14*
CLASS B 6,929 .13*
CLASS C 1,279 .18*
INSTITUTIONAL CLASS 4,999 .15*
$ 55,062
* ANNUALIZED
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A .85% $ 1,253
CLASS T .90% 55,901
CLASS B 1.60% 6,784
CLASS C 1.70% 1,203
INSTITUTIONAL CLASS .70% 4,626
$ 69,767
Effective December 1, 1998, Class A, Class B, Class C, and
Institutional Class expense limitations were changed from .90%, 1.65%,
1.75%, and .75%; to .85%, 1.60%, 1.70%, and .70% of each class'
average net assets, respectively.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER 31, YEARS ENDED NOVEMBER 30,
1999 1998 1997 A
FROM NET INTEREST INCOME
Class A $ 33,399 $ 31,705 $ 15,189
Class T 1,187,250 2,019,325 2,195,690
Class B 171,563 267,333 274,703
Class C 22,724 15,339 26
Institutional Class 141,056 242,842 308,745
Total $ 1,555,992 $ 2,576,544 $ 2,794,353
FROM NET REALIZED GAIN
Class A $ 8,041 $ 1,246 $ 24
Class T 448,257 136,882 5,310
Class B 74,885 22,913 767
Class C 10,453 35 -
Institutional Class 46,538 11,719 620
Total $ 588,174 $ 172,795 $ 6,721
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997 A
1999 31, 1998
CLASS A Shares sold 178,734 72,895 37,401
Issue in exchange for the - 52,153 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class A
Reinvestment of distributions 2,997 2,327 1,437
Shares redeemed (27,444) (68,581) (7,082)
Net increase (decrease) 154,287 58,794 31,756
CLASS T Shares sold 2,227,891 833,212 1,237,934
Issue in exchange for the - 1,639,675 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class T
Reinvestment of distributions 116,487 146,958 150,942
Shares redeemed (2,567,024) (1,651,570) (2,228,549)
Net increase (decrease) (222,646) 968,275 (839,673)
CLASS B Shares sold 224,051 412,030 162,293
Reinvestment of distributions 13,952 17,176 17,600
Shares redeemed (243,693) (142,402) (147,606)
Net increase (decrease) (5,690) 286,804 32,287
CLASS C Shares sold 84,091 123,360 1,185
Reinvestment of distributions 2,064 1,212 2
Shares redeemed (29,115) (20,180) -
Net increase (decrease) 57,040 104,392 1,187
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED YEAR ENDED NOVEMBER 30, 1997 A
1999 OCTOBER 31, 1998
CLASS A Shares sold $ 1,909,532 $ 774,852 $ 388,486
Issue in exchange for the - 554,907 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class A
Reinvestment of distributions 31,962 24,853 14,999
Shares redeemed (292,954) (732,634) (74,532)
Net increase (decrease) $ 1,648,540 $ 621,978 $ 328,953
CLASS T Shares sold $ 23,833,661 $ 8,684,653 $ 12,868,543
Issue in exchange for the - 17,446,147 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class T
Reinvestment of distributions 1,244,473 1,569,314 1,571,556
Shares redeemed (27,446,720) (17,602,042) (23,132,793)
Net increase (decrease) $ (2,368,586) $ 10,098,072 $ (8,692,694)
CLASS B Shares sold $ 2,390,126 $ 4,400,752 $ 1,686,065
Reinvestment of distributions 148,928 183,295 183,295
Shares redeemed (2,607,036) (1,517,988) (1,530,078)
Net increase (decrease) $ (67,982) $ 3,066,059 $ 339,282
CLASS C Shares sold $ 899,213 $ 1,314,301 $ 12,505
Reinvestment of distributions 22,058 12,987 25
Shares redeemed (311,990) (217,401) -
Net increase (decrease) $ 609,281 $ 1,109,887 $ 12,530
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
1999 31, 1998
INSTITUTIONAL CLASS Shares 129,165 344,786 221,521
sold
Issue in exchange for the - 41,426 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Institutional
Class
Reinvestment of distributions 4,188 3,754 5,385
Shares redeemed (78,719) (378,091) (271,323)
Net increase (decrease) 54,634 11,875 (44,417)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
1999 31, 1998
INSTITUTIONAL CLASS Shares $ 1,380,099 $ 3,651,862 $ 2,293,637
sold
Issue in exchange for the - 440,774 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Institutional
Class
Reinvestment of distributions 44,733 40,053 55,968
Shares redeemed (839,875) (4,030,847) (2,832,902)
Net increase (decrease) $ 584,957 $ 101,842 $ (483,297)
</TABLE>
8. MERGER INFORMATION.
On May 28, 1998, Class A, Class T, and Institutional Class of the fund
acquired all of the assets and assumed all of the liabilities of
Fidelity Advisor Short-Intermediate Municipal Income Fund Class A,
Class T, and Institutional Class, respectively. Each acquisition was
approved by the shareholders of each class of Fidelity Advisor
Short-Intermediate Municipal Income Fund on May 4, 1998. Based on the
opinion of fund counsel, the reorganization qualified as a tax-free
reorganization for federal income tax purposes with no gain or loss
recognized to the funds or their shareholders.
Class A's acquisition of Fidelity Advisor Short-Intermediate Class A
was accomplished by an exchange of 52,123 shares of Class A for the
54,832 shares then outstanding of Fidelity Advisor Short-Intermediate
Class A (each valued at $10.12). Class T's acquisition of Fidelity
Advisor Short-Intermediate Class T was accomplished by an exchange of
1,639,675 shares of Class T for the 1,722,226 shares then outstanding
of Fidelity Advisor Short-Intermediate Class T (each valued at
$10.13). Institutional Class' acquisition of Fidelity Advisor
Short-Intermediate Institutional Class was accomplished by an exchange
of 41,426 shares of Institutional Class for the 43,512 shares then
outstanding of Fidelity Advisor Short-Intermediate Institutional Class
(each valued at $10.13).
Fidelity Advisor Short-Intermediate Municipal Income Fund's net
assets, including $276,190 of unrealized appreciation, were combined
with the fund for total net assets after the acquisition of
$77,174,506.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith, Assistant Vice President
Norman U. Lind, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
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 Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
LTTE-SANN-0699 78048
1.704559.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
INTERMEDIATE MUNICIPAL INCOME FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME 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 total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.36% 5.75% 35.63% 88.99%
INCOME - INST CL
LB 1-17 Year Municipal Bond 1.77% 6.76% 39.71% n/a
Intermediate Municipal Debt 1.29% 5.83% 34.44% 93.13%
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 1-17 Year Municipal Bond Index
- - a market value-weighted index of investment-grade municipal bonds
with maturities between one and 17 years. To measure how Institutional
Class' performance stacked up against its peers, you can compare it to
the intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 135 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 5.75% 6.28% 6.57%
INCOME - INST CL
LB 1-17 Year Municipal Bond 6.76% 6.92% n/a
Intermediate Municipal Debt 5.83% 6.09% 6.80%
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 Int Muni Inc -CL I LB Municipal Bond
00089 LB015
1989/04/30 10000.00 10000.00
1989/05/31 10149.33 10207.70
1989/06/30 10260.72 10346.32
1989/07/31 10363.12 10487.13
1989/08/31 10329.55 10384.46
1989/09/30 10327.50 10353.52
1989/10/31 10410.33 10480.14
1989/11/30 10524.23 10663.55
1989/12/31 10619.09 10750.77
1990/01/31 10584.45 10699.92
1990/02/28 10678.44 10795.15
1990/03/31 10696.63 10798.39
1990/04/30 10586.64 10720.21
1990/05/31 10779.65 10954.23
1990/06/30 10868.90 11050.52
1990/07/31 11000.07 11212.96
1990/08/31 10936.11 11050.15
1990/09/30 10965.40 11056.45
1990/10/31 11088.03 11257.01
1990/11/30 11264.94 11483.39
1990/12/31 11295.34 11533.34
1991/01/31 11421.47 11688.12
1991/02/28 11525.45 11789.81
1991/03/31 11533.19 11794.05
1991/04/30 11637.75 11950.91
1991/05/31 11730.98 12057.16
1991/06/30 11738.10 12045.22
1991/07/31 11855.68 12191.93
1991/08/31 11950.41 12352.50
1991/09/30 12023.65 12513.33
1991/10/31 12152.77 12625.95
1991/11/30 12183.40 12661.17
1991/12/31 12384.72 12932.88
1992/01/31 12471.24 12962.37
1992/02/29 12485.55 12966.52
1992/03/31 12437.81 12971.32
1992/04/30 12524.80 13086.76
1992/05/31 12662.18 13240.79
1992/06/30 12828.35 13462.97
1992/07/31 13104.63 13866.59
1992/08/31 13007.74 13731.39
1992/09/30 13129.23 13821.20
1992/10/31 13039.57 13685.33
1992/11/30 13280.56 13930.44
1992/12/31 13286.60 14072.67
1993/01/31 13453.89 14236.33
1993/02/28 13816.87 14751.26
1993/03/31 13682.78 14595.34
1993/04/30 13781.60 14742.61
1993/05/31 13842.32 14825.46
1993/06/30 13991.55 15072.90
1993/07/31 14024.11 15092.64
1993/08/31 14272.38 15406.87
1993/09/30 14423.53 15582.36
1993/10/31 14454.04 15612.43
1993/11/30 14344.75 15474.88
1993/12/31 14606.87 15801.56
1994/01/31 14745.65 15982.01
1994/02/28 14367.04 15568.08
1994/03/31 13809.07 14934.15
1994/04/30 13934.17 15060.79
1994/05/31 14061.86 15191.37
1994/06/30 13963.79 15098.55
1994/07/31 14161.38 15375.30
1994/08/31 14217.89 15428.50
1994/09/30 14047.43 15202.01
1994/10/31 13850.84 14932.02
1994/11/30 13565.34 14662.05
1994/12/31 13813.59 14984.76
1995/01/31 14149.27 15413.03
1995/02/28 14511.05 15861.24
1995/03/31 14672.97 16043.48
1995/04/30 14671.95 16062.42
1995/05/31 15010.29 16574.97
1995/06/30 14932.74 16430.77
1995/07/31 15047.93 16586.53
1995/08/31 15239.64 16796.85
1995/09/30 15340.55 16903.17
1995/10/31 15507.52 17148.94
1995/11/30 15659.51 17433.44
1995/12/31 15798.81 17600.98
1996/01/31 15907.97 17733.87
1996/02/29 15859.62 17614.16
1996/03/31 15706.90 17389.05
1996/04/30 15660.35 17339.84
1996/05/31 15646.44 17332.91
1996/06/30 15785.97 17521.66
1996/07/31 15912.31 17681.11
1996/08/31 15914.26 17676.87
1996/09/30 16071.70 17924.34
1996/10/31 16230.84 18127.07
1996/11/30 16498.24 18458.79
1996/12/31 16454.59 18381.26
1997/01/31 16488.20 18416.01
1997/02/28 16627.57 18585.06
1997/03/31 16434.53 18337.33
1997/04/30 16561.47 18490.81
1997/05/31 16755.66 18768.91
1997/06/30 16916.40 18968.80
1997/07/31 17339.90 19494.24
1997/08/31 17192.69 19311.57
1997/09/30 17387.88 19540.80
1997/10/31 17470.85 19666.45
1997/11/30 17567.23 19782.09
1997/12/31 17783.09 20070.71
1998/01/31 17932.61 20277.84
1998/02/28 17925.32 20283.92
1998/03/31 17941.31 20301.77
1998/04/30 17872.22 20210.21
1998/05/31 18108.98 20530.14
1998/06/30 18174.25 20611.03
1998/07/31 18191.46 20662.76
1998/08/31 18446.67 20982.00
1998/09/30 18648.95 21243.44
1998/10/31 18628.56 21243.01
1998/11/30 18692.10 21317.57
1998/12/31 18723.91 21371.30
1999/01/31 18949.82 21625.40
1999/02/28 18852.02 21530.90
1999/03/31 18850.31 21560.82
1999/04/30 18899.08 21614.51
IMATRL PRASUN SHR__CHT 19990430 19990512 155520 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Institutional Class on April 30, 1989. As the chart shows, by April
30, 1999, the value of the investment would have grown to $18,899 - an
88.99% increase on the initial investment. For comparison, look at how
the Lehman Brothers Municipal Bond Index - a market value-weighted
index of investment-grade municipal bonds with maturities of one year
or more - did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 investment would have grown to
$21,615 - a 116.15% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.11% 4.55% 4.81% 4.85% 5.22% 4.45%
Capital returns -0.75% 2.18% 2.83% -0.19% 6.74% -8.62%
Total returns 1.36% 6.73% 7.64% 4.66% 11.96% -4.17%
</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.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.75(cents) 22.46(cents) 45.77(cents)
Annualized dividend rate 4.29% 4.24% 4.29%
30-day annualized yield 3.60% - -
30-day annualized 5.63% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.63 over the past one month, $10.68 over the past six months and
$10.68 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period.
It also helps you compare funds from different companies on an equal
basis. The tax equivalent yield shows what you would have to earn on a
taxable investment to equal the class' tax-free yield, if you're in
the 36% federal tax bracket, but does not reflect payment of the
federal alternative minimum tax, if applicable. If Fidelity had not
reimbursed certain class expenses, the yield and tax equivalent yield
would have been 3.45% and 5.39%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Municipal bonds outperformed
Treasuries during the six-month
period that ended April 30, 1999.
During that time, the Lehman Brothers
Municipal Bond Index - an index
of approximately 48,000
investment-grade, fixed-rate and
tax-exempt bonds - returned 1.75%.
In contrast, the Lehman Brothers
Aggregate Bond Index - a widely
followed measure of taxable bond
performance - gained 0.69%.
During the six-month period, the
ratio of municipal bond yields to
Treasury bond yields improved.
While Treasury yields rose during
the first quarter of the year,
municipal yields remained
relatively stable, due in part to an
improving supply and demand
environment. Municipal bond
issuance was off its torrid pace
experienced last year (which was
just shy of the record $292 billion
issued in 1993), while retail investor
demand strengthened in 1999,
helping municipal bonds
outperform Treasuries. Although the
municipal market managed to
produce marginal returns over the
past six months, bond market
sentiment turned bearish late in the
period as strong economic reports
indicated that the U.S. economy
continued to grow at brisk pace. The
strength of the domestic economy
combined with a perception of
improving overseas markets caused
investors to once again focus on the
threat of inflation and the prospects of
higher interest rates.
(photograph of Norm Lind)
An interview with Norm Lind, Portfolio Manager of Fidelity Advisor
Intermediate Municipal Income Fund
Q. HOW DID THE FUND PERFORM, NORM?
A. For the six-month period ended April 30, 1999, the fund's
Institutional Class shares had a total return of 1.36%. To get a sense
of how the fund did relative to its competitors, the intermediate
municipal debt funds average returned 1.29% for the same six-month
period, according to Lipper Inc. Additionally, the Lehman Brothers
1-17 Year Municipal Bond Index - which tracks the types of securities
in which the fund invests - returned 1.77% for the same six-month
period. For the 12-month period that ended April 30, 1999, the fund's
Institutional Class shares had a total return of 5.75%. That compared
to the intermediate municipal debt funds average's 5.83% return and
the Lehman Brothers index's 6.76% return for the same 12-month period.
Q. MUNICIPAL BONDS - WHILE OUTPACING THEIR TREASURY COUNTERPARTS - HAD
A FAIRLY TOUGH GO OF IT OVER THE PAST SIX MONTHS. WERE THERE ANY
BRIGHT SPOTS FOR THE FUND GIVEN THAT DIFFICULT BACKDROP?
A. The student loan bond area was one segment of the municipal bond
market that held up relatively well. These bonds tend to pay higher
levels of income than comparably rated bonds from other sectors
because they carry the risk of being prepaid before maturity.
Bondholders generally dislike prepayment because it potentially forces
them to reinvest at lower interest rates. The attractive level of
income that student loan bonds paid, coupled with the fact that there
was a diminished likelihood of prepayment due to rising interest
rates, helped the bonds. I'd also say that the fund benefited from its
emphasis on relatively high-quality bonds - rated A, Aa or Aaa -
because they outpaced lower-quality Baa-rated bonds during the period.
Q. CAN YOU EXPLAIN HOW PROBLEMS WITH A MAJOR HOSPITAL SYSTEM IN
PHILADELPHIA CAUSED MANY BAA-RATED SECURITIES TO FALTER?
A. Sure. When Allegheny Health Education and Research Foundation
(AHERF), - a hospital system in Philadelphia, that was at one time
Baa-rated - declared bankruptcy, the event cast a pall on the
Baa-rated segment of the market as a whole. In response to an increase
in the perceived risk of these securities, investors pushed Baa-rated
bond yields higher, and their prices lower. While the fund didn't own
any bonds issued by AHERF, its stake in Baa-rated bonds - which stood
at 11% of investments at the end of the period - performed poorly.
Q. BECAUSE OF THE STATE'S BETTER-THAN-AVERAGE ECONOMIC GROWTH, BONDS
ISSUED IN CALIFORNIA PERFORMED RELATIVELY WELL COMPARED WITH BONDS
FROM OTHER STATES. DID THE FUND BENEFIT FROM THAT DEVELOPMENT DURING
THE PAST SIX MONTHS?
A. Yes, it did, but the fund's relatively light stake in bonds issued
in California - 12.3% of investments at the end of the period - ended
up being a source of disappointment during the past six months. I had
reduced the fund's stake in California securities last year because I
felt their prices already reflected most of the economic improvement
that had or would take place, and the bonds had reached their upside
limit as a result. As it turned out, however, California bonds
generally continued to appreciate in response to further economic
expansion in that state.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. Supply and demand conditions - which can have a dramatic effect on
the municipal market's performance - appear favorable. In contrast to
last year, there has been a relatively light supply of municipal bonds
issued so far in 1999. In 1998, falling interest rates prompted a wave
of municipal bond refundings as issuers looked to refinance their debt
at lower interest rates. Those refundings made up more than one-third
of total supply of municipal bonds issued last year. So far this year,
however, refunding issuance has slowed dramatically as interest rates
rose. Meanwhile, demand has been firm. However, the direction of
interest rates will be the primary factor determining municipal bond
performance.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to provide high current
income exempt from federal
income tax by investing
normally in
investment-grade municipal
debt securities
START DATE: September 19,
1985
SIZE: as of April 30, 1999,
more than $78 million
MANAGER: Norm Lind, since
1998; joined Fidelity in
1986
NORM LIND ON DEVELOPMENTS
IN TECHNOLOGY AND THEIR EFFECT
ON MUNICIPAL-BOND ISSUERS:
"I'm currently keeping an eye on
two technology-related
developments and their
potential effect on
municipal-bond issuers. How
individual issuers meet these
challenges could have a dramatic
impact on their fiscal health and,
ultimately, their credit
worthiness. The first is potential
problems stemming from the
so-called Year 2000 glitch, or `Y2K.'
The issue is whether problems
that arise from Y2K will seriously
compromise the operations of a
municipal issuer. I'll also be
monitoring the extent to which
municipal issuers adequately
budget for Y2K fixes.
"The second technology-related
issue I'm watching is the rise of
the Internet. As more and more
people shop for goods and services
online, it's uncertain to what
extent states and municipalities
will lose out on sales tax revenue.
Many government entities across
the nation are wrestling with
whether they will be able to tax
Internet-based sales that emanate
from their states or
municipalities. As yet, there's no
definitive estimate of the
magnitude of potential problems
stemming from this issue.
Nonetheless, I'm factoring it in
when I evaluate the attractiveness
of issuers, especially those that
are heavily reliant on sales-tax
revenues."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE HOLDINGS 6 MONTHS AGO
California 12.3 13.1
Texas 11.0 5.2
New York 8.6 8.3
Massachusetts 7.6 6.6
Washington 7.4 5.5
TOP FIVE SECTORS AS OF APRIL
30, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE SECTORS 6 MONTHS AGO
General Obligations 24.8 20.9
Education 20.9 21.6
Electric Utilities 17.6 16.2
Health Care 13.9 14.6
Housing 5.1 5.2
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 1999
6 MONTHS AGO
Years 7.6 7.3
</TABLE>
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 APRIL 30, 1999
6 MONTHS AGO
Years 5.2 5.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 1999
Aaa 48.3%
Aa, A 38.3%
Baa 11.0%
Short-term
investments 2.4%
Row: 1, Col: 1, Value: 48.3
Row: 1, Col: 2, Value: 38.3
Row: 1, Col: 3, Value: 11.0
Row: 1, Col: 4, Value: 2.4
AS OF OCTOBER 31, 1998
Aaa 46.1%
Aa, A 34.5%
Baa 12.0%
Short-term
investments 7.4%
Row: 1, Col: 1, Value: 46.1
Row: 1, Col: 2, Value: 34.5
Row: 1, Col: 3, Value: 12.0
Row: 1, Col: 4, Value: 7.4
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P (registered
trademark) RATINGS. AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALASKA - 0.4%
Alaska Student Ln. Corp. Aaa $ 300,000 $ 309,828
Student Ln. Rev. Series A,
5% 7/1/03 (AMBAC Insured) (e)
ARIZONA - 1.3%
Maricopa County Cmnty. Aa1 1,000,000 1,050,110
College District Series B,
5.25% 7/1/10
ARKANSAS - 1.1%
Arkansas Gen. Oblig. (Cap. Aa3 1,000,000 889,710
Appreciation) Series A, 0%
6/1/02
CALIFORNIA - 12.3%
California Ed. Facilities AAA 225,000 233,890
Auth. Rev. Rfdg. (Chapman
Univ.) 5.375% 10/1/16
(Connie Lee Insured)
California Health Facilities A+ 2,275,000 2,414,048
Fing. Auth. Rev. (Casa de
Las Campanas) Series A,
5.375% 8/1/09
California Hsg. Fin. Agcy. Aaa 1,000,000 1,037,940
Rev. (Home Mtg.) Series R,
5.35% 8/1/07 (MBIA Insured)
(e)
California Poll. Cont. Fing. Baa2 500,000 532,965
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc.) Series
A, 7.15% 2/1/11 (e)
California Rural Home Mtg. Aaa 2,000,000 2,023,260
Fin. Auth. Lease Rev. (Rural
Lease Purp.) Series A, 4.45%
8/1/01 (MBIA Insured)
Los Angeles County Ctfs. of Baa1 970,000 765,825
Prtn. (Cap. Appreciation)
(Disney Parking Proj.) 0%
9/1/04
Sacramento Muni. Util. Aaa 1,000,000 1,073,240
District Elec. Rev. 5.45%
11/15/08 (FGIC Insured)
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/02 BBB- 1,000,000 1,062,030
6.5% 7/1/08 BBB- 300,000 336,594
San Bernardino County Rfdg. A3 500,000 526,685
Ctfs. of Prtn. (Med. Ctr.
Fing. Proj.) 5.25% 8/1/04
10,006,477
COLORADO - 1.2%
Arapaho County Cap. Impt. Aaa 3,620,000 581,444
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/2005 @ 20.8626) (f)
Colorado Health Facilities Baa2 400,000 411,828
Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.25%
2/1/04
993,272
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DISTRICT OF COLUMBIA - 1.9%
District of Columbia Gen. Aaa $ 1,000,000 $ 1,063,930
Oblig. Rfdg. Series B 1,
5.4% 6/1/06 (AMBAC Insured)
District of Columbia Redev. Baa 500,000 508,500
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.
5.4% 11/1/00
1,572,430
FLORIDA - 1.9%
Broward County Resource A3 460,000 483,538
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 500,000 517,665
Rfdg. (Miami Int'l. Arpt.)
Series A, 5.25% 10/1/01 (FSA
Insured) (e)
Jacksonville Port Auth. Rev. Aaa 500,000 546,570
Rfdg. 5.75% 11/1/09 (MBIA
Insured) (e)
1,547,773
ILLINOIS - 2.0%
Chicago Midway Arpt. Rev. Aaa 300,000 327,957
Series B, 6% 1/1/09 (MBIA
Insured) (e)
Metro. Pier & Exposition
Auth. Dedicated Tax Rev.:
(Cap. Appreciation) Series A:
0% 6/15/09 (FGIC Insured) Aaa 435,000 276,016
0% 6/15/09 (FGIC Insured) Aaa 65,000 41,121
(Escrowed to Maturity) (f)
0% 6/15/00 (AMBAC Insured) Aaa 1,000,000 962,920
1,608,014
IOWA - 1.9%
Iowa Student Ln. Liquidity Aa1 1,500,000 1,562,325
Corp. Student Ln. Rev.
Series A, 6.35% 3/1/01
KANSAS - 4.0%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity -
Leavenworth Health Svc. Co.):
5.25% 12/1/09 (MBIA Insured) Aaa 1,385,000 1,463,156
5.25% 12/1/11 (MBIA Insured) Aaa 1,750,000 1,825,705
3,288,861
LOUISIANA - 2.3%
Louisiana Pub. Facilities Aaa 1,825,000 1,892,799
Auth. Student Ln. Rev. Rfdg.
Series A 1, 6.2% 3/1/01
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MAINE - 1.2%
Maine Edl. Ln. Marketing Aaa $ 1,000,000 $ 1,007,910
Corp. Student Ln. Rev.
Series A 4, 5.45% 11/1/99 (e)
MASSACHUSETTS - 7.6%
Boston Gen. Oblig. Rev. Aaa 250,000 268,033
(Boston City Hosp.) Series
A, 7.625% 2/15/21
(Pre-Refunded to 8/15/2000 @
101.666) (f)
Massachusetts Gen. Oblig.
Rfdg.:
Series A, 5.5% 2/1/11 Aa3 250,000 265,670
Series C, 4.7% 8/1/02 Aa3 1,000,000 1,029,900
Massachusetts Health & Edl. Aaa 700,000 707,420
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care)
Series B, 4.55% 1/1/21 (MBIA
Insured), LOC BankBoston NA
Massachusetts Ind. Fin. Agcy. A1 1,600,000 1,406,480
Rev. (Cap. Appreciation)
(Massachusetts Biomedical)
Series A 1, 0% 8/1/02
Massachusetts Tpk. Auth. Aaa 550,000 554,494
Series A, 5.55% 1/1/17 (MBIA
Insured)
New England Ed. Ln. Marketing A3 1,950,000 1,986,543
Corp. Student Ln. Rev. Rfdg.
Series B, 5.4% 6/1/00
6,218,540
MICHIGAN - 2.6%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(McLaren Health Care Corp.) A1 2,000,000 1,928,620
Series A, 5% 6/1/19
(Mercy Health Services) Aa3 200,000 216,688
Series S, 5.75% 8/15/05
2,145,308
MINNESOTA - 0.5%
Minneapolis Gen. Oblig. (Cap. Aaa 200,000 175,572
Appreciation) Series B, 0%
12/1/02
Minnesota Higher Ed. Aa3 200,000 208,320
Facilities Auth. Rev.
(MacAlester College) Series
4 C, 5.5% 3/1/12
383,892
MONTANA - 1.5%
Montana Higher Ed. Student A 1,220,000 1,239,105
Assistance Corp. Student Ln.
Rev. Series B, 6.6% 12/1/99
(e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEVADA - 0.7%
Clark County School District Aaa $ 500,000 $ 559,890
Series A, 9.75% 6/1/01 (MBIA
Insured)
NEW MEXICO - 4.2%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/00 (AMBAC Insured) Aaa 250,000 257,360
(e)
6.75% 7/1/09 (AMBAC Insured) Aaa 450,000 527,999
(e)
New Mexico Edl. Assistance Aaa 1,900,000 2,019,928
Foundation Student Ln. Rev.
Series IV A2, 6.65% 3/1/07
Rio Rancho Wtr. & Wastewtr. Aaa 500,000 588,895
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
3,394,182
NEW YORK - 8.6%
Buffalo Gen. Oblig. Rfdg. Aaa 1,025,000 1,076,363
Series C, 5.25% 12/1/13
(FGIC Insured)
New York City Gen. Oblig. A3 1,000,000 1,059,170
Series H, 5.5% 8/1/12
New York State Dorm. Auth.
Rev.:
(Consolidated City Univ. Sys.):
Series A, 5.75% 7/1/13 Baa1 500,000 545,575
Series C, 7.5% 7/1/10 Baa1 500,000 592,935
Rfdg. (State Univ. Edl. A3 500,000 554,350
Facilities) Series A, 6.5%
5/15/04
New York State Envir. Aa2 500,000 485,715
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev. Series
F, 4.875% 6/15/18
New York State Local Govt.
Assistance Corp.:
(Cap. Appreciation) Series A, A3 1,000,000 675,660
0% 4/1/08
Rfdg. Series A, 5.5% 4/1/04 Aaa 100,000 106,814
(AMBAC Insured)
New York State Thruway Auth. A3 500,000 550,060
Hwy. & Bridge Trust Fund
Series A, 5.8% 4/1/09
(Pre-Refunded to 4/1/2004 @
102) (f)
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge):
5.4% 4/1/03 Baa1 250,000 262,623
6% 4/1/03 Baa1 200,000 214,024
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York State Urban Dev.
Corp. Rev.:
(Sports Facility Assistance Aaa $ 500,000 $ 534,570
Prog.) Series A, 5.5% 4/1/10
(MBIA Insured)
Rfdg. (Correctional Aaa 300,000 319,695
Facilities) 5.625% 1/1/07
(AMBAC Insured)
6,977,554
NORTH CAROLINA - 4.6%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series B, 6% 1/1/06 Baa1 1,315,000 1,401,488
Series C, 5.5% 1/1/07 Baa1 700,000 731,073
Series A, 5.625% 1/1/03 Baa1 500,000 521,300
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:
5.75% 1/1/02 A3 750,000 782,325
5.9% 1/1/03 A3 250,000 264,943
3,701,129
OHIO - 1.0%
Ohio Bldg. Auth. Facilities Aaa 500,000 540,730
(Adult Correctional) Series
A, 5.95% 10/1/14 (MBIA
Insured)
Ohio Tpk. Commission Tpk. Aaa 250,000 269,890
Rev. Series A, 5.6% 2/15/12
(MBIA Insured)
810,620
OREGON - 1.3%
Clackamas County School Aaa 1,000,000 1,042,440
District #12 5.25% 6/1/13
(FGIC Insured)
PENNSYLVANIA - 4.4%
Pennsylvania Convention Ctr. Baa 110,000 110,634
Auth. Rev. Rfdg. Series A,
5.75% 9/1/99
Pennsylvania Higher Edl. AA- 1,270,000 1,383,983
Facilities Auth. College &
Univ. Rev. Rfdg. (RIDC
Reg'l. Growth -Carnegie
Mellon Univ. Proj.) 6%
11/1/04
Pennsylvania Hsg. Fin. Agcy. Aa3 1,000,000 1,056,630
Rfdg. (Residential Dev.
Section 8) Series A, 7%
7/1/01
Philadelphia Gas Works Rev. Aaa 1,000,000 1,062,940
Series A, 5.25% 7/1/05 (FSA
Insured)
3,614,187
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RHODE ISLAND - 1.3%
Rhode Island Student Ln. A $ 1,000,000 $ 1,034,740
Auth. Student Ln. Rev. Rfdg.
Series A, 6.55% 12/1/00
SOUTH CAROLINA - 2.9%
South Carolina Ed. Assistance
Auth. Student Ln. Rev. Rfdg.:
(Sr. Lien) Series A 2, 5.4% AAA 1,250,000 1,292,063
9/1/02
Series B, 5.7% 9/1/05 (e) A 1,000,000 1,056,180
2,348,243
TENNESSEE - 1.5%
Memphis-Shelby County Arpt. Aaa 275,000 281,776
Auth. Arpt. Rev. Rfdg.
Series A, 5.25% 2/15/01
(MBIA Insured) (e)
Montgomery County Health Edl. Baa2 1,000,000 954,400
& Hsg. Facilities Board
Hosp.Rev. Rfdg. & Impt.
(Clarksville Reg'l. Health
Sys.) 5.375% 1/1/28
1,236,176
TEXAS - 11.0%
Austin Independent School Aaa 500,000 548,435
District (School Bldg.)
8.125% 8/1/01 (Escrowed to
Maturity) (f)
Brazos Higher Ed. Auth., Inc. Aaa 435,000 455,384
Student Ln. Rev. Rfdg.
Series A 1, 6.05% 12/1/01 (e)
Deer Park Independent School Aaa 200,000 172,144
District Rfdg. 0% 2/15/03
Harris County Gen. Oblig. Aaa 3,000,000 2,642,394
(Cap. Appreciation) (Toll
Road Tax) 0% 8/15/02 (MBIA
Insured)
Hurst Euless Bedford Aaa 1,000,000 556,650
Independent School District
Rfdg. (Cap. Appreciation) 0%
8/15/11
Irving Independent School Aaa 250,000 243,623
District (Cap. Appreciation)
0% 2/15/00
Laredo Gen. Oblig. Rfdg. Aaa 1,000,000 1,031,360
5.125% 8/15/12 (FGIC
Insured)
Northside Independent School Aaa 500,000 518,520
District (School Bldg.)
8.375% 2/1/00
San Antonio Gen. Oblig.:
Rfdg. 5.5% 8/1/02 Aa2 125,000 131,566
Series 2000, 5% 2/1/09 (b) Aa2 1,255,000 1,290,404
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TEXAS - CONTINUED
Texas Pub. Fin. Auth. Bldg. Aaa $ 1,000,000 $ 1,130,450
Rev. Rfdg. (Texas Technical
College) 6.25% 8/1/09 (MBIA
Insured)
Univ. of Texas Permanent Aaa 250,000 259,348
Univ. Fund Rfdg. 5% 7/1/10
8,980,278
UTAH - 3.4%
Intermountain Pwr. Agcy.:
(Cap. Appreciation) Series A, Aaa 2,860,000 2,102,844
0% 7/1/06 (MBIA Insured)
Rfdg.:
(Cap. Appreciation) Series B, Aaa 500,000 479,860
0% 7/1/00 (MBIA Insured)
Series D, 5% 7/1/21 (MBIA Aaa 200,000 194,768
Insured)
2,777,472
VIRGINIA - 1.6%
Henrico County Wtr. & Swr. Aa2 1,250,000 1,303,900
Rev. Rfdg. 5.25% 5/1/14
WASHINGTON - 7.4%
Grant County Pub. Util. Aaa 1,715,000 1,720,848
District No. 2 (Priest
Rapids Hydro Elec.) Series
B, 5.375% 1/1/16 (MBIA
Insured) (b)(e)
King County Gen. Oblig. Aa1 1,000,000 1,107,250
Series B, 5.9% 12/1/14
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series C, 7.5% 7/1/03 Aa1 525,000 567,483
(Pre-Refunded to 1/1/2001 @
102) (f)
5.4% 7/1/12 Aa1 2,000,000 2,107,420
Washington Pub. Pwr. Supply Aa1 500,000 523,115
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5.1% 7/1/07
6,026,116
TOTAL MUNICIPAL BONDS 79,523,281
(Cost $77,105,939)
CASH EQUIVALENTS - 2.4%
SHARES VALUE (NOTE 1)
Municipal Central Cash Fund 1,960,755 $ 1,960,755
(c)(d) (Cost $1,960,755)
TOTAL INVESTMENT IN $ 81,484,036
SECURITIES - 100%
(Cost $79,066,694)
</TABLE>
LEGEND
(a) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(d) At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.54%. The yield refers to the income earned by
investing in the fund over the seven-day period, expressed as an
annual percentage.
(e) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(f) Security collateralized by an amount sufficient to pay interest
and principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 78.7% AAA, AA, A 71.0%
Baa 9.3% BBB 11.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The distribution of municipal securities by revenue source, as a
percentage of total value of investments in securities, is as follows:
General Obligations 24.8%
Education 20.9
Electric Utilities 17.6
Health Care 13.9
Housing 5.1
Others (individually less 17.7
than 5%)
TOTAL 100.0%
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $79,066,694. Net unrealized appreciation
aggregated $2,417,342, of which $2,464,705 related to appreciated
investment securities and $47,363 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 81,484,036
value (cost $79,066,694) -
See accompanying schedule
Receivable for fund shares 124,252
sold
Interest receivable 1,100,748
Other receivables 911
TOTAL ASSETS 82,709,947
LIABILITIES
Payable to custodian bank $ 8,355
Payable for investments 495,713
purchased Regular delivery
Delayed delivery 2,975,265
Payable for fund shares 121,302
redeemed
Distributions payable 80,931
Accrued management fee 25,739
Distribution fees payable 21,545
Other payables and accrued 25,504
expenses
TOTAL LIABILITIES 3,754,354
NET ASSETS $ 78,955,593
Net Assets consist of:
Paid in capital $ 76,452,274
Accumulated undistributed net 85,977
realized gain (loss) on
investments
Net unrealized appreciation 2,417,342
(depreciation) on investments
NET ASSETS $ 78,955,593
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $10.61
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,702,562 (divided by)
254,760 shares)
Maximum offering price per $11.02
share (100/96.25 of $10.61)
CLASS T: NET ASSET VALUE and $10.61
redemption price per share
($56,809,048 (divided by)
5,355,073 shares)
Maximum offering price per $10.91
share (100/97.25 of $10.61)
CLASS B: NET ASSET VALUE and $10.60
offering price per share
($10,906,091 (divided by)
1,028,703 shares) A
CLASS C: NET ASSET VALUE and $10.61
offering price per share
($1,725,350 (divided by)
162,619 shares) A
INSTITUTIONAL CLASS: NET $10.61
ASSET VALUE, offering price
and redemption price per
share ($6,812,542 (divided
by) 642,252 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INTEREST INCOME $ 1,945,144
EXPENSES
Management fee $ 151,245
Transfer agent fees 55,062
Distribution fees 128,944
Accounting fees and expenses 30,977
Non-interested trustees' 143
compensation
Custodian fees and expenses 2,846
Registration fees 53,214
Audit 26,546
Legal 3,263
Reports to shareholders 6,590
Miscellaneous 89
Total expenses before 458,919
reductions
Expense reductions (69,767) 389,152
NET INTEREST INCOME 1,555,992
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 116,772
Futures contracts (46,201) 70,571
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (722,637)
Futures contracts 38,839 (683,798)
NET GAIN (LOSS) (613,227)
NET INCREASE (DECREASE) IN $ 942,765
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
1999 (UNAUDITED) 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 1,555,992 $ 2,576,544 $ 2,794,353
Net realized gain (loss) 70,571 831,999 875,029
Change in net unrealized (683,798) 795,349 192,183
appreciation (depreciation)
NET INCREASE (DECREASE) IN 942,765 4,203,892 3,861,565
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,555,992) (2,576,544) (2,794,353)
From net interest income
From net realized gain (588,174) (172,795) (6,721)
TOTAL DISTRIBUTIONS (2,144,166) (2,749,339) (2,801,074)
Share transactions - net 406,210 14,997,838 (8,495,226)
increase (decrease)
TOTAL INCREASE (DECREASE) (795,191) 16,452,391 (7,434,735)
IN NET ASSETS
NET ASSETS
Beginning of period 79,750,784 63,298,393 70,733,128
End of period $ 78,955,593 $ 79,750,784 $ 63,298,393
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED) 1998 H 1997 G 1996 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.600 $ 10.410 $ 10.160
period
Income from Investment
Operations
Net interest income .216 .411 .459 .113
Net realized and unrealized (.080) .200 .191 .250
gain (loss)
Total from investment .136 .611 .650 .363
operations
Less Distributions
From net interest income (.216) (.411) (.459) (.113)
From net realized gain (.080) (.030) (.001) -
Total distributions (.296) (.441) (.460) (.113)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.600 $ 10.410
TOTAL RETURN B, C 1.28% 5.89% 6.42% 3.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,703 $ 1,082 $ 442 $ 103
(000 omitted)
Ratio of expenses to average .86% A, E .90% A, E .90% E .90% A, E
net assets
Ratio of net interest income 4.08% A 4.19% A 4.37% 4.60% A
to average net assets
Portfolio turnover rate 11% A 26% A, F 18% 35%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G YEAR ENDED NOVEMBER 30
H ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30,
1999
(UNAUDITED) 1998 F 1997 G 1996 G 1995 G 1994 G 1993 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 10.460 $ 11.080
period
Income from Investment
Operations
Net interest income .214 .407 .449 .461 .451 .455 .508
Net realized and unrealized (.080) .210 .181 .030 .980 (1.040) .260
gain (loss)
Total from investment .134 .617 .630 .491 1.431 (.585) .768
operations
Less Distributions
From net interest income (.214) (.407) (.449) (.461) (.451) (.455) (.508)
From net realized gain (.080) (.030) (.001) - - - (.880)
In excess of net realized gain - - - - - (.020) -
Total distributions (.294) (.437) (.450) (.461) (.451) (.475) (1.388)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 10.460
TOTAL RETURN B, C 1.26% 5.94% 6.21% 4.89% 15.49% (5.78)% 7.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 56,809 $ 60,070 $ 48,830 $ 56,729 $ 62,852 $ 57,382 $ 39,800
(000 omitted)
Ratio of expenses to average .90% A, D .95% A, D 1.00% D 1.00% D .94% D .90% D .90% D
net assets
Ratio of net interest income 4.05% A 4.15% A 4.32% 4.42% 4.56% 4.49% 4.76%
to average net assets
Portfolio turnover rate 11% A 26% A, E 18% 35% 53% 53% 46%
</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 FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
F ELEVEN MONTHS ENDED OCTOBER 31.
G YEAR ENDED NOVEMBER 30.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED) 1998 G 1997 H 1996 H 1995 H 1994 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 9.890
period
Income from Investment
Operations
Net interest income .177 .339 .382 .394 .373 .155
Net realized and unrealized (.080) .200 .181 .030 .980 (.490)
gain (loss)
Total from investment .097 .539 .563 .424 1.353 (.335)
operations
Less Distributions
From net interest income (.177) (.339) (.382) (.394) (.373) (.155)
From net realized gain (.080) (.030) (.001) - - -
Total distributions (.257) (.369) (.383) (.394) (.373) (.155)
Net asset value, end of period $ 10.600 $ 10.760 $ 10.590 $ 10.410 $ 10.380 $ 9.400
TOTAL RETURN B, C .91% 5.17% 5.54% 4.21% 14.60% (3.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,906 $ 11,134 $ 7,917 $ 7,445 $ 6,226 $ 1,682
(000 omitted)
Ratio of expenses to average 1.61% A, E 1.65% A, E 1.65% E 1.66% E 1.68% E 1.65% A, E
net assets
Ratio of net interest income 3.34% A 3.45% A 3.67% 3.76% 3.71% 3.74% A
to average net assets
Portfolio turnover rate 11% A 26% A, F 18% 35% 53% 53%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994.
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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G ELEVEN MONTHS ENDED OCTOBER 31.
H YEAR ENDED NOVEMBER 30.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED) 1998 G 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.550
period
Income from Investment
Operations
Net interest income .171 .328 .027
Net realized and unrealized (.080) .210 .040
gain (loss)
Total from investment .091 .538 .067
operations
Less Distributions
From net interest income (.171) (.328) (.027)
From net realized gain (.080) (.030) -
Total distributions (.251) (.358) (.027)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.590
TOTAL RETURN B, C .86% 5.16% .63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,725 $ 1,137 $ 13
(000 omitted)
Ratio of expenses to average 1.71% A, E 1.75% A, E 1.75% A, E
net assets
Ratio of net interest income 3.23% A 3.29% A 3.33% A
to average net assets
Portfolio turnover rate 11% A 26% A, F 18%
</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 CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO NOVEMBER 30, 1997.
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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G ELEVEN MONTHS ENDED OCTOBER 31.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30,
INSTITUTIONAL CLASS 1999
(UNAUDITED) 1998 G 1997 H 1996 H 1995 H 1994 H 1993 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410 $ 10.460 $ 11.080
period
Income from Investment
Operations
Net interest income .225 .427 .475 .487 .477 .481 .536
Net realized and unrealized (.080) .210 .181 .050 .950 (1.030) .260
gain (loss)
Total from investment .145 .637 .656 .537 1.427 (.549) .796
operations
Less Distributions
From net interest income (.225) (.427) (.475) (.487) (.477) (.481) (.536)
From net realized gain (.080) (.030) (.001) - - - (.880)
In excess of net realized gain - - - - - (.020) -
Total distributions (.305) (.457) (.476) (.487) (.477) (.501) (1.416)
Net asset value, end of period $ 10.610 $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410 $ 10.460
TOTAL RETURN B, C 1.36% 6.14% 6.48% 5.36% 15.44% (5.43)% 8.01%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,813 $ 6,328 $ 6,098 $ 6,455 $ 11,085 $ 11,702 $ 15,076
(000 omitted)
Ratio of expenses to average .71% A, D .75% A, D .75% D .75% D .70% D .65% D .65% D
net assets
Ratio of expenses to average .71% A .75% A .75% .74% E .70% .65% .65%
net assets after expense
reductions
Ratio of net interest income 4.25% A 4.36% A 4.57% 4.68% 4.96% 4.75% 5.01%
to average net assets
Portfolio turnover rate 11% A 26% A, F 18% 35% 53% 53% 46%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
F THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN
THE MERGER.
G ELEVEN MONTHS ENDED OCTOBER 31.
H YEAR ENDED NOVEMBER 30.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Municipal Income Fund (the fund) is a
fund of Fidelity Advisor Series II (the trust) (formerly a fund of
Advisor Series VI) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Interest income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. 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 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."
INTEREST INCOME. Interest income, which includes amortization of
premium and 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 interest 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 futures transactions and losses deferred due to
futures. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the fund may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by Fidelity
Investments Money Management, Inc. (FIMM), an affiliate of Fidelity
Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other
accounts managed by FMR and its affiliates. The Cash Fund seeks
preservation of capital, liquidity, and current income by investing in
high-quality, short-term municipal securities of various states and
municipalities. Income distributions from the Cash Fund are declared
daily and paid monthly from net interest income. Income distributions
earned by the fund are recorded as interest income in the accompanying
financial statements.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities, if the counterparty does not perform under the contract,
or if the issuer does not issue the securities due to political,
economic, or other factors.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
Losses may arise from changes in the value of the underlying
instruments or if the counterparties do not perform under the
contracts' terms. Gains (losses) are realized upon the expiration or
closing of the futures contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $11,072,169 and $4,111,713, respectively.
The market value of futures contracts opened and closed during the
period amounted to $3,833,875 and $6,387,873, 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 .25%. 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 .38% of average net
assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement (effective January 1, 1999) with FIMM, a wholly
owned subsidiary of FMR. For its services, FIMM receives a fee from
FMR of 50% of the management fee payable to FMR. The fee is paid prior
to any voluntary expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .15%
CLASS T .25%
CLASS B .90%*
CLASS C 1.00%**
* .65% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
** .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A
SHAREHOLDER SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,241 $ 182
CLASS T 73,935 1,850
CLASS B 46,673 33,825
CLASS C 7,095 6,505
$ 128,944 $ 42,362
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 FDC RETAINED BY FDC
CLASS A $ 5,781 $ 1,198
CLASS T 12,210 5,933
CLASS B 6,484 6,484*
CLASS C 352 352*
$ 24,827 $ 13,967
* 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 AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, Class C, and Institutional Class
shares. UMB has entered into a sub-arrangement with Fidelity
Investments Institutional Operations Company, Inc. (FIIOC) with
respect to all classes of the fund to perform the transfer, dividend
disbursing, and shareholder servicing agent functions. FIIOC, an
affiliate of FMR, receives account fees and asset-based fees that vary
according to the account size and type of account of the shareholders
of the respective classes of the fund. All fees are paid to FIIOC by
UMB, which is reimbursed by each class for such payments. FIIOC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, each class paid the following
transfer agent fees:
AMOUNT % OF AVERAGE NET ASSETS
CLASS A $ 1,525 .19*
CLASS T 40,330 .14*
CLASS B 6,929 .13*
CLASS C 1,279 .18*
INSTITUTIONAL CLASS 4,999 .15*
$ 55,062
* ANNUALIZED
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC 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 EXPENSE LIMITATIONS REIMBURSEMENT
CLASS A .85% $ 1,253
CLASS T .90% 55,901
CLASS B 1.60% 6,784
CLASS C 1.70% 1,203
INSTITUTIONAL CLASS .70% 4,626
$ 69,767
Effective December 1, 1998, Class A, Class B, Class C, and
Institutional Class expense limitations were changed from .90%, 1.65%,
1.75%, and .75%; to .85%, 1.60%, 1.70%, and .70% of each class'
average net assets, respectively.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER 31, YEARS ENDED NOVEMBER 30,
1999 1998 1997 A
FROM NET INTEREST INCOME
Class A $ 33,399 $ 31,705 $ 15,189
Class T 1,187,250 2,019,325 2,195,690
Class B 171,563 267,333 274,703
Class C 22,724 15,339 26
Institutional Class 141,056 242,842 308,745
Total $ 1,555,992 $ 2,576,544 $ 2,794,353
FROM NET REALIZED GAIN
Class A $ 8,041 $ 1,246 $ 24
Class T 448,257 136,882 5,310
Class B 74,885 22,913 767
Class C 10,453 35 -
Institutional Class 46,538 11,719 620
Total $ 588,174 $ 172,795 $ 6,721
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997 A
1999 31, 1998
CLASS A Shares sold 178,734 72,895 37,401
Issue in exchange for the - 52,153 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class A
Reinvestment of distributions 2,997 2,327 1,437
Shares redeemed (27,444) (68,581) (7,082)
Net increase (decrease) 154,287 58,794 31,756
CLASS T Shares sold 2,227,891 833,212 1,237,934
Issue in exchange for the - 1,639,675 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class T
Reinvestment of distributions 116,487 146,958 150,942
Shares redeemed (2,567,024) (1,651,570) (2,228,549)
Net increase (decrease) (222,646) 968,275 (839,673)
CLASS B Shares sold 224,051 412,030 162,293
Reinvestment of distributions 13,952 17,176 17,600
Shares redeemed (243,693) (142,402) (147,606)
Net increase (decrease) (5,690) 286,804 32,287
CLASS C Shares sold 84,091 123,360 1,185
Reinvestment of distributions 2,064 1,212 2
Shares redeemed (29,115) (20,180) -
Net increase (decrease) 57,040 104,392 1,187
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED YEAR ENDED NOVEMBER 30, 1997 A
1999 OCTOBER 31, 1998
CLASS A Shares sold $ 1,909,532 $ 774,852 $ 388,486
Issue in exchange for the - 554,907 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class A
Reinvestment of distributions 31,962 24,853 14,999
Shares redeemed (292,954) (732,634) (74,532)
Net increase (decrease) $ 1,648,540 $ 621,978 $ 328,953
CLASS T Shares sold $ 23,833,661 $ 8,684,653 $ 12,868,543
Issue in exchange for the - 17,446,147 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Class T
Reinvestment of distributions 1,244,473 1,569,314 1,571,556
Shares redeemed (27,446,720) (17,602,042) (23,132,793)
Net increase (decrease) $ (2,368,586) $ 10,098,072 $ (8,692,694)
CLASS B Shares sold $ 2,390,126 $ 4,400,752 $ 1,686,065
Reinvestment of distributions 148,928 183,295 183,295
Shares redeemed (2,607,036) (1,517,988) (1,530,078)
Net increase (decrease) $ (67,982) $ 3,066,059 $ 339,282
CLASS C Shares sold $ 899,213 $ 1,314,301 $ 12,505
Reinvestment of distributions 22,058 12,987 25
Shares redeemed (311,990) (217,401) -
Net increase (decrease) $ 609,281 $ 1,109,887 $ 12,530
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
1999 31, 1998
INSTITUTIONAL CLASS Shares 129,165 344,786 221,521
sold
Issue in exchange for the - 41,426 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Institutional
Class
Reinvestment of distributions 4,188 3,754 5,385
Shares redeemed (78,719) (378,091) (271,323)
Net increase (decrease) 54,634 11,875 (44,417)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
SIX MONTHS ENDED APRIL 30, ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
1999 31, 1998
INSTITUTIONAL CLASS Shares $ 1,380,099 $ 3,651,862 $ 2,293,637
sold
Issue in exchange for the - 440,774 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Institutional
Class
Reinvestment of distributions 44,733 40,053 55,968
Shares redeemed (839,875) (4,030,847) (2,832,902)
Net increase (decrease) $ 584,957 $ 101,842 $ (483,297)
</TABLE>
8. MERGER INFORMATION.
On May 28, 1998, Class A, Class T, and Institutional Class of the fund
acquired all of the assets and assumed all of the liabilities of
Fidelity Advisor Short-Intermediate Municipal Income Fund Class A,
Class T, and Institutional Class, respectively. Each acquisition was
approved by the shareholders of each class of Fidelity Advisor
Short-Intermediate Municipal Income Fund on May 4, 1998. Based on the
opinion of fund counsel, the reorganization qualified as a tax-free
reorganization for federal income tax purposes with no gain or loss
recognized to the funds or their shareholders.
Class A's acquisition of Fidelity Advisor Short-Intermediate Class A
was accomplished by an exchange of 52,123 shares of Class A for the
54,832 shares then outstanding of Fidelity Advisor Short-Intermediate
Class A (each valued at $10.12). Class T's acquisition of Fidelity
Advisor Short-Intermediate Class T was accomplished by an exchange of
1,639,675 shares of Class T for the 1,722,226 shares then outstanding
of Fidelity Advisor Short-Intermediate Class T (each valued at
$10.13). Institutional Class' acquisition of Fidelity Advisor
Short-Intermediate Institutional Class was accomplished by an exchange
of 41,426 shares of Institutional Class for the 43,512 shares then
outstanding of Fidelity Advisor Short-Intermediate Institutional Class
(each valued at $10.13).
Fidelity Advisor Short-Intermediate Municipal Income Fund's net
assets, including $276,190 of unrealized appreciation, were combined
with the fund for total net assets after the acquisition of
$77,174,506.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith, Assistant Vice President
Norman U. Lind, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
*INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
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 Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
LTTEI-SANN-0699 78051
1.704563
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
SHORT FIXED-INCOME
FUND - CLASS A, CLASS T AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 15 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 18 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 19 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 32 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 40 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR SHORT FIXED-INCOME 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. Returns prior to September 3, 1996 are those of Class T, the
original class of the fund, and reflect Class T shares' 0.15% 12b-1
fee. If Fidelity had not reimbursed certain class expenses, the past
one year, past five years and past 10 years total returns and
dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 1.88% 5.38% 30.16% 91.95%
FIXED-INCOME - CL A
FIDELITY ADV SHORT 0.35% 3.79% 28.20% 89.07%
FIXED-INCOME - CL A (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 1.43% 6.03% 36.45% 100.92%
Short Investment Grade Debt 1.76% 5.05% 32.92% 94.68%
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 the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and three
years. To measure how Class A's performance stacked up against its
peers, you can compare it to the short investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 110 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 5.38% 5.41% 6.74%
FIXED-INCOME - CL A
FIDELITY ADV SHORT 3.79% 5.09% 6.58%
FIXED-INCOME - CL A (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 6.03% 6.41% 7.23%
Short Investment Grade Debt 5.05% 5.85% 6.88%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' cumulative return
and show you what would have happened if Class A shares had performed
at a constant rate each year.
$10,000 OVER 10 YEARS
FA Short Fixed-Inc -CL A LB 1-3 Year Govt/Corp
00263 LB013
1989/04/30 9850.00 10000.00
1989/05/31 9984.38 10142.08
1989/06/30 10146.87 10329.29
1989/07/31 10319.61 10483.23
1989/08/31 10245.97 10423.91
1989/09/30 10298.83 10485.26
1989/10/31 10452.21 10648.75
1989/11/30 10534.31 10743.95
1989/12/31 10589.64 10786.48
1990/01/31 10565.67 10797.77
1990/02/28 10608.38 10855.06
1990/03/31 10664.52 10889.49
1990/04/30 10674.25 10916.69
1990/05/31 10842.00 11085.39
1990/06/30 10925.88 11202.58
1990/07/31 11055.28 11338.29
1990/08/31 11037.58 11378.51
1990/09/30 11065.11 11463.87
1990/10/31 11036.87 11582.22
1990/11/30 11106.38 11695.36
1990/12/31 11211.16 11832.23
1991/01/31 11177.46 11939.29
1991/02/28 11293.42 12025.52
1991/03/31 11495.09 12112.91
1991/04/30 11662.41 12231.55
1991/05/31 11781.44 12307.94
1991/06/30 11839.03 12353.66
1991/07/31 11920.37 12462.17
1991/08/31 12120.47 12631.15
1991/09/30 12245.85 12767.15
1991/10/31 12382.55 12904.60
1991/11/30 12507.80 13035.10
1991/12/31 12710.23 13232.15
1992/01/31 12762.36 13218.55
1992/02/29 12848.40 13260.51
1992/03/31 12908.37 13257.62
1992/04/30 12992.10 13378.86
1992/05/31 13126.79 13504.15
1992/06/30 13247.44 13642.18
1992/07/31 13412.17 13802.19
1992/08/31 13526.07 13913.60
1992/09/30 13637.94 14045.26
1992/10/31 13551.39 13960.76
1992/11/30 13557.71 13941.09
1992/12/31 13676.96 14072.75
1993/01/31 13884.23 14222.92
1993/02/28 14053.15 14338.96
1993/03/31 14143.38 14385.54
1993/04/30 14214.96 14475.82
1993/05/31 14275.29 14442.84
1993/06/30 14418.63 14552.22
1993/07/31 14503.92 14585.49
1993/08/31 14646.21 14707.60
1993/09/30 14696.80 14755.06
1993/10/31 14788.30 14789.49
1993/11/30 14849.16 14793.83
1993/12/31 14975.45 14853.73
1994/01/31 15068.89 14948.35
1994/02/28 14945.92 14857.78
1994/03/31 14603.59 14781.39
1994/04/30 14526.60 14725.25
1994/05/31 14614.06 14745.22
1994/06/30 14499.05 14783.99
1994/07/31 14631.30 14918.55
1994/08/31 14750.08 14968.89
1994/09/30 14744.40 14935.62
1994/10/31 14755.65 14969.76
1994/11/30 14780.99 14906.97
1994/12/31 14470.91 14935.33
1995/01/31 14578.57 15140.48
1995/02/28 14759.21 15349.98
1995/03/31 14836.80 15437.08
1995/04/30 14957.59 15576.84
1995/05/31 15226.71 15846.52
1995/06/30 15298.41 15932.75
1995/07/31 15354.76 15996.41
1995/08/31 15445.96 16093.35
1995/09/30 15520.09 16172.92
1995/10/31 15648.24 16307.18
1995/11/30 15775.19 16447.52
1995/12/31 15891.22 16572.24
1996/01/31 16008.19 16714.03
1996/02/29 15952.80 16650.37
1996/03/31 15923.03 16638.21
1996/04/30 15924.97 16655.00
1996/05/31 15959.74 16693.48
1996/06/30 16076.47 16815.59
1996/07/31 16126.14 16880.99
1996/08/31 16176.47 16943.20
1996/09/30 16310.28 17098.30
1996/10/31 16484.15 17291.30
1996/11/30 16603.14 17420.93
1996/12/31 16547.05 17423.83
1997/01/31 16616.03 17508.03
1997/02/28 16660.77 17551.43
1997/03/31 16641.36 17537.83
1997/04/30 16780.27 17681.65
1997/05/31 16885.64 17805.20
1997/06/30 16989.55 17929.05
1997/07/31 17187.44 18128.13
1997/08/31 17201.74 18145.20
1997/09/30 17324.05 18284.96
1997/10/31 17413.63 18416.62
1997/11/30 17466.15 18462.92
1997/12/31 17576.51 18584.74
1998/01/31 17797.25 18764.14
1998/02/28 17817.28 18782.95
1998/03/31 17881.00 18856.16
1998/04/30 17942.89 18949.62
1998/05/31 18046.31 19052.63
1998/06/30 18125.07 19151.02
1998/07/31 18209.95 19240.14
1998/08/31 18333.55 19461.50
1998/09/30 18553.09 19723.37
1998/10/31 18558.75 19808.73
1998/11/30 18562.63 19804.97
1998/12/31 18647.49 19881.65
1999/01/31 18752.50 19966.72
1999/02/28 18693.53 19882.52
1999/03/31 18823.93 20023.36
1999/04/30 18907.39 20091.99
IMATRL PRASUN SHR__CHT 19990430 19990512 155715 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Class A on
April 30, 1989, and the current 1.50% sales charge was paid. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $18,907 - an 89.07% increase on the initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year
Government/Corporate Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $20,092 - a 100.92% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 2.73% 5.83% 6.28% 0.99%
Capital returns -0.85% 0.75% -0.64% 0.86%
Total returns 1.88% 6.58% 5.64% 1.85%
</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 APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.12(cents) 25.38(cents) 51.01(cents)
Annualized dividend rate 5.38% 5.49% 5.46%
30-day annualized yield 5.02% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $9.31 over the past one month, $9.32 over the past six months, and
$9.34 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class A's current 1.50% sales charge.
FIDELITY ADVISOR SHORT FIXED-INCOME 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. If Fidelity had not reimbursed certain
class expenses, the past 10 years total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 1.90% 5.41% 30.42% 92.35%
FIXED-INCOME - CL T
FIDELITY ADV SHORT 0.38% 3.83% 28.47% 89.46%
FIXED-INCOME - CL T (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 1.43% 6.03% 36.45% 100.92%
Short Investment Grade Debt 1.76% 5.05% 32.92% 94.68%
Funds Average
</TABLE>
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 the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and three
years. To measure how Class T's performance stacked up against its
peers, you can compare it to the short investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 110 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 5.41% 5.46% 6.76%
FIXED-INCOME - CL T
FIDELITY ADV SHORT 3.83% 5.14% 6.60%
FIXED-INCOME - CL T (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 6.03% 6.41% 7.23%
Short Investment Grade Debt 5.05% 5.85% 6.88%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class T shares' cumulative return
and show you what would have happened
if Class T shares had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Short Fixed-Inc -CL T LB 1-3 Year Govt/Corp
00173 LB013
1989/04/30 9850.00 10000.00
1989/05/31 9984.38 10142.08
1989/06/30 10146.87 10329.29
1989/07/31 10319.61 10483.23
1989/08/31 10245.97 10423.91
1989/09/30 10298.83 10485.26
1989/10/31 10452.21 10648.75
1989/11/30 10534.31 10743.95
1989/12/31 10589.64 10786.48
1990/01/31 10565.67 10797.77
1990/02/28 10608.38 10855.06
1990/03/31 10664.52 10889.49
1990/04/30 10674.25 10916.69
1990/05/31 10842.00 11085.39
1990/06/30 10925.88 11202.58
1990/07/31 11055.28 11338.29
1990/08/31 11037.58 11378.51
1990/09/30 11065.11 11463.87
1990/10/31 11036.87 11582.22
1990/11/30 11106.38 11695.36
1990/12/31 11211.16 11832.23
1991/01/31 11177.46 11939.29
1991/02/28 11293.42 12025.52
1991/03/31 11495.09 12112.91
1991/04/30 11662.41 12231.55
1991/05/31 11781.44 12307.94
1991/06/30 11839.03 12353.66
1991/07/31 11920.37 12462.17
1991/08/31 12120.47 12631.15
1991/09/30 12245.85 12767.15
1991/10/31 12382.55 12904.60
1991/11/30 12507.80 13035.10
1991/12/31 12710.23 13232.15
1992/01/31 12762.36 13218.55
1992/02/29 12848.40 13260.51
1992/03/31 12908.37 13257.62
1992/04/30 12992.10 13378.86
1992/05/31 13126.79 13504.15
1992/06/30 13247.44 13642.18
1992/07/31 13412.17 13802.19
1992/08/31 13526.07 13913.60
1992/09/30 13637.94 14045.26
1992/10/31 13551.39 13960.76
1992/11/30 13557.71 13941.09
1992/12/31 13676.96 14072.75
1993/01/31 13884.23 14222.92
1993/02/28 14053.15 14338.96
1993/03/31 14143.38 14385.54
1993/04/30 14214.96 14475.82
1993/05/31 14275.29 14442.84
1993/06/30 14418.63 14552.22
1993/07/31 14503.92 14585.49
1993/08/31 14646.21 14707.60
1993/09/30 14696.80 14755.06
1993/10/31 14788.30 14789.49
1993/11/30 14849.16 14793.83
1993/12/31 14975.45 14853.73
1994/01/31 15068.89 14948.35
1994/02/28 14945.92 14857.78
1994/03/31 14603.59 14781.39
1994/04/30 14526.60 14725.25
1994/05/31 14614.06 14745.22
1994/06/30 14499.05 14783.99
1994/07/31 14631.30 14918.55
1994/08/31 14750.08 14968.89
1994/09/30 14744.40 14935.62
1994/10/31 14755.65 14969.76
1994/11/30 14780.99 14906.97
1994/12/31 14470.91 14935.33
1995/01/31 14578.57 15140.48
1995/02/28 14759.21 15349.98
1995/03/31 14836.80 15437.08
1995/04/30 14957.59 15576.84
1995/05/31 15226.71 15846.52
1995/06/30 15298.41 15932.75
1995/07/31 15354.76 15996.41
1995/08/31 15445.96 16093.35
1995/09/30 15520.09 16172.92
1995/10/31 15648.24 16307.18
1995/11/30 15775.19 16447.52
1995/12/31 15891.22 16572.24
1996/01/31 16008.19 16714.03
1996/02/29 15952.80 16650.37
1996/03/31 15923.03 16638.21
1996/04/30 15924.97 16655.00
1996/05/31 15959.74 16693.48
1996/06/30 16076.47 16815.59
1996/07/31 16126.14 16880.99
1996/08/31 16176.47 16943.20
1996/09/30 16327.90 17098.30
1996/10/31 16501.83 17291.30
1996/11/30 16620.76 17420.93
1996/12/31 16618.19 17423.83
1997/01/31 16687.27 17508.03
1997/02/28 16731.96 17551.43
1997/03/31 16712.72 17537.83
1997/04/30 16851.75 17681.65
1997/05/31 16957.46 17805.20
1997/06/30 17061.40 17929.05
1997/07/31 17260.15 18128.13
1997/08/31 17275.47 18145.20
1997/09/30 17379.48 18284.96
1997/10/31 17486.98 18416.62
1997/11/30 17536.31 18462.92
1997/12/31 17644.58 18584.74
1998/01/31 17809.60 18764.14
1998/02/28 17833.08 18782.95
1998/03/31 17885.60 18856.16
1998/04/30 17972.87 18949.62
1998/05/31 18083.11 19052.63
1998/06/30 18150.38 19151.02
1998/07/31 18238.51 19240.14
1998/08/31 18363.79 19461.50
1998/09/30 18584.96 19723.37
1998/10/31 18591.95 19808.73
1998/11/30 18595.75 19804.97
1998/12/31 18681.38 19881.65
1999/01/31 18787.69 19966.72
1999/02/28 18727.97 19882.52
1999/03/31 18880.35 20023.36
1999/04/30 18946.07 20091.99
IMATRL PRASUN SHR__CHT 19990430 19990512 155944 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Class T on
April 30, 1989, and the current 1.50% sales charge was paid. As the
chart shows, by April 30, 1999, the value of the investment would have
grown to $18,946 - an 89.46% increase on the initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year
Government/Corporate Bond Index did over the same period. With
dividends, and capital gains, if any, reinvested, the same $10,000
would have grown to $20,092 - a 100.92% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995 1994
Dividend returns 2.75% 6.00% 6.29% 6.40% 6.16% 5.82%
Capital returns -0.85% 0.32% -0.32% -0.95% -0.11% -6.04%
Total returns 1.90% 6.32% 5.97% 5.45% 6.05% -0.22%
</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 effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.24(cents) 25.63(cents) 52.38(cents)
Annualized dividend rate 5.54% 5.55% 5.61%
30-day annualized yield 5.12% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $9.32 over the past one month, $9.32 over the past six months, and
$9.34 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class T's current 1.50% sales charge.
FIDELITY ADVISOR SHORT FIXED-INCOME 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.
Returns prior to November 3, 1997 are those of Class T, the original
class of the fund, and reflect Class T shares' 0.15% 12b-1 fee. Had
Class C shares' 12b-1 fee been reflected, returns prior to November 3,
1997 would have been lower. Class C shares' contingent deferred sales
charge included in the past six months, one year, past five year and
past 10 year total return figures are 1%, 1%, 0% and 0%, respectively.
If Fidelity had not reimbursed certain class expenses, the past one
year, past five years and past 10 years total returns and dividends
would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 1.56% 4.51% 28.88% 90.07%
FIXED-INCOME - CL C
FIDELITY ADV SHORT 0.57% 3.51% 28.88% 90.07%
FIXED-INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-3 Year Govt/Corp 1.43% 6.03% 36.45% 100.92%
Short Investment Grade Debt 1.76% 5.05% 32.92% 94.68%
Funds Average
</TABLE>
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 the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and three
years. To measure how Class C's performance stacked up against its
peers, you can compare it to the short investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 110 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 4.51% 5.20% 6.63%
FIXED-INCOME - CL C
FIDELITY ADV SHORT 3.51% 5.20% 6.63%
FIXED-INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-3 Year Govt/Corp 6.03% 6.41% 7.23%
Short Investment Grade Debt 5.05% 5.85% 6.88%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Class C shares' cumulative return
and show you what would have happened
if Class C shares had performed at a constant rate each year.
$10,000 OVER 10 YEARS
FA Short Fixed-Inc -CL C LB 1-3 Year Govt/Corp
00526 LB013
1989/04/30 10000.00 10000.00
1989/05/31 10136.42 10142.08
1989/06/30 10301.39 10329.29
1989/07/31 10476.77 10483.23
1989/08/31 10402.00 10423.91
1989/09/30 10455.67 10485.26
1989/10/31 10611.38 10648.75
1989/11/30 10694.73 10743.95
1989/12/31 10750.91 10786.48
1990/01/31 10726.57 10797.77
1990/02/28 10769.93 10855.06
1990/03/31 10826.93 10889.49
1990/04/30 10836.80 10916.69
1990/05/31 11007.11 11085.39
1990/06/30 11092.27 11202.58
1990/07/31 11223.63 11338.29
1990/08/31 11205.67 11378.51
1990/09/30 11233.61 11463.87
1990/10/31 11204.94 11582.22
1990/11/30 11275.51 11695.36
1990/12/31 11381.89 11832.23
1991/01/31 11347.67 11939.29
1991/02/28 11465.40 12025.52
1991/03/31 11670.14 12112.91
1991/04/30 11840.01 12231.55
1991/05/31 11960.86 12307.94
1991/06/30 12019.32 12353.66
1991/07/31 12101.90 12462.17
1991/08/31 12305.04 12631.15
1991/09/30 12432.34 12767.15
1991/10/31 12571.11 12904.60
1991/11/30 12698.28 13035.10
1991/12/31 12903.79 13232.15
1992/01/31 12956.71 13218.55
1992/02/29 13044.06 13260.51
1992/03/31 13104.95 13257.62
1992/04/30 13189.95 13378.86
1992/05/31 13326.69 13504.15
1992/06/30 13449.18 13642.18
1992/07/31 13616.42 13802.19
1992/08/31 13732.05 13913.60
1992/09/30 13845.62 14045.26
1992/10/31 13757.75 13960.76
1992/11/30 13764.17 13941.09
1992/12/31 13885.24 14072.75
1993/01/31 14095.66 14222.92
1993/02/28 14267.16 14338.96
1993/03/31 14358.76 14385.54
1993/04/30 14431.43 14475.82
1993/05/31 14492.68 14442.84
1993/06/30 14638.21 14552.22
1993/07/31 14724.79 14585.49
1993/08/31 14869.25 14707.60
1993/09/30 14920.61 14755.06
1993/10/31 15013.51 14789.49
1993/11/30 15075.29 14793.83
1993/12/31 15203.51 14853.73
1994/01/31 15298.37 14948.35
1994/02/28 15173.53 14857.78
1994/03/31 14825.98 14781.39
1994/04/30 14747.81 14725.25
1994/05/31 14836.61 14745.22
1994/06/30 14719.85 14783.99
1994/07/31 14854.11 14918.55
1994/08/31 14974.70 14968.89
1994/09/30 14968.94 14935.62
1994/10/31 14980.36 14969.76
1994/11/30 15006.09 14906.97
1994/12/31 14691.28 14935.33
1995/01/31 14800.58 15140.48
1995/02/28 14983.97 15349.98
1995/03/31 15062.74 15437.08
1995/04/30 15185.37 15576.84
1995/05/31 15458.59 15846.52
1995/06/30 15531.38 15932.75
1995/07/31 15588.59 15996.41
1995/08/31 15681.18 16093.35
1995/09/30 15756.43 16172.92
1995/10/31 15886.54 16307.18
1995/11/30 16015.43 16447.52
1995/12/31 16133.22 16572.24
1996/01/31 16251.97 16714.03
1996/02/29 16195.73 16650.37
1996/03/31 16165.51 16638.21
1996/04/30 16167.48 16655.00
1996/05/31 16202.78 16693.48
1996/06/30 16321.29 16815.59
1996/07/31 16371.72 16880.99
1996/08/31 16422.82 16943.20
1996/09/30 16576.54 17098.30
1996/10/31 16753.13 17291.30
1996/11/30 16873.87 17420.93
1996/12/31 16871.26 17423.83
1997/01/31 16941.39 17508.03
1997/02/28 16986.76 17551.43
1997/03/31 16967.22 17537.83
1997/04/30 17108.38 17681.65
1997/05/31 17215.69 17805.20
1997/06/30 17321.22 17929.05
1997/07/31 17523.00 18128.13
1997/08/31 17538.55 18145.20
1997/09/30 17644.14 18284.96
1997/10/31 17753.28 18416.62
1997/11/30 17769.95 18462.92
1997/12/31 17885.73 18584.74
1998/01/31 18039.96 18764.14
1998/02/28 18053.80 18782.95
1998/03/31 18111.59 18856.16
1998/04/30 18186.81 18949.62
1998/05/31 18265.76 19052.63
1998/06/30 18341.12 19151.02
1998/07/31 18397.21 19240.14
1998/08/31 18530.58 19461.50
1998/09/30 18720.99 19723.37
1998/10/31 18714.05 19808.73
1998/11/30 18725.39 19804.97
1998/12/31 18798.97 19881.65
1999/01/31 18872.61 19966.72
1999/02/28 18820.56 19882.52
1999/03/31 18935.32 20023.36
1999/04/30 19006.63 20091.99
IMATRL PRASUN SHR__CHT 19990430 19990512 155742 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Class C on
April 30, 1989. As the chart shows, by April 30, 1999, the value of
the investment would have grown to $19,007 - a 90.07% increase on the
initial investment. For comparison, look at how the Lehman Brothers
1-3 Year Government/Corporate Bond Index did over the same period.
With dividends and capital gains, if any, reinvested, the same $10,000
would have grown to $20,092 - a 100.92% increase.
(checkmark)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.
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 2.31% 5.06%
Capital returns -0.75% 0.43%
Total returns 1.56% 5.49%
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 effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.51(cents) 21.49(cents) 44.29(cents)
Annualized dividend rate 4.58% 4.64% 4.74%
30-day annualized yield 4.22% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $9.32 over the past one month, $9.33 over the past six months and
$9.34 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering price used in the calculation of the yield
excludes the effect of Class C's contingent deferred sales charge.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Andrew Dudley)
An interview with Andrew Dudley, Portfolio Manager of Fidelity Advisor
Short Fixed-Income Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six-months that ended April 30, 1999, the fund's Class A,
Class T and Class C shares returned 1.88%, 1.90% and 1.56%,
respectively. In comparison, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 1.43%, while the short
investment grade debt funds average tracked by Lipper Inc. returned
1.76% during the same period. For the 12-month period that ended April
30, 1999, the fund's Class A, Class T and Class C shares returned
5.38%, 5.41% and 4.51%, respectively. The Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 6.03%, while the short
investment grade debt funds average returned 5.05% during the 12-month
period.
Q. THE LAST TIME WE SPOKE, UNCERTAINTY IN GLOBAL EQUITY MARKETS AND
THE FEDERAL RESERVE BOARD'S BIAS TOWARD EASING RATES RESULTED IN AN
EXTREME FLIGHT TO TREASURIES. HOW HAS THE MARKET ENVIRONMENT CHANGED,
AND HOW DID IT AFFECT THE FUND?
A. Bond investors' perception of the global financial markets reversed
course amid stronger-than-expected economic data in the U.S. and
improving overseas markets. Additionally, concerns that the Fed may
change its policy course toward tightening monetary policy by
increasing rates caused further concern. In response, the bond market
pushed up yields, causing bond prices - which move in the opposite
direction of yields - to decline. While returns were marginally
positive during the period, declining bond prices erased much of the
gains made late last year. Among the different fixed-income sectors,
Treasuries became the least favored as they experienced one of their
biggest sell-offs in over 20 years during the month of February.
Nevertheless, the fund's overweighted positions in corporate bonds and
asset-backed and mortgage securities compared to the benchmark index
helped relative performance during the six-month period.
Q. DID ANY OTHER MARKET FACTORS HAVE AN EFFECT ON PERFORMANCE?
A. Another key factor was the strong rebound in stocks and the
stronger-than-expected earnings reports from the corporate market.
This environment boosted interest in new corporate issues, and
investors absorbed a relatively large supply of new bonds. More
recently, the increase in interest rates served to reduce the pace of
new issuance, particularly with bonds of shorter maturities - because
bonds are more expensive to finance at higher rates. This led to
further support for a positive supply and demand environment.
Q. HOW WERE THE FUND'S ASSETS ALLOCATED, AND CAN YOU TELL US A BIT
MORE ABOUT THE PERFORMANCE OF THESE SECTORS?
A. Corporate bonds and asset-backed securities - which are bonds
backed by a pool of loans such as credit cards, for example -
accounted for approximately 63% of the fund's investments at the end
of the period. Within these holdings, corporate bonds accounted for
roughly 45% of the fund's investments. In the first quarter of 1999,
absolute returns were hampered across most bond sectors by rising
interest rates. On the other hand, relative performance was helped by
the overweighted positions in asset-backed and corporate bonds, which
outperformed Treasuries. As the market reversed course from the
massive flight to quality we saw last fall, mortgage securities, which
represented approximately 19% of the fund's investments at the end of
the period, also outperformed Treasuries over the past six months.
Q. WHAT'S YOUR OUTLOOK, ANDY?
A. Of course, it is very difficult to predict the direction of
interest rates. However, I do think we may be moving into a more
stable interest-rate environment compared to what we experienced last
fall. Though the U.S. economy was stronger than anticipated and
there's the perception that overseas economies are improving,
inflation remains in check with the help of low global commodity
prices and persistent weakness in global demand. In a more stable
interest-rate environment, I'll continue to concentrate a majority of
the fund's assets in corporate and mortgage securities because they
can offer better total return potential than government bonds.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income,
consistent with preservation
of capital, by investing
primarily in a broad range of
investment grade,
fixed-income securities
START DATE: September 16,
1987
SIZE: as of April 30, 1999,
more than $332 million
MANAGER: Andrew Dudley,
since 1997; joined Fidelity
in 1996
ANDREW DUDLEY ON THE BOND
MARKET'S OBSESSION WITH
INFLATION:
"The bond market's preoccupation
with inflation centers upon the
direct impact inflation has on the
direction of interest rates.
Interest rates represent the value
of money; consequently, if the
bond market expects higher
inflation and, therefore, a
deterioration in the value of money,
then bond investors expect to be
paid more - in the form of
interest - for that decline in
purchasing or buying power. The
bond market sells off in the wake
of higher inflation forecasts
because investors fear being stuck
with fixed cash flows that will be
worth less in the future. During
periods of complex and conflicting
global economic and market
forecasts, similar to what we
experienced over the past six
months, the market can move very
quickly to adjust for these changes
in inflation expectations."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 36.0 40.8
Aa 7.3 8.3
A 18.7 13.2
Baa 32.4 29.8
Ba and Below 1.3 1.6
Not Rated 0.9 1.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) 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 APRIL 30, 1999
6 MONTHS AGO
Years 2.6 2.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 1999
6 MONTHS AGO
Years 1.9 1.8
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 APRIL 30, 1999 *
Corporate bonds 62.8%
U.S. government
and agency
obligations 11.7%
Mortgage securities 18.7%
Foreign government
obligations 1.3%
Other 2.1%
Short-term
investments 3.4%
* FOREIGN
INVESTMENTS 6.3%
Row: 1, Col: 1, Value: 62.8
Row: 1, Col: 2, Value: 11.7
Row: 1, Col: 3, Value: 18.7
Row: 1, Col: 4, Value: 1.3
Row: 1, Col: 5, Value: 2.1
Row: 1, Col: 6 Value: 3.4
AS OF OCTOBER 30, 1998 **
Corporate bonds 57.1%
U.S. government
and agency
obligations 16.2%
Mortgage securities 18.0%
Foreign government
obligations 0.7%
Other 2.7%
Short-term
investments 5.3%
** FOREIGN
INVESTMENTS 6.9%
Row: 1, Col: 1, Value: 57.1
Row: 1, Col: 2, Value: 16.2
Row: 1, Col: 3, Value: 18.0
Row: 1, Col: 4, Value: 0.7
Row: 1, Col: 5, Value: 2.7
Row: 1, Col: 6, Value: 5.3
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 44.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.7%
Equistar Chemicals Baa3 $ 800,000 $ 826,400
L.P./Equistar Funding Corp.
8.5% 2/15/04 (b)
Monsanto Co. 5.375% 12/1/01 A2 1,470,000 1,457,432
(b)
2,283,832
CONSTRUCTION & REAL ESTATE -
2.2%
REAL ESTATE - 0.1%
Cabot Industrial Properties Baa2 575,000 573,413
LP 7.125% 5/1/04
REAL ESTATE INVESTMENT TRUSTS
- - 2.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 470,000 449,240
7.125% 3/15/04 Baa2 1,300,000 1,291,485
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 1,650,000 1,647,261
6.375% 2/15/03 Baa1 1,200,000 1,188,576
6.376% 2/15/02 Baa1 900,000 896,211
ProLogis Trust 6.7% 4/15/04 Baa1 245,000 243,557
Weeks Realty LP 6.875% 3/15/05 Baa2 1,200,000 1,197,852
6,914,182
TOTAL CONSTRUCTION & REAL 7,487,595
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Delphi Automotive Systems Baa2 725,000 724,079
Corp. 6.125% 5/1/04
ENERGY - 1.5%
ENERGY SERVICES - 0.6%
Baker Hughes, Inc. 5.8% A2 2,100,000 2,082,990
2/15/03 (b)
OIL & GAS - 0.9%
Conoco, Inc. 5.9% 4/15/04 A3 400,000 397,120
Occidental Petroleum Corp. Baa3 700,000 701,603
6.09% 11/29/99
Oryx Energy Co.:
8% 10/15/03 Baa1 335,000 349,395
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Oryx Energy Co.: - continued
8.125% 10/15/05 Baa1 $ 1,030,000 $ 1,089,225
8.375% 7/15/04 Baa1 485,000 515,487
3,052,830
TOTAL ENERGY 5,135,820
FINANCE - 17.9%
BANKS - 7.7%
Banc One Corp. 6.7% 3/24/00 Aa3 1,600,000 1,616,544
Banco Latinoamericano Baa2 700,000 692,563
Exportaciones SA euro 6.9%
12/4/99 (b)
Banc One Corp. 7.25% 8/1/02 A1 1,100,000 1,142,515
BankBoston Corp. 6.125% A2 1,900,000 1,912,350
3/15/02
BanPonce Financial Corp. A3 650,000 657,261
6.88% 6/16/00
Barclays Bank PLC yankee A1 2,500,000 2,504,000
5.875% 7/15/00
Capital One Bank:
6.48% 6/28/02 Baa3 1,500,000 1,514,355
6.65% 3/15/04 Baa3 2,500,000 2,521,250
KeyCorp. 7.45% 4/5/00 A1 1,500,000 1,528,470
Korea Development Bank:
6.625% 11/21/03 Baa3 745,000 721,354
7.125% 9/17/01 Baa3 215,000 215,712
7.375% 9/17/04 Baa3 250,000 247,750
yankee 6.5% 11/15/02 Baa3 580,000 563,470
NationsBank Corp. 5.75% Aa2 1,600,000 1,601,408
3/15/01
Popular, Inc.:
6.2% 4/30/01 A3 2,885,000 2,877,586
6.4% 8/25/00 A3 1,730,000 1,734,412
Providian National Bank:
6.25% 5/7/01 Baa3 1,400,000 1,402,954
6.7% 3/15/03 Baa3 2,200,000 2,206,710
25,660,664
CREDIT & OTHER FINANCE - 7.7%
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 3,050,000 3,071,350
6.875% 1/16/01 Baa3 1,870,000 1,901,079
Chrysler Financial Corp. A1 2,600,000 2,581,618
5.25% 5/4/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Chrysler Financial LLC 6.375% A1 $ 2,300,000 $ 2,316,859
1/28/00
Edison Mission Energy Funding Baa1 1,984,177 2,008,999
Corp. 6.77% 9/15/03 (b)
ERP Operating LP 6.55% A3 300,000 301,794
11/15/01
Ford Motor Credit Co. 5.125% A1 1,300,000 1,284,530
10/15/01
General Motors Acceptance A2 2,200,000 2,197,030
Corp. 5.625% 2/15/01
GS Escrow Corp. 6.75% 8/1/01 Ba1 2,200,000 2,196,832
Heller Financial, Inc. 6.25% A3 1,800,000 1,814,688
3/1/01
Money Store, Inc. 7.3% 12/1/02 A2 800,000 836,560
Salton Sea Funding Corp. Baa2 370,407 372,726
7.02% 5/30/00
Sprint Capital Corp. 5.7% Baa1 4,280,000 4,235,317
11/15/03
Trizec Finance Ltd. yankee Baa3 350,000 385,000
10.875% 10/15/05
25,504,382
SAVINGS & LOANS - 1.1%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 1,350,000 1,354,293
7% 6/13/02 Baa3 1,250,000 1,279,250
Sovereign Bancorp, Inc. Ba1 1,000,000 1,000,870
6.625% 3/15/01
3,634,413
SECURITIES INDUSTRY - 1.4%
Amvescap PLC:
yankee 6.375% 5/15/03 A3 1,150,000 1,150,069
yankee 6.6% 5/15/05 A3 600,000 591,282
Goldman Sachs Group L.P.:
6.2% 2/15/01 A1 1,000,000 1,006,530
6.6% 7/15/02 (b) A1 500,000 506,330
Merrill Lynch & Co., Inc. Aa3 1,500,000 1,495,056
5.71% 1/15/02
4,749,267
TOTAL FINANCE 59,548,726
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA Baa1 2,250,000 2,263,613
yankee 6.125% 6/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MEDIA & LEISURE - 5.0%
BROADCASTING - 3.8%
Continental Cablevision, Inc. Baa3 $ 3,015,000 $ 3,175,428
8.5% 9/15/01
TCI Communications, Inc.:
6.375% 9/15/99 A2 4,250,000 4,268,828
8.25% 1/15/03 A2 300,000 324,000
9% 1/2/02 Ba1 970,000 1,048,104
Time Warner, Inc. 7.95% 2/1/00 Baa3 3,690,000 3,755,387
12,571,747
ENTERTAINMENT - 1.2%
Paramount Communications, Baa3 1,125,000 1,163,385
Inc. 7.5% 1/15/02
Viacom, Inc. 6.75% 1/15/03 Baa3 2,885,000 2,936,238
4,099,623
TOTAL MEDIA & LEISURE 16,671,370
NONDURABLES - 3.5%
BEVERAGES - 1.5%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,005,000 1,002,035
6.4% 12/15/03 Baa3 4,000,000 3,993,600
4,995,635
FOODS - 0.8%
Dole Food, Inc. 6.75% 7/15/00 Baa2 2,590,000 2,612,481
TOBACCO - 1.2%
Philip Morris Companies, Inc.:
7.125% 12/1/99 A2 2,850,000 2,875,223
7.25% 9/15/01 A2 1,125,000 1,154,936
4,030,159
TOTAL NONDURABLES 11,638,275
RETAIL & WHOLESALE - 2.6%
DRUG STORES - 1.2%
Rite Aid Corp.:
5.5% 12/15/00 (b) Baa1 2,970,000 2,940,300
6% 12/15/05 (b) Baa1 1,100,000 1,052,590
3,992,890
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES -
1.4%
Dayton Hudson Corp.:
9.75% 7/1/02 A3 $ 1,240,000 $ 1,377,466
10% 12/1/00 A3 1,070,000 1,140,192
Federated Department Stores, Baa2 1,860,000 1,978,408
Inc. 8.125% 10/15/02
4,496,066
TOTAL RETAIL & WHOLESALE 8,488,956
TECHNOLOGY - 3.2%
COMPUTERS & OFFICE EQUIPMENT
- - 3.2%
Comdisco, Inc.:
6% 1/30/02 Baa1 1,500,000 1,498,620
6.1% 6/5/01 Baa1 7,210,000 7,218,580
6.65% 11/13/01 Baa1 2,010,000 2,034,763
10,751,963
TRANSPORTATION - 3.3%
AIR TRANSPORTATION - 1.4%
Continental Airlines, Inc.
Pass Through Trust
Certificates:
6.954% 2/2/11 Baa1 2,200,000 2,191,200
7.08% 11/1/04 Baa1 1,250,000 1,255,550
Delta Air Lines, Inc.:
6.65% 3/15/04 Baa3 660,000 665,326
9.875% 5/15/00 Baa3 475,000 493,112
4,605,188
RAILROADS - 1.3%
CSX Corp.:
7.05% 5/1/02 Baa2 1,600,000 1,640,736
9.5% 8/1/00 Baa2 1,800,000 1,879,164
Norfolk Southern Corp. 6.95% Baa1 900,000 923,202
5/1/02
4,443,102
TRUCKING & FREIGHT - 0.6%
Federal Express Corp. 7.53% A3 1,953,000 1,990,087
9/23/06
TOTAL TRANSPORTATION 11,038,377
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - 3.8%
CELLULAR - 0.1%
Cable & Wireless Baa1 $ 425,000 $ 425,914
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.7%
Avon Energy Partners Holdings Baa2 2,300,000 2,324,978
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp. Baa3 1,020,000 1,037,065
6.875% 3/1/01
Ohio Edison Co. 7.375% 9/15/02 Baa2 1,510,000 1,566,383
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 1,560,000 1,554,337
6.5% 5/1/03 Baa1 600,000 612,342
Texas Utilities Electric Co.:
7.375% 11/1/99 A3 1,100,000 1,111,132
7.375% 8/1/01 A3 721,000 743,113
8,949,350
GAS - 0.4%
Cms Panhandle Holding Co. Baa3 600,000 600,000
6.125% 3/15/04 (b)
Enserch Corp. 6.25% 1/1/03 Baa2 650,000 653,406
1,253,406
TELEPHONE SERVICES - 0.6%
MCI WorldCom, Inc.:
6.125% 8/15/01 Baa2 1,230,000 1,237,712
8.875% 1/15/06 Baa2 811,000 871,209
2,108,921
TOTAL UTILITIES 12,737,591
TOTAL NONCONVERTIBLE BONDS 148,770,197
(Cost $148,878,987)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 11.7%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 1.2%
Government Trust Certificates Aaa $ 329,447 $ 342,493
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 C, 6.61% 9/15/99 Aaa 36,728 36,838
Series 1995 A, 6.28% 6/15/04 Aaa 1,941,176 1,970,411
Israel Export Trust Aaa 564,706 577,412
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 1, 6.88% 1/26/03
Private Export Funding Corp. Aaa 954,000 982,323
secured 6.86% 4/30/04
TOTAL U.S. GOVERNMENT AGENCY 3,909,477
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
10.5%
U.S. Treasury Notes:
5.375% 7/31/00 Aaa 29,300,000 29,432,726
5.375% 2/15/01 Aaa 2,950,000 2,964,750
5.75% 10/31/00 Aaa 2,600,000 2,625,584
TOTAL U.S. TREASURY 35,023,060
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 38,932,537
GOVERNMENT AGENCY OBLIGATIONS
(Cost $38,956,995)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 9.1%
FANNIE MAE - 6.3%
6.5% 10/1/11 to 12/1/28 (d) Aaa 8,624,093 8,571,136
7% 7/1/25 to 4/1/29 Aaa 11,651,626 11,805,006
11.5% 11/1/15 Aaa 438,315 487,327
20,863,469
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FREDDIE MAC - 0.2%
7% 9/1/99 to 8/1/01 Aaa $ 654,975 $ 658,026
12% 11/1/19 Aaa 111,060 124,614
782,640
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.6%
6.5% 5/15/29 (c) Aaa 3,500,000 3,480,313
9.5% 9/15/16 to 10/15/20 Aaa 1,576,016 1,693,244
11% 12/15/09 to 1/15/16 Aaa 1,857,496 2,057,009
11.5% 8/15/13 to 11/15/15 Aaa 645,568 729,179
12% 2/15/16 Aaa 601,025 685,337
8,645,082
TOTAL U.S. GOVERNMENT AGENCY 30,291,191
- - MORTGAGE SECURITIES
(Cost $30,539,537)
ASSET-BACKED SECURITIES - 18.2%
Arcadia Automobile Aaa 1,300,000 1,290,250
Receivables Trust 5.67%
1/15/04
ARG Funding Corp. 5.88% Aaa 2,650,000 2,649,669
5/20/03 (b)
Boatmens Auto Trust 6.35% A2 640,000 640,100
10/15/01
Capita Equipment Receivables
Trust:
6.45% 8/15/02 Aa3 2,200,000 2,219,184
6.57% 3/15/01 Aa3 1,020,000 1,024,896
Case Equipment Loan Trust Aa2 800,000 800,562
5.85% 2/15/03
Caterpillar Financial Asset A3 360,694 359,905
Trust 6.55% 5/25/02
Chase Manhattan Marine Owner Aaa 2,020,000 2,038,200
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 1,516,363 1,520,154
6.2% 3/20/04 Aaa 640,164 643,265
Citibank Credit Card Master Aaa 1,800,000 1,803,094
Trust I 5.75% 1/15/03
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 3,196,297 3,196,297
6.3% 7/15/12 Aaa 1,600,000 1,598,992
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 857,217 860,164
6.7% 2/15/02 Aaa 267,293 269,047
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage Aaa $ 1,000,000 $ 1,010,781
Securities Corp. 7% 3/15/27
Discover Card Master Trust I A2 5,250,000 5,245,078
6.0006% 7/18/05 (e)
Fidelity Funding Auto Trust Aaa 310,542 313,938
6.99% 11/15/02 (b)
Ford Credit Auto Owner Trust A2 1,800,000 1,795,500
6.15% 9/15/02
Ford Credit Grantor Trust Aaa 557,960 558,134
5.9% 10/15/00
Green Tree Financial Corp.:
6.1% 4/15/27 Aaa 228,963 229,105
6.45% 5/15/27 Aaa 66,839 66,859
Green Tree Lease Finance LLC A 2,150,297 2,145,674
6.66% 10/20/04
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 2,200,000 2,190,375
6.65% 10/15/03 Baa3 255,269 257,264
KeyCorp Auto Grantor Trust A3 18,970 18,973
5.8% 7/15/00
Newcourt Equipment Trust Aaa 2,050,000 2,038,149
Securities sequential pay
Series 1998-1 Class A3,
5.24% 12/20/02
Norwest Automobile Trust 6.3% A2 1,424,000 1,428,005
5/15/03
Olympic Automobile
Receivables Trust:
6.125% 11/15/04 Aaa 534,501 534,334
6.4% 9/15/01 Aaa 870,438 868,262
Onyx Acceptance Grantor Trust:
5.95% 7/15/04 Aaa 1,823,129 1,830,530
6.2% 6/15/03 Aaa 897,627 903,237
Petroleum Enhanced Trust Baa2 1,785,428 1,774,269
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(e)
Premier Auto Trust:
5.7% 10/6/02 Aaa 4,000,000 4,007,480
6.35% 7/6/00 A3 1,980,000 1,983,089
Reliance Auto Receivables Aaa 495,519 495,364
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master Aaa 1,600,000 1,614,000
Trust II 6.2% 2/16/06
TMS Auto Grantor Trust 5.9% Aaa 132,999 133,166
9/15/02
Tranex Auto Receivables Owner Aaa 884,900 889,048
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 2,009,163 1,990,327
Trust 5.98% 9/17/05
Union Acceptance Corp. 7.075% Baa2 114,350 114,456
7/10/02
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Western Financial Grantor Aaa $ 584,901 $ 583,621
Trust 5.875% 3/1/02
WFS Financial Owner Trust:
6.9% 12/20/03 Aaa 1,990,000 1,972,588
7.05% 11/20/03 Aaa 2,876,371 2,879,967
TOTAL ASSET-BACKED SECURITIES 60,785,352
(Cost $60,773,730)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.3%
PRIVATE SPONSOR - 0.8%
GE Capital Mortgage Services, Aaa 674,431 674,483
Inc. planned amortization
class Series 1994-2 Class
A-4, 6% 1/25/09
Residential Funding Mortgage Aa1 2,061,172 2,062,461
Securities I, Inc. planned
amortization class Series
1994-S12 Class A-2, 6.5%
4/25/09
2,736,944
U.S. GOVERNMENT AGENCY - 0.5%
Fannie Mae ACES sequential Aaa 1,714,589 1,716,197
pay Series 1995 - M1 Class
A, 6.65% 7/25/10
TOTAL COLLATERALIZED MORTGAGE 4,453,141
OBLIGATIONS
(Cost $4,461,470)
COMMERCIAL MORTGAGE
SECURITIES - 8.3%
Allied Capital Commercial Aaa 1,327,151 1,325,077
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 2,200,000 2,199,656
1999-S1A, 7.0925% 2/28/14
(b)(e)
Bankers Trust Remic Trust Aa2 2,780,000 2,786,516
1988-1 floater Series
1998-S1A Class D, 5.7869%
11/28/02 (b)(e)
CBM Funding Corp.:
sequential pay Series 1996-1 AA 1,380,000 1,392,722
Class A-2, 6.88% 7/1/02
sequential pay Series 1996-1 AA 17,661 17,688
Class A-1, 7.55% 7/1/99
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - $ 2,055,779 $ 2,051,924
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998 FLI Class E, Baa2 2,700,000 2,640,094
5.7888% 1/10/13 (b)(e)
DLJ Commercial Mortgage Corp. A2 1,170,000 1,166,709
floater Series 1998-STFA
Class A-3, 5.57% 12/8/00
(b)(e)
Equitable Life Assurance
Society of the United States
(The):
floater Series 174 Class D-2, Baa2 1,200,000 1,176,000
6.7063% 5/15/03 (b)(e)
sequential pay Series 174 Aaa 1,000,000 1,042,250
Class A1, 7.24% 5/15/06 (b)
Federal Deposit Insurance
Corp. Remic Trust:
sequential pay Series 1996-C1 Aaa 1,377,449 1,384,767
Class 1A, 6.75% 7/25/26
sequential pay Series 1994-C1 Aaa 262,756 263,002
Class II-A2, 7.85% 9/25/25
FMAC Loan Receivables Trust Aaa 728,359 717,889
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust 1998-1 Aaa 1,359,958 1,347,208
sequential pay Series 1998-I
Class A1 Notes, 6.24%
7/15/20 (b)
GS Mortgage Securities Corp.
II Series 1999-GSFL II:
Class E, 7.0475% 11/13/13 Baa2 1,100,000 1,095,160
(b)(e)
Class F, 7.6634% 11/13/13 Baa3 1,100,000 1,083,170
(b)(e)
Kidder Peabody Acceptance Aaa 99,788 99,570
Corp. I sequential pay
Series 1993-M1 Class A-2,
7.15% 4/25/25
Nomura Asset Securities Corp. - 881,017 881,292
floater Series 1994 MD-II
Class A-6, 6.2025% 7/7/03 (e)
Nomura Depositor Trust Baa2 2,290,000 2,109,484
floater Series 1998-ST1A
Class A-4, 5.8263% 2/15/34
(b)(e)
Resolution Trust Corp. Aaa 946,866 946,866
sequential pay Series 1995
C-1 Class A2C, 6.9% 2/25/27
Structured Asset Securities A3 2,075,784 2,067,352
Corp. floater Series
1998-C2A Class C, 5.3425%
1/25/13 (b)(e)
TOTAL COMMERCIAL MORTGAGE 27,794,396
SECURITIES
(Cost $28,114,827)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 1.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Korean Republic 8.75% 4/15/03 Baa3 $ 1,700,000 $ 1,787,040
(f)
Ontario Province:
5.75% 11/7/00 (f) Aa3 1,180,000 1,182,679
euro global 6.125% 6/28/00 (f) Aa3 1,200,000 1,209,408
TOTAL FOREIGN GOVERNMENT AND 4,179,127
GOVERNMENT AGENCY OBLIGATIONS
(Cost $4,164,575)
SUPRANATIONAL OBLIGATIONS -
2.1%
African Development Bank:
7.75% 12/15/01 Aa1 2,240,000 2,345,907
9.3% 7/1/00 Aa1 4,320,000 4,502,347
TOTAL SUPRANATIONAL OBLIGATIONS 6,848,254
(Cost $7,001,936)
CASH EQUIVALENTS - 3.4%
MATURITY AMOUNT
Investments in repurchase $ 11,475,732 11,471,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $11,471,000)
TOTAL INVESTMENT IN $ 333,525,195
SECURITIES - 100%
(Cost $334,363,057)
</TABLE>
LEGEND
(a) Standard & Poor's(registered trademark) credit ratings are used in
the absence of a rating by Moody's Investors Service, Inc.
(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 $43,423,359 or 13.1% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) A portion of the security sold on a delayed delivery or
when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 61.0% AAA, AA, A 57.9%
Baa 32.4% BBB 32.1%
Ba 1.3% BB 0.8%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.9%.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $334,363,143. Net unrealized depreciation
aggregated $837,948, of which $786,348 related to appreciated
investment securities and $1,624,296 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $43,066,000 of which $130,000, $38,000, $336,000,
$17,691,000, $19,457,000, $2,265,000 and $3,149,000 will expire on
October 31, 1999, 2000, 2001, 2002, 2003, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 333,525,195
value (including repurchase
agreements of $11,471,000)
(cost $334,363,057) - See
accompanying schedule
Commitment to sell securities $ (3,923,804)
on a delayed delivery basis
Receivable for securities 3,946,462 22,658
sold on a delayed delivery
basis
Receivable for investments 537,521
sold, regular delivery
Cash 161,737
Receivable for fund shares 2,011,589
sold
Interest receivable 3,603,646
TOTAL ASSETS 339,862,346
LIABILITIES
Payable for investments 2,466,238
purchased Regular delivery
Delayed delivery 3,514,535
Payable for fund shares 837,160
redeemed
Distributions payable 248,381
Accrued management fee 121,579
Distribution fees payable 47,997
Other payables and accrued 87,918
expenses
TOTAL LIABILITIES 7,323,808
NET ASSETS $ 332,538,538
Net Assets consist of:
Paid in capital $ 377,293,497
Undistributed net investment 157,553
income
Accumulated undistributed net (44,097,308)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (815,204)
(depreciation) on investments
NET ASSETS $ 332,538,538
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $9.30
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($11,822,966 (divided by)
1,271,864 shares)
Maximum offering price per $9.44
share (100/98.50 of $9.30)
CLASS T: NET ASSET VALUE and $9.30
redemption price per share
($303,088,972 (divided by)
32,579,757 shares)
Maximum offering price per $9.44
share (100/98.50 of $9.30)
CLASS C: NET ASSET VALUE and $9.31
offering price per share
($10,092,277 (divided by)
1,084,296 shares) A
INSTITUTIONAL CLASS: NET $9.30
ASSET VALUE, offering price
and redemption price per
share ($7,534,323 (divided
by) 809,849 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 10,808,742
Interest
EXPENSES
Management fee $ 724,950
Transfer agent fees 278,482
Distribution fees 280,588
Accounting fees and expenses 54,204
Non-interested trustees' 613
compensation
Custodian fees and expenses 11,641
Registration fees 31,412
Audit 17,311
Legal 761
Miscellaneous 639
Total expenses before 1,400,601
reductions
Expense reductions (4,639) 1,395,962
NET INVESTMENT INCOME 9,412,780
REALIZED AND UNREALIZED GAIN (1,008,344)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,009,684)
Delayed delivery commitments 12,158 (1,997,526)
NET GAIN (LOSS) (3,005,870)
NET INCREASE (DECREASE) IN $ 6,406,910
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,412,780 $ 20,862,249
income
Net realized gain (loss) (1,008,344) 173,470
Change in net unrealized (1,997,526) 421,556
appreciation (depreciation)
NET INCREASE (DECREASE) IN 6,406,910 21,457,275
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,198,966) (20,556,957)
from net investment income
Share transactions - net (22,065,369) (21,594,124)
increase (decrease)
TOTAL INCREASE (DECREASE) (24,857,425) (20,693,806)
IN NET ASSETS
NET ASSETS
Beginning of period 357,395,963 378,089,769
End of period (including $ 332,538,538 $ 357,395,963
under (over) distribution
of net investment income of
$157,553 and $(56,261),
respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.310 $ 9.370 $ 9.290
period
Income from Investment
Operations
Net investment income D .256 .572 .532 .090
Net realized and unrealized (.082) .024 (.021) .081
gain (loss)
Total from investment .174 .596 .511 .171
operations
Less Distributions
From net investment income (.254) (.526) (.571) (.091)
Net asset value, end of period $ 9.300 $ 9.380 $ 9.310 $ 9.370
TOTAL RETURN B, C 1.88% 6.58% 5.64% 1.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,823 $ 5,524 $ 19,726 $ 204
(000 omitted)
Ratio of expenses to average .83% A .90% F .90% F .90% A, F
net assets
Ratio of net investment 5.66% A 6.03% 6.00% 6.27% A
income to average net assets
Portfolio turnover rate 151% A 124% 105% 124%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.350 $ 9.380 $ 9.470 $ 9.480
period
Income from Investment
Operations
Net investment income .262 C .555 C .578 C .594 C .403
Net realized and unrealized (.086) .019 (.036) (.094) .148
gain (loss)
Total from investment .176 .574 .542 .500 .551
operations
Less Distributions
From net investment income (.256) (.544) (.572) (.590) (.407)
In excess of net investment - - - - -
income
Return of capital - - - - (.154)
Total distributions (.256) (.544) (.572) (.590) (.561)
Net asset value, end of $ 9.300 $ 9.380 $ 9.350 $ 9.380 $ 9.470
period
TOTAL RETURN B 1.90% 6.32% 5.97% 5.45% 6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 303,089 $ 333,050 $ 351,614 $ 416,700 $ 546,546
(000 omitted)
Ratio of expenses to average .82% A .89% .89% .88% .89%
net assets
Ratio of net investment 5.67% A 5.93% 6.19% 6.29% 6.05%
income to average net assets
Portfolio turnover rate 151% A 124% 105% 124% 179%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.090
period
Income from Investment
Operations
Net investment income .479
Net realized and unrealized (.501)
gain (loss)
Total from investment (.022)
operations
Less Distributions
From net investment income (.464)
In excess of net investment (.044)
income
Return of capital (.080)
Total distributions (.588)
Net asset value, end of $ 9.480
period
TOTAL RETURN B (.22)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 787,926
(000 omitted)
Ratio of expenses to average .97%
net assets
Ratio of net investment 5.91%
income to average net assets
Portfolio turnover rate 108%
</TABLE>
A ANNUALIZED.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED..
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.340
period
Income from Investment
Operations
Net investment income D .219 .437
Net realized and unrealized (.074) .064
gain (loss)
Total from investment .145 .501
operations
Less Distributions
From net investment income (.215) (.461)
Net asset value, end of period $ 9.310 $ 9.380
TOTAL RETURN B, C 1.56% 5.49%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,092 $ 11,795
(000 omitted)
Ratio of expenses to average 1.74% A 1.75% A, F
net assets
Ratio of expenses to average 1.73% A, G 1.75% A
net assets after expense
reductions
Ratio of net investment 4.72% A 4.92% A
income to average net assets
Portfolio turnover rate 151% A 124%
</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 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 OCTOBER 31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.380 $ 9.350 $ 9.370 $ 9.470 $ 9.450
of period
Income from Investment
Operations
Net investment income .268 D .566 D .589 D .598 D .137
Net realized and unrealized (.084) .021 (.023) (.098) .067
gain (loss)
Total from investment .184 .587 .566 .500 .204
operations
Less Distributions
From net investment income (.264) (.557) (.586) (.600) (.136)
Return of capital - - - - (.048)
Total distributions (.264) (.557) (.586) (.600) (.184)
Net asset value, end of $ 9.300 $ 9.380 $ 9.350 $ 9.370 $ 9.470
period
TOTAL RETURN B, C 1.99% 6.47% 6.24% 5.45% 2.18%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,534 $ 7,027 $ 6,750 $ 9,200 $ 9,827
(000 omitted)
Ratio of expenses to average .69% A .75% F .75% F .80% F .85% A, F
net assets
Ratio of expenses to average .68% A, G .75% .75% .80% .85% A
net assets after expense
reductions
Ratio of net investment 5.81% A 6.06% 6.30% 6.37% 6.10% A
income to average net assets
Portfolio turnover rate 151% A 124% 105% 124% 179%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Short Fixed-Income Fund (the fund) is a fund of
Fidelity Advisor Series II (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 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 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments,
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
the fund identifies securities as segregated in its records with a
value at least equal to the amount of the commitment. Losses may arise
due to changes in the market value of the underlying securities or if
the counterparty does not perform under the contract.
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 $243,127,860 and $270,823,070, respectively, of which U.S.
government and government agency obligations aggregated $164,113,109
and $189,631,857, 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 .43% of average net assets
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
services. For the period, this fee was based on the following annual
rates of the average net assets of each applicable class:
CLASS A .15%
CLASS T .15%
CLASS C 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 4,895 $ 0
CLASS T 236,092 2,673
CLASS C 39,601 37,512
$ 280,588 $ 40,185
SALES LOAD. FDC receives a front-end sales charge of up to 1.50% for
selling Class A and Class T shares of the fund and the proceeds of a
contingent deferred sales charge levied on Class C share redemptions
occurring within one year of purchase. The Class C charge is 1% of the
lesser of the cost of shares at the initial date of purchase or the
net asset value of the redeemed shares, excluding any reinvested
dividends and capital gains. A portion of the sales charges paid to
FDC are paid to securities dealers, banks and other financial
institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 12,970 $ 2,968
CLASS T 117,377 36,214
CLASS C 16,420 16,420*
$ 146,767 $ 55,602
* WHEN 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
(collectively referred to as the transfer agent) for the fund's Class
A, Class T, Class C and Institutional Class. FIIOC receives account
fees and asset-based fees that vary according to the account size and
type of account of the shareholders
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 $ 5,854 .18*
CLASS T 257,293 .16*
CLASS C 9,168 .23*
INSTITUTIONAL CLASS 6,167 .18*
$ 278,482
*ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
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 $4,639 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998 A
FROM NET INVESTMENT INCOME
Class A $ 177,552 $ 388,579
Class T 8,648,310 19,688,772
Class C 181,713 94,836
Institutional Class 191,391 384,770
Total $ 9,198,966 $ 20,556,957
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30 YEAR ENDED SIX MONTHS ENDED APRIL 30 YEAR ENDED
OCTOBER 31 OCTOBER 31
1999 1998 A 1999 1998 A
CLASS A Shares sold 592,781 $ 9,665,891 $ 5,547,089
1,037,871
Reinvestment of distributions 15,767 15,963 146,857 149,204
Shares redeemed (370,798) (2,137,845) (3,458,864) (20,007,107)
Net increase (decrease) 682,840 (1,529,101) $ 6,353,884 $ (14,310,814)
CLASS T Shares sold 10,283,264 18,467,587 $ 96,223,660 $ 172,851,708
Reinvestment of distributions 731,162 1,675,946 6,815,032 15,669,989
Shares redeemed (13,944,369) (22,231,985) (130,390,483) (207,892,792)
Net increase (decrease) (2,929,943) (2,088,452) $ (27,351,791) $ (19,371,095)
CLASS C Shares sold 1,013,233 1,458,611 $ 9,453,119 $ 13,712,358
Reinvestment of distributions 14,802 6,695 138,006 62,751
Shares redeemed (1,200,694) (208,351) (11,221,499) (1,947,580)
Net increase (decrease) (172,659) 1,256,955 $ (1,630,374) $ 11,827,529
INSTITUTIONAL CLASS Shares 217,619 733,154 $ 2,029,784 $ 6,860,400
sold
Reinvestment of distributions 17,982 33,202 167,579 310,406
Shares redeemed (175,010) (738,984) (1,634,451) (6,910,550)
Net increase (decrease) 60,591 27,372 $ 562,912 $ 260,256
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Advisor
Short Fixed-Income Fund, the Board of Trustees has determined not to
retain PricewaterhouseCoopers LLP as the fund's independent auditor
and voted to appoint Deloitte & Touche LLP for the fiscal year ending
October 31, 1999. For the fiscal years ended October 31, 1998 and
October 31, 1997, PricewaterhouseCoopers LLP's audit reports contained
no adverse opinion or disclaimer of opinion; nor were their reports
qualified as to uncertainty, audit scope, or accounting principles.
Further, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference to the disagreement in their report.
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
Fidelity Investments Money Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Andrew J. Dudley, Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
SFI-SANN-0699 78318
1.703632.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY ADVISOR
SHORT FIXED-INCOME
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 1999
(2_FIDELITY_LOGOS)(registered trademark)
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 24 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 32 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
With 13 record-high closings, the Dow Jones Industrial Average surged
nearly 1,000 points in April. What's particularly noteworthy about
this performance is that, in some cases, gains were fueled by a
rotation out of growth stocks and into issues more sensitive to
economic swings. The strength in blue chips, combined with heavy
global, corporate and agency bond issuance, contributed to the
downward pressure on government security prices.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR SHORT FIXED-INCOME 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. The initial offering of Institutional
Class shares took place on July 3, 1995. Institutional Class shares
are sold to eligible investors without a sales load or 12b-1 fee.
Returns prior to July 3, 1995 are those of Class T, the original class
of the fund, and reflect Class T shares' 0.15% 12b-1 fee. If Fidelity
had not reimbursed certain class expenses, the past one year, past
five years and past 10 years total returns and dividends would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 1.99% 5.57% 31.10% 93.34%
FIXED-INCOME - INST CL
LB 1-3 Year Govt/Corp 1.43% 6.03% 36.45% 100.92%
Short Investment Grade Debt 1.76% 5.05% 32.92% 94.68%
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 the performance of the Lehman Brothers 1-3 Year
Government/Corporate Bond Index - a market value-weighted index of
government and investment-grade corporate fixed-rate debt issues with
maturities between one and three years. To measure how Institutional
Class' performance stacked up against its peers, you can compare it to
the short investment grade debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 110 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 APRIL 30, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 5.57% 5.56% 6.82%
FIXED-INCOME - INST CL
LB 1-3 Year Govt/Corp 6.03% 6.41% 7.23%
Short Investment Grade Debt 5.05% 5.85% 6.88%
Funds Average
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class shares'
cumulative return and show you what would have
happened if Institutional Class shares had performed at a constant
rate each year.
$10,000 OVER 10 YEARS
FA Short Fixed-Inc -CL I LB 1-3 Year Govt/Corp
00643 LB013
1989/04/30 10000.00 10000.00
1989/05/31 10136.42 10142.08
1989/06/30 10301.39 10329.29
1989/07/31 10476.77 10483.23
1989/08/31 10402.00 10423.91
1989/09/30 10455.67 10485.26
1989/10/31 10611.38 10648.75
1989/11/30 10694.73 10743.95
1989/12/31 10750.91 10786.48
1990/01/31 10726.57 10797.77
1990/02/28 10769.93 10855.06
1990/03/31 10826.93 10889.49
1990/04/30 10836.80 10916.69
1990/05/31 11007.11 11085.39
1990/06/30 11092.27 11202.58
1990/07/31 11223.63 11338.29
1990/08/31 11205.67 11378.51
1990/09/30 11233.61 11463.87
1990/10/31 11204.94 11582.22
1990/11/30 11275.51 11695.36
1990/12/31 11381.89 11832.23
1991/01/31 11347.67 11939.29
1991/02/28 11465.40 12025.52
1991/03/31 11670.14 12112.91
1991/04/30 11840.01 12231.55
1991/05/31 11960.86 12307.94
1991/06/30 12019.32 12353.66
1991/07/31 12101.90 12462.17
1991/08/31 12305.04 12631.15
1991/09/30 12432.34 12767.15
1991/10/31 12571.11 12904.60
1991/11/30 12698.28 13035.10
1991/12/31 12903.79 13232.15
1992/01/31 12956.71 13218.55
1992/02/29 13044.06 13260.51
1992/03/31 13104.95 13257.62
1992/04/30 13189.95 13378.86
1992/05/31 13326.69 13504.15
1992/06/30 13449.18 13642.18
1992/07/31 13616.42 13802.19
1992/08/31 13732.05 13913.60
1992/09/30 13845.62 14045.26
1992/10/31 13757.75 13960.76
1992/11/30 13764.17 13941.09
1992/12/31 13885.24 14072.75
1993/01/31 14095.66 14222.92
1993/02/28 14267.16 14338.96
1993/03/31 14358.76 14385.54
1993/04/30 14431.43 14475.82
1993/05/31 14492.68 14442.84
1993/06/30 14638.21 14552.22
1993/07/31 14724.79 14585.49
1993/08/31 14869.25 14707.60
1993/09/30 14920.61 14755.06
1993/10/31 15013.51 14789.49
1993/11/30 15075.29 14793.83
1993/12/31 15203.51 14853.73
1994/01/31 15298.37 14948.35
1994/02/28 15173.53 14857.78
1994/03/31 14825.98 14781.39
1994/04/30 14747.81 14725.25
1994/05/31 14836.61 14745.22
1994/06/30 14719.85 14783.99
1994/07/31 14854.11 14918.55
1994/08/31 14974.70 14968.89
1994/09/30 14968.94 14935.62
1994/10/31 14980.36 14969.76
1994/11/30 15006.09 14906.97
1994/12/31 14691.28 14935.33
1995/01/31 14800.58 15140.48
1995/02/28 14983.97 15349.98
1995/03/31 15062.74 15437.08
1995/04/30 15185.37 15576.84
1995/05/31 15458.59 15846.52
1995/06/30 15531.38 15932.75
1995/07/31 15606.42 15996.41
1995/08/31 15701.76 16093.35
1995/09/30 15778.97 16172.92
1995/10/31 15893.98 16307.18
1995/11/30 16025.64 16447.52
1995/12/31 16146.34 16572.24
1996/01/31 16268.35 16714.03
1996/02/29 16215.08 16650.37
1996/03/31 16184.67 16638.21
1996/04/30 16186.41 16655.00
1996/05/31 16220.99 16693.48
1996/06/30 16339.95 16815.59
1996/07/31 16390.51 16880.99
1996/08/31 16441.26 16943.20
1996/09/30 16579.57 17098.30
1996/10/31 16760.08 17291.30
1996/11/30 16903.18 17420.93
1996/12/31 16903.09 17423.83
1997/01/31 16973.15 17508.03
1997/02/28 17020.51 17551.43
1997/03/31 17003.01 17537.83
1997/04/30 17128.22 17681.65
1997/05/31 17237.59 17805.20
1997/06/30 17364.16 17929.05
1997/07/31 17567.71 18128.13
1997/08/31 17565.79 18145.20
1997/09/30 17692.88 18284.96
1997/10/31 17805.91 18416.62
1997/11/30 17860.64 18462.92
1997/12/31 17973.18 18584.74
1998/01/31 18142.01 18764.14
1998/02/28 18167.71 18782.95
1998/03/31 18222.89 18856.16
1998/04/30 18313.70 18949.62
1998/05/31 18408.80 19052.63
1998/06/30 18499.40 19151.02
1998/07/31 18591.51 19240.14
1998/08/31 18721.47 19461.50
1998/09/30 18949.08 19723.37
1998/10/31 18957.36 19808.73
1998/11/30 18965.11 19804.97
1998/12/31 19054.97 19881.65
1999/01/31 19166.33 19966.72
1999/02/28 19108.20 19882.52
1999/03/31 19265.51 20023.36
1999/04/30 19334.18 20091.99
IMATRL PRASUN SHR__CHT 19990430 19990512 160026 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Institutional
Class on April 30, 1989. As the chart shows, by April 30, 1999, the
value of the investment would have grown to $19,334 - a 93.34%
increase on the initial investment. For comparison, look at how the
Lehman Brothers 1-3 Year Government/Corporate Bond Index did over the
same period. With dividends, and capital gains, if any, reinvested,
the same $10,000 would have grown to $20,092 - a 100.92% increase.
(checkmark)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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 2.84% 6.15% 6.45% 6.51% 1.97%
Capital returns -0.85% 0.32% -0.21% -1.06% 0.21%
Total returns 1.99% 6.47% 6.24% 5.45% 2.18%
</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.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.32(cents) 26.39(cents) 53.78(cents)
Annualized dividend rate 5.64% 5.71% 5.76%
30-day annualized yield 5.31% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $9.32 over the past one month, $9.32 over the past six months, and
$9.34 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized
YIELD is a standard formula for all bond funds based on the yields of
the bonds in the fund, averaged over the past 30 days. This figure
shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different
companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A steady stream of positive
economic data, in conjunction with
the last of three interest-rate cuts
by the Federal Reserve Board,
boosted the performance of
domestic equities, but left the bond
market with only modest gains for
the six-month period that ended
April 30, 1999. The Lehman
Brothers Aggregate Bond Index -
a widely followed measure of
taxable bond performance -
posted a total return of 0.69% for
this period. Confronted with strong
indications of improving conditions
abroad and the lingering fear of
inflation from an overheated U.S.
economy, Treasuries gave back
nearly all of their flight-to-quality
gains captured during the fall. As
prices plunged, yields soared to
levels not seen since early August -
at the outset of the global crisis. As
such, the Lehman Brothers Treasury
Index, reflective of this downturn,
returned -1.21% for the
six-month period that ended April
30, 1999. Conversely, unabated
demand for corporate bonds and
mortgage securities - both with
historically attractive valuations
- - fueled rallies as each sector
managed strong returns relative
to comparable-duration Treasuries
during this time frame. The
Lehman Brothers Corporate Bond
Index and the Lehman Brothers
Mortgage Securities Index had
returns of 1.75% and 2.39%,
respectively.
(photograph of Andrew Dudley)
An interview with Andrew Dudley, Portfolio Manager of Fidelity Advisor
Short Fixed-Income Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six-months that ended April 30, 1999, the fund's
Institutional Class shares returned 1.99%. This performance compares
favorably to the 1.43% return for the Lehman Brothers 1-3 Year
Government/Corporate Bond Index and the 1.76% return for the short
investment grade debt funds average tracked by Lipper Inc. during the
same period. For the 12-month period that ended April 30, 1999, the
fund's Institutional Class shares returned 5.57%. In comparison, the
Lehman Brothers 1-3 Year Government/Corporate Bond Index returned
6.03%, while the short investment grade debt funds average returned
5.05% during the 12-month period.
Q. THE LAST TIME WE SPOKE, UNCERTAINTY IN GLOBAL EQUITY MARKETS AND
THE FEDERAL RESERVE BOARD'S BIAS TOWARD EASING RATES RESULTED IN AN
EXTREME FLIGHT TO TREASURIES. HOW HAS THE MARKET ENVIRONMENT CHANGED,
AND HOW DID IT AFFECT THE FUND?
A. Bond investors' perception of the global financial markets reversed
course amid stronger-than-expected economic data in the U.S. and
improving overseas markets. Additionally, concerns that the Fed may
change its policy course toward tightening monetary policy by
increasing rates caused further concern. In response, the bond market
pushed up yields, causing bond prices - which move in the opposite
direction of yields - to decline. While returns were marginally
positive during the period, declining bond prices erased much of the
gains made late last year. Among the different fixed-income sectors,
Treasuries became the least favored as they experienced one of their
biggest sell-offs in over 20 years during the month of February.
Nevertheless, the fund's overweighted positions in corporate bonds and
asset-backed and mortgage securities compared to the benchmark index
helped relative performance during the six-month period.
Q. DID ANY OTHER MARKET FACTORS HAVE AN EFFECT ON PERFORMANCE?
A. Another key factor was the strong rebound in stocks and the
stronger-than-expected earnings reports from the corporate market.
This environment boosted interest in new corporate issues, and
investors absorbed a relatively large supply of new bonds. More
recently, the increase in interest rates served to reduce the pace of
new issuance, particularly with bonds of shorter maturities - because
bonds are more expensive to finance at higher rates. This led to
further support for a positive supply and demand environment.
Q. HOW WERE THE FUND'S ASSETS ALLOCATED, AND CAN YOU TELL US A BIT
MORE ABOUT THE PERFORMANCE OF THESE SECTORS?
A. Corporate bonds and asset-backed securities - which are bonds
backed by a pool of loans such as credit cards, for example -
accounted for approximately 63% of the fund's investments at the end
of the period. Within these holdings, corporate bonds accounted for
roughly 45% of the fund's investments. In the first quarter of 1999,
absolute returns were hampered across most bond sectors by rising
interest rates. On the other hand, relative performance was helped by
the overweighted positions in asset-backed and corporate bonds, which
outperformed Treasuries. As the market reversed course from the
massive flight to quality we saw last fall, mortgage securities, which
represented approximately 19% of the fund's investments at the end of
the period, also outperformed Treasuries over the past six months.
Q. WHAT'S YOUR OUTLOOK, ANDY?
A. Of course, it is very difficult to predict the direction of
interest rates. However, I do think we may be moving into a more
stable interest-rate environment compared to what we experienced last
fall. Though the U.S. economy was stronger than anticipated and
there's the perception that overseas economies are improving,
inflation remains in check with the help of low global commodity
prices and persistent weakness in global demand. In a more stable
interest-rate environment, I'll continue to concentrate a majority of
the fund's assets in corporate and mortgage securities because they
can offer better total return potential than government bonds.
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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income,
consistent with preservation
of capital, by investing
primarily in a broad range of
investment grade,
fixed-income securities
START DATE: September 16,
1987
SIZE: as of April 30, 1999,
more than $332 million
MANAGER: Andrew Dudley,
since 1997; joined Fidelity
in 1996
ANDREW DUDLEY ON THE BOND
MARKET'S OBSESSION WITH
INFLATION:
"The bond market's preoccupation
with inflation centers upon the
direct impact inflation has on the
direction of interest rates.
Interest rates represent the value
of money; consequently, if the
bond market expects higher
inflation and, therefore, a
deterioration in the value of money,
then bond investors expect to be
paid more - in the form of
interest - for that decline in
purchasing or buying power. The
bond market sells off in the wake
of higher inflation forecasts
because investors fear being stuck
with fixed cash flows that will be
worth less in the future. During
periods of complex and conflicting
global economic and market
forecasts, similar to what we
experienced over the past six
months, the market can move very
quickly to adjust for these changes
in inflation expectations."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 36.0 40.8
Aa 7.3 8.3
A 18.7 13.2
Baa 32.4 29.8
Ba and Below 1.3 1.6
Not Rated 0.9 1.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) 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 APRIL 30, 1999
6 MONTHS AGO
Years 2.6 2.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF APRIL 30, 1999
6 MONTHS AGO
Years 1.9 1.8
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 APRIL 30, 1999 *
Corporate bonds 62.8%
U.S. government
and agency
obligations 11.7%
Mortgage securities 18.7%
Foreign government
obligations 1.3%
Other 2.1%
Short-term
investments 3.4%
* FOREIGN
INVESTMENTS 6.3%
Row: 1, Col: 1, Value: 62.8
Row: 1, Col: 2, Value: 11.7
Row: 1, Col: 3, Value: 18.7
Row: 1, Col: 4, Value: 1.3
Row: 1, Col: 5, Value: 2.1
Row: 1, Col: 6, Value: 3.4
AS OF OCTOBER 30, 1998 **
Corporate bonds 57.1%
U.S. government
and agency
obligations 16.2%
Mortgage securities 18.0%
Foreign government
obligations 0.7%
Other 2.7%
Short-term
investments 5.3%
** FOREIGN
INVESTMENTS 6.9%
Row: 1, Col: 1, Value: 57.1
Row: 1, Col: 2, Value: 16.2
Row: 1, Col: 3, Value: 18.0
Row: 1, Col: 4, Value: 0.7
Row: 1, Col: 5, Value: 2.7
Row: 1, Col: 6, Value: 5.3
INVESTMENTS APRIL 30, 1999 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 44.6%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.7%
Equistar Chemicals Baa3 $ 800,000 $ 826,400
L.P./Equistar Funding Corp.
8.5% 2/15/04 (b)
Monsanto Co. 5.375% 12/1/01 A2 1,470,000 1,457,432
(b)
2,283,832
CONSTRUCTION & REAL ESTATE -
2.2%
REAL ESTATE - 0.1%
Cabot Industrial Properties Baa2 575,000 573,413
LP 7.125% 5/1/04
REAL ESTATE INVESTMENT TRUSTS
- - 2.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 470,000 449,240
7.125% 3/15/04 Baa2 1,300,000 1,291,485
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 1,650,000 1,647,261
6.375% 2/15/03 Baa1 1,200,000 1,188,576
6.376% 2/15/02 Baa1 900,000 896,211
ProLogis Trust 6.7% 4/15/04 Baa1 245,000 243,557
Weeks Realty LP 6.875% 3/15/05 Baa2 1,200,000 1,197,852
6,914,182
TOTAL CONSTRUCTION & REAL 7,487,595
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Delphi Automotive Systems Baa2 725,000 724,079
Corp. 6.125% 5/1/04
ENERGY - 1.5%
ENERGY SERVICES - 0.6%
Baker Hughes, Inc. 5.8% A2 2,100,000 2,082,990
2/15/03 (b)
OIL & GAS - 0.9%
Conoco, Inc. 5.9% 4/15/04 A3 400,000 397,120
Occidental Petroleum Corp. Baa3 700,000 701,603
6.09% 11/29/99
Oryx Energy Co.:
8% 10/15/03 Baa1 335,000 349,395
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Oryx Energy Co.: - continued
8.125% 10/15/05 Baa1 $ 1,030,000 $ 1,089,225
8.375% 7/15/04 Baa1 485,000 515,487
3,052,830
TOTAL ENERGY 5,135,820
FINANCE - 17.9%
BANKS - 7.7%
Banc One Corp. 6.7% 3/24/00 Aa3 1,600,000 1,616,544
Banco Latinoamericano Baa2 700,000 692,563
Exportaciones SA euro 6.9%
12/4/99 (b)
Banc One Corp. 7.25% 8/1/02 A1 1,100,000 1,142,515
BankBoston Corp. 6.125% A2 1,900,000 1,912,350
3/15/02
BanPonce Financial Corp. A3 650,000 657,261
6.88% 6/16/00
Barclays Bank PLC yankee A1 2,500,000 2,504,000
5.875% 7/15/00
Capital One Bank:
6.48% 6/28/02 Baa3 1,500,000 1,514,355
6.65% 3/15/04 Baa3 2,500,000 2,521,250
KeyCorp. 7.45% 4/5/00 A1 1,500,000 1,528,470
Korea Development Bank:
6.625% 11/21/03 Baa3 745,000 721,354
7.125% 9/17/01 Baa3 215,000 215,712
7.375% 9/17/04 Baa3 250,000 247,750
yankee 6.5% 11/15/02 Baa3 580,000 563,470
NationsBank Corp. 5.75% Aa2 1,600,000 1,601,408
3/15/01
Popular, Inc.:
6.2% 4/30/01 A3 2,885,000 2,877,586
6.4% 8/25/00 A3 1,730,000 1,734,412
Providian National Bank:
6.25% 5/7/01 Baa3 1,400,000 1,402,954
6.7% 3/15/03 Baa3 2,200,000 2,206,710
25,660,664
CREDIT & OTHER FINANCE - 7.7%
AT&T Capital Corp.:
6.25% 5/15/01 Baa3 3,050,000 3,071,350
6.875% 1/16/01 Baa3 1,870,000 1,901,079
Chrysler Financial Corp. A1 2,600,000 2,581,618
5.25% 5/4/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Chrysler Financial LLC 6.375% A1 $ 2,300,000 $ 2,316,859
1/28/00
Edison Mission Energy Funding Baa1 1,984,177 2,008,999
Corp. 6.77% 9/15/03 (b)
ERP Operating LP 6.55% A3 300,000 301,794
11/15/01
Ford Motor Credit Co. 5.125% A1 1,300,000 1,284,530
10/15/01
General Motors Acceptance A2 2,200,000 2,197,030
Corp. 5.625% 2/15/01
GS Escrow Corp. 6.75% 8/1/01 Ba1 2,200,000 2,196,832
Heller Financial, Inc. 6.25% A3 1,800,000 1,814,688
3/1/01
Money Store, Inc. 7.3% 12/1/02 A2 800,000 836,560
Salton Sea Funding Corp. Baa2 370,407 372,726
7.02% 5/30/00
Sprint Capital Corp. 5.7% Baa1 4,280,000 4,235,317
11/15/03
Trizec Finance Ltd. yankee Baa3 350,000 385,000
10.875% 10/15/05
25,504,382
SAVINGS & LOANS - 1.1%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 1,350,000 1,354,293
7% 6/13/02 Baa3 1,250,000 1,279,250
Sovereign Bancorp, Inc. Ba1 1,000,000 1,000,870
6.625% 3/15/01
3,634,413
SECURITIES INDUSTRY - 1.4%
Amvescap PLC:
yankee 6.375% 5/15/03 A3 1,150,000 1,150,069
yankee 6.6% 5/15/05 A3 600,000 591,282
Goldman Sachs Group L.P.:
6.2% 2/15/01 A1 1,000,000 1,006,530
6.6% 7/15/02 (b) A1 500,000 506,330
Merrill Lynch & Co., Inc. Aa3 1,500,000 1,495,056
5.71% 1/15/02
4,749,267
TOTAL FINANCE 59,548,726
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA Baa1 2,250,000 2,263,613
yankee 6.125% 6/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MEDIA & LEISURE - 5.0%
BROADCASTING - 3.8%
Continental Cablevision, Inc. Baa3 $ 3,015,000 $ 3,175,428
8.5% 9/15/01
TCI Communications, Inc.:
6.375% 9/15/99 A2 4,250,000 4,268,828
8.25% 1/15/03 A2 300,000 324,000
9% 1/2/02 Ba1 970,000 1,048,104
Time Warner, Inc. 7.95% 2/1/00 Baa3 3,690,000 3,755,387
12,571,747
ENTERTAINMENT - 1.2%
Paramount Communications, Baa3 1,125,000 1,163,385
Inc. 7.5% 1/15/02
Viacom, Inc. 6.75% 1/15/03 Baa3 2,885,000 2,936,238
4,099,623
TOTAL MEDIA & LEISURE 16,671,370
NONDURABLES - 3.5%
BEVERAGES - 1.5%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,005,000 1,002,035
6.4% 12/15/03 Baa3 4,000,000 3,993,600
4,995,635
FOODS - 0.8%
Dole Food, Inc. 6.75% 7/15/00 Baa2 2,590,000 2,612,481
TOBACCO - 1.2%
Philip Morris Companies, Inc.:
7.125% 12/1/99 A2 2,850,000 2,875,223
7.25% 9/15/01 A2 1,125,000 1,154,936
4,030,159
TOTAL NONDURABLES 11,638,275
RETAIL & WHOLESALE - 2.6%
DRUG STORES - 1.2%
Rite Aid Corp.:
5.5% 12/15/00 (b) Baa1 2,970,000 2,940,300
6% 12/15/05 (b) Baa1 1,100,000 1,052,590
3,992,890
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES -
1.4%
Dayton Hudson Corp.:
9.75% 7/1/02 A3 $ 1,240,000 $ 1,377,466
10% 12/1/00 A3 1,070,000 1,140,192
Federated Department Stores, Baa2 1,860,000 1,978,408
Inc. 8.125% 10/15/02
4,496,066
TOTAL RETAIL & WHOLESALE 8,488,956
TECHNOLOGY - 3.2%
COMPUTERS & OFFICE EQUIPMENT
- - 3.2%
Comdisco, Inc.:
6% 1/30/02 Baa1 1,500,000 1,498,620
6.1% 6/5/01 Baa1 7,210,000 7,218,580
6.65% 11/13/01 Baa1 2,010,000 2,034,763
10,751,963
TRANSPORTATION - 3.3%
AIR TRANSPORTATION - 1.4%
Continental Airlines, Inc.
Pass Through Trust
Certificates:
6.954% 2/2/11 Baa1 2,200,000 2,191,200
7.08% 11/1/04 Baa1 1,250,000 1,255,550
Delta Air Lines, Inc.:
6.65% 3/15/04 Baa3 660,000 665,326
9.875% 5/15/00 Baa3 475,000 493,112
4,605,188
RAILROADS - 1.3%
CSX Corp.:
7.05% 5/1/02 Baa2 1,600,000 1,640,736
9.5% 8/1/00 Baa2 1,800,000 1,879,164
Norfolk Southern Corp. 6.95% Baa1 900,000 923,202
5/1/02
4,443,102
TRUCKING & FREIGHT - 0.6%
Federal Express Corp. 7.53% A3 1,953,000 1,990,087
9/23/06
TOTAL TRANSPORTATION 11,038,377
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - 3.8%
CELLULAR - 0.1%
Cable & Wireless Baa1 $ 425,000 $ 425,914
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.7%
Avon Energy Partners Holdings Baa2 2,300,000 2,324,978
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp. Baa3 1,020,000 1,037,065
6.875% 3/1/01
Ohio Edison Co. 7.375% 9/15/02 Baa2 1,510,000 1,566,383
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 1,560,000 1,554,337
6.5% 5/1/03 Baa1 600,000 612,342
Texas Utilities Electric Co.:
7.375% 11/1/99 A3 1,100,000 1,111,132
7.375% 8/1/01 A3 721,000 743,113
8,949,350
GAS - 0.4%
Cms Panhandle Holding Co. Baa3 600,000 600,000
6.125% 3/15/04 (b)
Enserch Corp. 6.25% 1/1/03 Baa2 650,000 653,406
1,253,406
TELEPHONE SERVICES - 0.6%
MCI WorldCom, Inc.:
6.125% 8/15/01 Baa2 1,230,000 1,237,712
8.875% 1/15/06 Baa2 811,000 871,209
2,108,921
TOTAL UTILITIES 12,737,591
TOTAL NONCONVERTIBLE BONDS 148,770,197
(Cost $148,878,987)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 11.7%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 1.2%
Government Trust Certificates Aaa $ 329,447 $ 342,493
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1994 C, 6.61% 9/15/99 Aaa 36,728 36,838
Series 1995 A, 6.28% 6/15/04 Aaa 1,941,176 1,970,411
Israel Export Trust Aaa 564,706 577,412
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 1, 6.88% 1/26/03
Private Export Funding Corp. Aaa 954,000 982,323
secured 6.86% 4/30/04
TOTAL U.S. GOVERNMENT AGENCY 3,909,477
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
10.5%
U.S. Treasury Notes:
5.375% 7/31/00 Aaa 29,300,000 29,432,726
5.375% 2/15/01 Aaa 2,950,000 2,964,750
5.75% 10/31/00 Aaa 2,600,000 2,625,584
TOTAL U.S. TREASURY 35,023,060
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 38,932,537
GOVERNMENT AGENCY OBLIGATIONS
(Cost $38,956,995)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 9.1%
FANNIE MAE - 6.3%
6.5% 10/1/11 to 12/1/28 (d) Aaa 8,624,093 8,571,136
7% 7/1/25 to 4/1/29 Aaa 11,651,626 11,805,006
11.5% 11/1/15 Aaa 438,315 487,327
20,863,469
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FREDDIE MAC - 0.2%
7% 9/1/99 to 8/1/01 Aaa $ 654,975 $ 658,026
12% 11/1/19 Aaa 111,060 124,614
782,640
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.6%
6.5% 5/15/29 (c) Aaa 3,500,000 3,480,313
9.5% 9/15/16 to 10/15/20 Aaa 1,576,016 1,693,244
11% 12/15/09 to 1/15/16 Aaa 1,857,496 2,057,009
11.5% 8/15/13 to 11/15/15 Aaa 645,568 729,179
12% 2/15/16 Aaa 601,025 685,337
8,645,082
TOTAL U.S. GOVERNMENT AGENCY 30,291,191
- - MORTGAGE SECURITIES
(Cost $30,539,537)
ASSET-BACKED SECURITIES - 18.2%
Arcadia Automobile Aaa 1,300,000 1,290,250
Receivables Trust 5.67%
1/15/04
ARG Funding Corp. 5.88% Aaa 2,650,000 2,649,669
5/20/03 (b)
Boatmens Auto Trust 6.35% A2 640,000 640,100
10/15/01
Capita Equipment Receivables
Trust:
6.45% 8/15/02 Aa3 2,200,000 2,219,184
6.57% 3/15/01 Aa3 1,020,000 1,024,896
Case Equipment Loan Trust Aa2 800,000 800,562
5.85% 2/15/03
Caterpillar Financial Asset A3 360,694 359,905
Trust 6.55% 5/25/02
Chase Manhattan Marine Owner Aaa 2,020,000 2,038,200
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 1,516,363 1,520,154
6.2% 3/20/04 Aaa 640,164 643,265
Citibank Credit Card Master Aaa 1,800,000 1,803,094
Trust I 5.75% 1/15/03
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 3,196,297 3,196,297
6.3% 7/15/12 Aaa 1,600,000 1,598,992
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 857,217 860,164
6.7% 2/15/02 Aaa 267,293 269,047
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage Aaa $ 1,000,000 $ 1,010,781
Securities Corp. 7% 3/15/27
Discover Card Master Trust I A2 5,250,000 5,245,078
6.0006% 7/18/05 (e)
Fidelity Funding Auto Trust Aaa 310,542 313,938
6.99% 11/15/02 (b)
Ford Credit Auto Owner Trust A2 1,800,000 1,795,500
6.15% 9/15/02
Ford Credit Grantor Trust Aaa 557,960 558,134
5.9% 10/15/00
Green Tree Financial Corp.:
6.1% 4/15/27 Aaa 228,963 229,105
6.45% 5/15/27 Aaa 66,839 66,859
Green Tree Lease Finance LLC A 2,150,297 2,145,674
6.66% 10/20/04
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 2,200,000 2,190,375
6.65% 10/15/03 Baa3 255,269 257,264
KeyCorp Auto Grantor Trust A3 18,970 18,973
5.8% 7/15/00
Newcourt Equipment Trust Aaa 2,050,000 2,038,149
Securities sequential pay
Series 1998-1 Class A3,
5.24% 12/20/02
Norwest Automobile Trust 6.3% A2 1,424,000 1,428,005
5/15/03
Olympic Automobile
Receivables Trust:
6.125% 11/15/04 Aaa 534,501 534,334
6.4% 9/15/01 Aaa 870,438 868,262
Onyx Acceptance Grantor Trust:
5.95% 7/15/04 Aaa 1,823,129 1,830,530
6.2% 6/15/03 Aaa 897,627 903,237
Petroleum Enhanced Trust Baa2 1,785,428 1,774,269
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(e)
Premier Auto Trust:
5.7% 10/6/02 Aaa 4,000,000 4,007,480
6.35% 7/6/00 A3 1,980,000 1,983,089
Reliance Auto Receivables Aaa 495,519 495,364
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master Aaa 1,600,000 1,614,000
Trust II 6.2% 2/16/06
TMS Auto Grantor Trust 5.9% Aaa 132,999 133,166
9/15/02
Tranex Auto Receivables Owner Aaa 884,900 889,048
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 2,009,163 1,990,327
Trust 5.98% 9/17/05
Union Acceptance Corp. 7.075% Baa2 114,350 114,456
7/10/02
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Western Financial Grantor Aaa $ 584,901 $ 583,621
Trust 5.875% 3/1/02
WFS Financial Owner Trust:
6.9% 12/20/03 Aaa 1,990,000 1,972,588
7.05% 11/20/03 Aaa 2,876,371 2,879,967
TOTAL ASSET-BACKED SECURITIES 60,785,352
(Cost $60,773,730)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.3%
PRIVATE SPONSOR - 0.8%
GE Capital Mortgage Services, Aaa 674,431 674,483
Inc. planned amortization
class Series 1994-2 Class
A-4, 6% 1/25/09
Residential Funding Mortgage Aa1 2,061,172 2,062,461
Securities I, Inc. planned
amortization class Series
1994-S12 Class A-2, 6.5%
4/25/09
2,736,944
U.S. GOVERNMENT AGENCY - 0.5%
Fannie Mae ACES sequential Aaa 1,714,589 1,716,197
pay Series 1995 - M1 Class
A, 6.65% 7/25/10
TOTAL COLLATERALIZED MORTGAGE 4,453,141
OBLIGATIONS
(Cost $4,461,470)
COMMERCIAL MORTGAGE
SECURITIES - 8.3%
Allied Capital Commercial Aaa 1,327,151 1,325,077
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 2,200,000 2,199,656
1999-S1A, 7.0925% 2/28/14
(b)(e)
Bankers Trust Remic Trust Aa2 2,780,000 2,786,516
1988-1 floater Series
1998-S1A Class D, 5.7869%
11/28/02 (b)(e)
CBM Funding Corp.:
sequential pay Series 1996-1 AA 1,380,000 1,392,722
Class A-2, 6.88% 7/1/02
sequential pay Series 1996-1 AA 17,661 17,688
Class A-1, 7.55% 7/1/99
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - $ 2,055,779 $ 2,051,924
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998 FLI Class E, Baa2 2,700,000 2,640,094
5.7888% 1/10/13 (b)(e)
DLJ Commercial Mortgage Corp. A2 1,170,000 1,166,709
floater Series 1998-STFA
Class A-3, 5.57% 12/8/00
(b)(e)
Equitable Life Assurance
Society of the United States
(The):
floater Series 174 Class D-2, Baa2 1,200,000 1,176,000
6.7063% 5/15/03 (b)(e)
sequential pay Series 174 Aaa 1,000,000 1,042,250
Class A1, 7.24% 5/15/06 (b)
Federal Deposit Insurance
Corp. Remic Trust:
sequential pay Series 1996-C1 Aaa 1,377,449 1,384,767
Class 1A, 6.75% 7/25/26
sequential pay Series 1994-C1 Aaa 262,756 263,002
Class II-A2, 7.85% 9/25/25
FMAC Loan Receivables Trust Aaa 728,359 717,889
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust 1998-1 Aaa 1,359,958 1,347,208
sequential pay Series 1998-I
Class A1 Notes, 6.24%
7/15/20 (b)
GS Mortgage Securities Corp.
II Series 1999-GSFL II:
Class E, 7.0475% 11/13/13 Baa2 1,100,000 1,095,160
(b)(e)
Class F, 7.6634% 11/13/13 Baa3 1,100,000 1,083,170
(b)(e)
Kidder Peabody Acceptance Aaa 99,788 99,570
Corp. I sequential pay
Series 1993-M1 Class A-2,
7.15% 4/25/25
Nomura Asset Securities Corp. - 881,017 881,292
floater Series 1994 MD-II
Class A-6, 6.2025% 7/7/03 (e)
Nomura Depositor Trust Baa2 2,290,000 2,109,484
floater Series 1998-ST1A
Class A-4, 5.8263% 2/15/34
(b)(e)
Resolution Trust Corp. Aaa 946,866 946,866
sequential pay Series 1995
C-1 Class A2C, 6.9% 2/25/27
Structured Asset Securities A3 2,075,784 2,067,352
Corp. floater Series
1998-C2A Class C, 5.3425%
1/25/13 (b)(e)
TOTAL COMMERCIAL MORTGAGE 27,794,396
SECURITIES
(Cost $28,114,827)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 1.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Korean Republic 8.75% 4/15/03 Baa3 $ 1,700,000 $ 1,787,040
(f)
Ontario Province:
5.75% 11/7/00 (f) Aa3 1,180,000 1,182,679
euro global 6.125% 6/28/00 (f) Aa3 1,200,000 1,209,408
TOTAL FOREIGN GOVERNMENT AND 4,179,127
GOVERNMENT AGENCY OBLIGATIONS
(Cost $4,164,575)
SUPRANATIONAL OBLIGATIONS -
2.1%
African Development Bank:
7.75% 12/15/01 Aa1 2,240,000 2,345,907
9.3% 7/1/00 Aa1 4,320,000 4,502,347
TOTAL SUPRANATIONAL OBLIGATIONS 6,848,254
(Cost $7,001,936)
CASH EQUIVALENTS - 3.4%
MATURITY AMOUNT
Investments in repurchase $ 11,475,732 11,471,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.95%,
dated 4/30/99 due 5/3/99
(Cost $11,471,000)
TOTAL INVESTMENT IN $ 333,525,195
SECURITIES - 100%
(Cost $334,363,057)
</TABLE>
LEGEND
(a) Standard & Poor's(registered trademark) credit ratings are used in
the absence of a rating by Moody's Investors Service, Inc.
(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 $43,423,359 or 13.1% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) A portion of the security sold on a delayed delivery or
when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 61.0% AAA, AA, A 57.9%
Baa 32.4% BBB 32.1%
Ba 1.3% BB 0.8%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.9%.
INCOME TAX INFORMATION
At April 30, 1999, the aggregate cost of investment securities for
income tax purposes was $334,363,143. Net unrealized depreciation
aggregated $837,948, of which $786,348 related to appreciated
investment securities and $1,624,296 related to depreciated investment
securities.
At October 31, 1998, the fund had a capital loss carryforward of
approximately $43,066,000 of which $130,000, $38,000, $336,000,
$17,691,000, $19,457,000, $2,265,000 and $3,149,000 will expire on
October 31, 1999, 2000, 2001, 2002, 2003, 2004 and 2005, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS
Investment in securities, at $ 333,525,195
value (including repurchase
agreements of $11,471,000)
(cost $334,363,057) - See
accompanying schedule
Commitment to sell securities $ (3,923,804)
on a delayed delivery basis
Receivable for securities 3,946,462 22,658
sold on a delayed delivery
basis
Receivable for investments 537,521
sold, regular delivery
Cash 161,737
Receivable for fund shares 2,011,589
sold
Interest receivable 3,603,646
TOTAL ASSETS 339,862,346
LIABILITIES
Payable for investments 2,466,238
purchased Regular delivery
Delayed delivery 3,514,535
Payable for fund shares 837,160
redeemed
Distributions payable 248,381
Accrued management fee 121,579
Distribution fees payable 47,997
Other payables and accrued 87,918
expenses
TOTAL LIABILITIES 7,323,808
NET ASSETS $ 332,538,538
Net Assets consist of:
Paid in capital $ 377,293,497
Undistributed net investment 157,553
income
Accumulated undistributed net (44,097,308)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (815,204)
(depreciation) on investments
NET ASSETS $ 332,538,538
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 1999 (UNAUDITED)
CALCULATION OF MAXIMUM $9.30
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($11,822,966 (divided by)
1,271,864 shares)
Maximum offering price per $9.44
share (100/98.50 of $9.30)
CLASS T: NET ASSET VALUE and $9.30
redemption price per share
($303,088,972 (divided by)
32,579,757 shares)
Maximum offering price per $9.44
share (100/98.50 of $9.30)
CLASS C: NET ASSET VALUE and $9.31
offering price per share
($10,092,277 (divided by)
1,084,296 shares) A
INSTITUTIONAL CLASS: NET $9.30
ASSET VALUE, offering price
and redemption price per
share ($7,534,323 (divided
by) 809,849 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
1999 (UNAUDITED)
INVESTMENT INCOME $ 10,808,742
Interest
EXPENSES
Management fee $ 724,950
Transfer agent fees 278,482
Distribution fees 280,588
Accounting fees and expenses 54,204
Non-interested trustees' 613
compensation
Custodian fees and expenses 11,641
Registration fees 31,412
Audit 17,311
Legal 761
Miscellaneous 639
Total expenses before 1,400,601
reductions
Expense reductions (4,639) 1,395,962
NET INVESTMENT INCOME 9,412,780
REALIZED AND UNREALIZED GAIN (1,008,344)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,009,684)
Delayed delivery commitments 12,158 (1,997,526)
NET GAIN (LOSS) (3,005,870)
NET INCREASE (DECREASE) IN $ 6,406,910
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1998
1999 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,412,780 $ 20,862,249
income
Net realized gain (loss) (1,008,344) 173,470
Change in net unrealized (1,997,526) 421,556
appreciation (depreciation)
NET INCREASE (DECREASE) IN 6,406,910 21,457,275
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,198,966) (20,556,957)
from net investment income
Share transactions - net (22,065,369) (21,594,124)
increase (decrease)
TOTAL INCREASE (DECREASE) (24,857,425) (20,693,806)
IN NET ASSETS
NET ASSETS
Beginning of period 357,395,963 378,089,769
End of period (including $ 332,538,538 $ 357,395,963
under (over) distribution
of net investment income of
$157,553 and $(56,261),
respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.310 $ 9.370 $ 9.290
period
Income from Investment
Operations
Net investment income D .256 .572 .532 .090
Net realized and unrealized (.082) .024 (.021) .081
gain (loss)
Total from investment .174 .596 .511 .171
operations
Less Distributions
From net investment income (.254) (.526) (.571) (.091)
Net asset value, end of period $ 9.300 $ 9.380 $ 9.310 $ 9.370
TOTAL RETURN B, C 1.88% 6.58% 5.64% 1.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,823 $ 5,524 $ 19,726 $ 204
(000 omitted)
Ratio of expenses to average .83% A .90% F .90% F .90% A, F
net assets
Ratio of net investment 5.66% A 6.03% 6.00% 6.27% A
income to average net assets
Portfolio turnover rate 151% A 124% 105% 124%
</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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.350 $ 9.380 $ 9.470 $ 9.480
period
Income from Investment
Operations
Net investment income .262 C .555 C .578 C .594 C .403
Net realized and unrealized (.086) .019 (.036) (.094) .148
gain (loss)
Total from investment .176 .574 .542 .500 .551
operations
Less Distributions
From net investment income (.256) (.544) (.572) (.590) (.407)
In excess of net investment - - - - -
income
Return of capital - - - - (.154)
Total distributions (.256) (.544) (.572) (.590) (.561)
Net asset value, end of $ 9.300 $ 9.380 $ 9.350 $ 9.380 $ 9.470
period
TOTAL RETURN B 1.90% 6.32% 5.97% 5.45% 6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 303,089 $ 333,050 $ 351,614 $ 416,700 $ 546,546
(000 omitted)
Ratio of expenses to average .82% A .89% .89% .88% .89%
net assets
Ratio of net investment 5.67% A 5.93% 6.19% 6.29% 6.05%
income to average net assets
Portfolio turnover rate 151% A 124% 105% 124% 179%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.090
period
Income from Investment
Operations
Net investment income .479
Net realized and unrealized (.501)
gain (loss)
Total from investment (.022)
operations
Less Distributions
From net investment income (.464)
In excess of net investment (.044)
income
Return of capital (.080)
Total distributions (.588)
Net asset value, end of $ 9.480
period
TOTAL RETURN B (.22)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 787,926
(000 omitted)
Ratio of expenses to average .97%
net assets
Ratio of net investment 5.91%
income to average net assets
Portfolio turnover rate 108%
</TABLE>
A ANNUALIZED.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED..
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.340
period
Income from Investment
Operations
Net investment income D .219 .437
Net realized and unrealized (.074) .064
gain (loss)
Total from investment .145 .501
operations
Less Distributions
From net investment income (.215) (.461)
Net asset value, end of period $ 9.310 $ 9.380
TOTAL RETURN B, C 1.56% 5.49%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,092 $ 11,795
(000 omitted)
Ratio of expenses to average 1.74% A 1.75% A, F
net assets
Ratio of expenses to average 1.73% A, G 1.75% A
net assets after expense
reductions
Ratio of net investment 4.72% A 4.92% A
income to average net assets
Portfolio turnover rate 151% A 124%
</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 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 OCTOBER 31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.380 $ 9.350 $ 9.370 $ 9.470 $ 9.450
of period
Income from Investment
Operations
Net investment income .268 D .566 D .589 D .598 D .137
Net realized and unrealized (.084) .021 (.023) (.098) .067
gain (loss)
Total from investment .184 .587 .566 .500 .204
operations
Less Distributions
From net investment income (.264) (.557) (.586) (.600) (.136)
Return of capital - - - - (.048)
Total distributions (.264) (.557) (.586) (.600) (.184)
Net asset value, end of $ 9.300 $ 9.380 $ 9.350 $ 9.370 $ 9.470
period
TOTAL RETURN B, C 1.99% 6.47% 6.24% 5.45% 2.18%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,534 $ 7,027 $ 6,750 $ 9,200 $ 9,827
(000 omitted)
Ratio of expenses to average .69% A .75% F .75% F .80% F .85% A, F
net assets
Ratio of expenses to average .68% A, G .75% .75% .80% .85% A
net assets after expense
reductions
Ratio of net investment 5.81% A 6.06% 6.30% 6.37% 6.10% A
income to average net assets
Portfolio turnover rate 151% A 124% 105% 124% 179%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1999 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Short Fixed-Income Fund (the fund) is a fund of
Fidelity Advisor Series II (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 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 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
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.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased on a delayed
delivery basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in
the purchase of a delayed delivery security. With respect to purchase
commitments,
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
the fund identifies securities as segregated in its records with a
value at least equal to the amount of the commitment. Losses may arise
due to changes in the market value of the underlying securities or if
the counterparty does not perform under the contract.
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 $243,127,860 and $270,823,070, respectively, of which U.S.
government and government agency obligations aggregated $164,113,109
and $189,631,857, 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 .43% of average net assets
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement(effective January 1, 1999) with Fidelity
Investments Money Management, Inc. (FIMM), a wholly owned subsidiary
of FMR. For its services, FIMM receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
services. For the period, this fee was based on the following annual
rates of the average net assets of each applicable class:
CLASS A .15%
CLASS T .15%
CLASS C 1.00%*
* .75% REPRESENTS A DISTRIBUTION FEE AND .25% REPRESENTS A SHAREHOLDER
SERVICE FEE.
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 4,895 $ 0
CLASS T 236,092 2,673
CLASS C 39,601 37,512
$ 280,588 $ 40,185
SALES LOAD. FDC receives a front-end sales charge of up to 1.50% for
selling Class A and Class T shares of the fund and the proceeds of a
contingent deferred sales charge levied on Class C share redemptions
occurring within one year of purchase. The Class C charge is 1% of the
lesser of the cost of shares at the initial date of purchase or the
net asset value of the redeemed shares, excluding any reinvested
dividends and capital gains. A portion of the sales charges paid to
FDC are paid to securities dealers, banks and other financial
institutions.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 12,970 $ 2,968
CLASS T 117,377 36,214
CLASS C 16,420 16,420*
$ 146,767 $ 55,602
* WHEN 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
(collectively referred to as the transfer agent) for the fund's Class
A, Class T, Class C and Institutional Class. FIIOC receives account
fees and asset-based fees that vary according to the account size and
type of account of the shareholders
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 $ 5,854 .18*
CLASS T 257,293 .16*
CLASS C 9,168 .23*
INSTITUTIONAL CLASS 6,167 .18*
$ 278,482
*ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc. (FSC), an affiliate of
FMR, maintains the fund's accounting records. The fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
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 $4,639 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998 A
FROM NET INVESTMENT INCOME
Class A $ 177,552 $ 388,579
Class T 8,648,310 19,688,772
Class C 181,713 94,836
Institutional Class 191,391 384,770
Total $ 9,198,966 $ 20,556,957
</TABLE>
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30 YEAR ENDED SIX MONTHS ENDED APRIL 30 YEAR ENDED
OCTOBER 31 OCTOBER 31
1999 1998 A 1999 1998 A
CLASS A Shares sold 592,781 $ 9,665,891 $ 5,547,089
1,037,871
Reinvestment of distributions 15,767 15,963 146,857 149,204
Shares redeemed (370,798) (2,137,845) (3,458,864) (20,007,107)
Net increase (decrease) 682,840 (1,529,101) $ 6,353,884 $ (14,310,814)
CLASS T Shares sold 10,283,264 18,467,587 $ 96,223,660 $ 172,851,708
Reinvestment of distributions 731,162 1,675,946 6,815,032 15,669,989
Shares redeemed (13,944,369) (22,231,985) (130,390,483) (207,892,792)
Net increase (decrease) (2,929,943) (2,088,452) $ (27,351,791) $ (19,371,095)
CLASS C Shares sold 1,013,233 1,458,611 $ 9,453,119 $ 13,712,358
Reinvestment of distributions 14,802 6,695 138,006 62,751
Shares redeemed (1,200,694) (208,351) (11,221,499) (1,947,580)
Net increase (decrease) (172,659) 1,256,955 $ (1,630,374) $ 11,827,529
INSTITUTIONAL CLASS Shares 217,619 733,154 $ 2,029,784 $ 6,860,400
sold
Reinvestment of distributions 17,982 33,202 167,579 310,406
Shares redeemed (175,010) (738,984) (1,634,451) (6,910,550)
Net increase (decrease) 60,591 27,372 $ 562,912 $ 260,256
</TABLE>
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. CHANGE IN INDEPENDENT AUDITOR.
Based on the recommendation of the Audit Committee of Fidelity Advisor
Short Fixed-Income Fund, the Board of Trustees has determined not to
retain PricewaterhouseCoopers LLP as the fund's independent auditor
and voted to appoint Deloitte & Touche LLP for the fiscal year ending
October 31, 1999. For the fiscal years ended October 31, 1998 and
October 31, 1997, PricewaterhouseCoopers LLP's audit reports contained
no adverse opinion or disclaimer of opinion; nor were their reports
qualified as to uncertainty, audit scope, or accounting principles.
Further, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on accounting principles, financial
statement disclosure or audit scope, which if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference to the disagreement in their report.
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
Fidelity Investments Money Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Andrew J. Dudley, Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O.McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor Japan Fund
Fidelity Advisor Europe Capital Appreciation Fund
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor Diversified International Fund
Fidelity Advisor Global Equity Fund
Fidelity Advisor TechnoQuantSM
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Retirement Growth Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
SFII-SANN-0699 78320
1.703633.101
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Asset Allocation 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
(2_FIDELITY_LOGOS)(registered trademark)
